​By Associate Attorney Heather McKaig

Holding companies are having a resurgence in popularity recently.  Interest, as represented by Google searches, has steadily grown and experienced a marked increase in the past eighteen months.  A holding company is a parent company, usually a corporation or LLC, that owns or controls other companies.  Some holding companies are created just to own property, such as real estate, intellectual property, or stocks.

Unfortunately, holding companies and their structure can be misused by those attempting to conceal information about the nature of their businesses in multiple tiers of management or by the holding company itself exerting overreaching control and making unreasonable demands of its subsidiaries.

Most business owners who express interest in holding companies cite liability protection and loss protection as their primary purposes for having one. However, like other corporate entities, the liability protections of holding companies can be disregarded by courts in favor of creditors if the companies are not formed, owned and managed correctly.

Holding companies are not the only means to protect assets from creditors. Both corporations and LLCs provide protection of an individual’s assets from business creditors. And having properly organized, separate LLCs or corporations keeps creditors of one business from reaching the assets of another business.

Holding companies are subject to the same formation, reporting, and maintenance requirements and fee schedules as other companies.  Each subsidiary within the holding company must also keep up with its own corporate governance in addition to its day-to-day management.  Adding the holding company framework creates more work for the business owner in filing and compliance, not only upon formation, but also with regular reporting each year.  More tiers of reporting and compliance brings unnecessary expense and added risk of a missed deadline or annual report. Therefore, the holding company framework is sometimes more trouble than it is worth.

If you are interested in having a discussion about what business structure is right for you, please give Jesson & Rains a call!

Our clients are busy and they sometimes forget to keep their information updated with the Secretary of State’s Office or file their annual reports; they pay for a registered agent who does nothing more than forward their mail; and they sometimes fall victim to scams like this and this. 

We’re offering a yearly plan that includes serving as our client’s registered agent and filing their annual report, among other things.  A description of the plan is attached to this email.  This plan helps to ensure your privacy (if your business is ever sued, the lawsuit will be delivered to our office’s address); you will be less likely to fall victim to a scam (we will sort through and destroy junk mail); you will be more organized and have less paper (we will scan and forward your mail immediately to your attention after sorting); and we will ensure that corporate records and Secretary of State records are kept up to date.
 
We’re also offering an upgraded yearly plan that includes unlimited access to attorneys throughout the year.  No more billing for .1 emails or .2 telephone calls.  We want to encourage people to contact us anytime they need us instead of being afraid to get a bill from us. 
 
This is a continued effort from us to offer flat fees instead of hourly billing.  Annual reports are due April 15, and they can be filed now, so this is a great time to switch over to having Jesson & Rains handle it.  Please contact us if you’re interested, and please forward to any busy business owners you think may need our help!

By Attorney Edward Jesson
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Whether good or bad, it is sometimes necessary to dissolve a corporation or limited liability company (“LLC”). If the business has no assets or liabilities, then closing down is relatively simple. However, business owners can get into trouble when they attempt to close down their businesses if it has remaining assets and liabilities. It is recommended that they work with an attorney. There are some subtle differences between dissolving an LLC and a corporation, but we are just going to use a corporation as an example below.

The first step in voluntarily closing a business in North Carolina is to file the articles of dissolution with the Secretary of State. Once the articles of dissolution are filed, the corporation still must adhere to its bylaws with regards to its directors and shareholders. However, the corporation is no longer allowed to carry on its normal business and must only do things in furtherance of winding up its affairs and liquidating. The North Carolina Business Corporation Act specifically states that a business may:

• Collect its assets;
• Dispose of property not to be distributed to shareholders;
• Discharge its liabilities;
• Distribute the remaining property to shareholders; and,
• Do any other act necessary to wind up and liquidate.

Any act further than those necessary to wind up and liquidate may invalidate the dissolution, which could have potential liability ramifications at a later date.

The next step in the process is liquidation. During this process, the owners of the business are responsible for selling assets and for settling the corporation’s debts. In the North Carolina Business Corporations Act, there are notice and publication procedures that a corporation can use to give notice of its dissolution or liquidation to creditors or potential creditors. While the Act does not impose any legal requirement to do so, it is beneficial for businesses to follow this procedure because it starts a clock and establishes deadlines within which creditors must bring claims.
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The potential claims against a corporation fall into two main camps: known claims and unknown claims. If a corporation sends written notice of its dissolution to known creditors, it can establish a claims due date of 120 days from the date of the notice. If the claim is not made by that deadline, the claim will be considered time barred. For unknown claims, a corporation must publish, among other things, notice of its dissolution in a newspaper in the county where the dissolved corporation has its principal office. This will start a five-year clock for unknown claims.

Generally, when liquidating a corporation, all assets of the corporation will be distributed to any creditors first and then to the shareholders. If the assets are not properly distributed (e.g. if a shareholder received assets instead of a creditor), then the aggrieved creditor could potentially file a lawsuit against the shareholder and against the directors who authorized the distribution.

As you can see, closing down a business can be a minefield for all involved. The attorneys at Jesson & Rains can help you close down your corporation or LLC properly or help you figure out alternatives to closing down your business.