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!
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By Attorney Edward Jesson - Updated 3/2/2024 (Originally Published 3/2/2023)
There are numerous to-do items and deadlines business owners must keep up with to successfully run a business. However, many business owners forget that they must file an Annual Report with the North Carolina Secretary of State to keep their business in active and good standing with the state. The Annual Report is used to keep the business records up to date with the Secretary of State. Most businesses formalized with the Secretary of State’s Office need to file an Annual Report, such as Business Corporations, Limited Liability Companies (LLC), Limited Liability Partnerships (LLP), and Limited Liability Limited Partnerships (LLLP). Non-Profits, Limited Partnerships, Professional Corporations (PCs), and Professional Limited Liability Companies (PLLC’s) do not have to file an Annual Report. There is also a filing fee due with the Annual Report. For LLC’s and partnerships, the fee is $200, and for corporations, the fee is $25. The due date for your business’s annual report depends upon the type of business, but generally April 15th is the deadline for most businesses. For corporations and partnerships, the annual report is due to the Secretary of State’s Office the 15th day of the fourth month following the entity’s fiscal year’s end. For example, if your fiscal year ends on December 31, your annual report for that year is due on April 15th. Jesson & Rains offers a yearly plan for businesses that includes filing the annual report, among other things. 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. As a part of this plan, Jesson & Rains will also assist in filing the necessary documents in response to the new Corporate Transparency Act (“CTA”), which requires companies to disclose beneficial owner information to the U.S. Department of Treasury’s financial crimes agency “FinCEN”. We also offer an upgraded yearly plan that includes unlimited telephone access to attorneys throughout the year. The consequence for not filing an Annual Report and/or paying the fee is that the Secretary of State can administratively dissolve your business. This means that you can lose the liability protection you enjoy by being a business, and a creditor may be able to come after your personal assets. If you have questions about filing your Annual Report or want to learn more about the annual plan services offered by our firm, you can click HERE, or feel free to reach out to Jesson & Rains directly! By Attorney Kelly Jesson
One of the main reasons why business owners formalize their businesses by forming an LLC or a corporation is so that their personal assets and liabilities can be separated from their business assets and liabilities. If the business is sued, the owner’s personal assets will be protected, and vice versa. However, in certain circumstances, a court may disregard the corporate entity and hold its owners personally liable for business debts if the corporate entity, at the time, had no separate mind, will, or existence of its own. In making this determination, a court will consider, among other factors, whether a business has complied with “corporate formalities.” Corporate formalities include issuing and following bylaws, issuing shares, electing a board of directors, holding annual meetings of the board and shareholders, sending proper notice of these meetings, and keeping minutes and other corporate records. Owners should not intermingle business and personal assets or employees. Owners should not deal with third parties in such a way that the third party does not know they are doing business with an LLC or a corporation. Some closely-held corporations may enter into a shareholder agreement in lieu of some of the above requirements. With an LLC, some of these corporate formalities do not have to be observed, since LLCs are subject to fewer formal statutory requirements than are corporations. If the owner of a business complies with corporate formalities and consistently lists the business’s name on contracts and other documents, third parties will be considered to have voluntarily dealt with the business, and a court will be less inclined to hold the individual owner personally liable for the business’s debts. However, if corporate formalities are being ignored, even inadvertently, that could lead to a court ignoring the existence of the LLC or corporation, which may result in the business owner’s personal assets being at risk. If you or someone you know needs assistance bringing a business in line with its required formalities, please give Jesson & Rains a call! We offer flat fee packages for these formation documents. We also offer flat fee annual plans that include preparing annual meeting notices and minutes, filing annual reports with the Secretary of State’s office, and other legal services. More information can be found here. We work with our clients to reduce the likelihood that they will ever be responsible for business liabilities. By Attorney Kelly Jesson Jesson & Rains, PLLC, is offering a couple of new business plan packages that include discounted legal services. 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; t |