Marc J. Soss, Esq. | (941) 928-0310
​2070 Ringling Blvd., Sarasota, FL

SUBCHAPTER - S CORPORATION

An S-Corporation has the same basic organizational structure as a regular Florida Corporation, but some of the tax advantages of a partnership and LLC. If your Florida Corporation meets the minimum requirements (domestically incorporated, less than 100 shareholders, one class of stock, all shareholders are U.S. citizens, etc.) you can elect via IRS Form 2553 to have it taxed under Subchapter S of the Internal Revenue Code. This will enable your Florida Corporation to avoid the “double taxation” – tax on corporate profits and shareholders’ dividends – that is characteristic of corporate entities. This is a result of the fact that an S-Corporation pays no federal income tax, except for tax on certain capital gains and passive income. Instead, the corporation's profits and losses "pass through" to shareholders, and profits are taxed at individual rates on each shareholder's Form 1040.

----------------------------------------------------------------------------- PIERCING THE CORPORATE VEIL

Corporations are designed to shield the assets of their individual owners. Public policy favors individuals investing money and taking risk to start a new businesses. If a new Corporation is not successful then the Corporation is liable for any debts or claims incurred, but the individual owner(s) (shareholders) are protected from the consequences of business failure unless the owner personally guaranteed Corporation obligations. In the event of a lawsuit by the Corporation’s creditors, the Corporation’s assets are at risk but the individual owner’s assets are protected by the “corporate shield.” Without the corporate shield, in theory, individuals would not risk their personal wealth in new business ventures.

The lawsuit protection features of a Florida Corporation are only effective to the extent  the Corporation is treated as a separate and distinct entity, apart from the individual. If a judgment creditor finds through post-judgment discovery that the debtor Corporation has no significant assets the creditor may attempt to convince the court that the corporate entity should not be respected and that the plaintiff should be able to sue the owners individually to recovery money owed by the debtor Corporation. This collection practice is referred to as “piercing the corporate veil.” In Florida, one partcular Supreme Court decision knows as the Dania Jai Ali  case explains the legal standard in Florida for piercing a debtor Corporation. Florida law makes it very difficult for a creditor to pierce the veil of a legitimate Corporation.

In general, Florida law does not allow creditor to pierce a Corporation as long as the Corporation is established and operated to conduct a bona fide business venture and as long as the Corporation operates as a distinct and separate entity from its individual owners. Piercing may be permitted if the debtor establishes a Corporation with the intent to defraud creditors, or if the debtor operates the Corporation as his or her personal alter ego by commingling personal assets and debts with those of the Corporation.

Defense:

The first defense against piercing the veil of a  business is for the owner to have  a proper asset protection plan to protect his or her personal assets from the potential liability from all sources. If the owner’s  personal assets are protected from creditors then attempted veil piercing will provide no additional asset targets for the creditors.

The second defense is to follow all corporate formalities: By-Laws, Directors, Certificates of Ownership, a Corporate Book with minutes of annual director and shareholder meetings and any similar formalities.This includes (i) conducting a real and legitimate business; (ii) not commingling business and personal bank accounts; and (iii) conducting business in the Corporate name.  

SARASOTA & MANATEE COUNTY FLORIDA

CORPORATE LAWYER


FLORIDA CORPORATION - INCORPORATION

Articles of Incorporation. In Florida, the Articles must include the following:

· The name of the corporation (must contain “Inc.”, “Corp”, “Corporation”, etc.),

· The corporation’s authorized shares (maximum number of shares the corporation is authorized to issue, and the distinguishing characteristics of classes or series),

· Whether the shareholders are to have preemptive rights (to maintain their fractional ownership of the corporation by buying a proportional number of shares of any future issue of common stock),

· The address of the corporation’s initial registered office,

· The name and address of the corporation’s initial registered agent,

· The names and addresses of the incorporators, and

· The address of the corporation’s principal office, if known, and the mailing address of corporation.

The Articles may include:

· The number of directors constituting the initial Board of Directors and their names/ addresses,

· The par value of the stock (the minimum purchase price for each share),

· The imposition of personal liability on shareholders and the extent, if any,

· The corporate purpose, if any, and

· Any other provision regarding the management of business, corporate powers, the directors or the shareholders.

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CORPORATE BYLAWS

The Bylaws of a Florida Corporation set forth internal rules and procedures for the corporation, including the existence and responsibilities of corporate offices, the size of the board of directors and the manner and term of their election, how and when board and shareholder meetings will be held, who may call meetings, and how the board of directors will function. The corporation should keep a copy at its principal place a business.

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FLORIDA SHAREHOLDER AGREEMENT

A Florida Shareholders Agreement is a legal document that flushes out the shareholder’s responsibilities to each other. A shareholders’ agreement may be key to the successful operation of your corporation and is a private contract between shareholders. You can thus insert into your shareholders’ agreement whatever
terms you would prefer to remain confidential from third parties.

Shareholders Agreement - should outline the following: 

·  The nature and amount of initial contribution of capital/ funds to the business, and the method by which future contributions are to be made, 

·  Non-competition terms,

·  Stock valuation formulas, 

·  Buy-out terms and conditions (Buy-Sell Agreement), 

·  The governing law of shareholders’ disputes, 

·  The ownership and voting rights of the shares, including restrictions on their transfer, preemption rights, rights of first refusal (i.e. shareholders’ rights to maintain their fractional ownership of the corporation by buying a proportional number of shares of any future issue of common stock), etc., and 

·  The manner of control/ management of the business, such as the method for electing directors/ officers, when to impose super-majority voting requirements (i.e. when/ what percentage of shares must vote in favor of crucial matters).