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Entrepreneurial Forum. Presenters Timothy K. Cutler, Esq. Connie C. Dai, Esq. CUTLER P.C. 10 Milk Street, Suite 720 Boston, MA 02108 Kenneth Der, CPA,

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Presentation on theme: "Entrepreneurial Forum. Presenters Timothy K. Cutler, Esq. Connie C. Dai, Esq. CUTLER P.C. 10 Milk Street, Suite 720 Boston, MA 02108 Kenneth Der, CPA,"— Presentation transcript:

1 Entrepreneurial Forum

2 Presenters Timothy K. Cutler, Esq. Connie C. Dai, Esq. CUTLER P.C. 10 Milk Street, Suite 720 Boston, MA Kenneth Der, CPA, CFP Richard SooHoo, CPA FAS Corporation 1661 Worcester Road, Suite 104 Framingham, MA The Business Partner to Businesses and Individuals

3 Timothy K. Cutler, Esq. Practicing 24 Years 10 Years in Los Angeles & 14 Years in Boston Founded CUTLER P.C. in 2004 Served as a Mediator Completed Over 30 Trials in 4 States Overseen Legal Matters in 8 States Represented Start-ups and Emerging Companies in the Areas of Software, Internet, Retail, Engineering and Marketing Represented Chinese Companies Creates Legal Entities Drafts: Licensing Agreements, Contracts and Employment Agreements Handles: Employment Matters, Disputes Between Shareholders, Unfair Business Practices and Contract Disputes Handles: Purchase and Sale of Businesses

4 Connie C. Dai, Esq. MBA Practicing business, immigration and real estate Experience in cross border transactions, contract review and drafting, judicial internship, work and business visa, naturalization, green card petition Business and financial consulting in Canada Anti-trademark infringement management, joint venture negotiation, and IP training in Coca-Cola China Volunteer – unemployment Insurance appeals NECINA Engagement Officer J.D., Suffolk, MBA, University of Calgary, B.A., Shanghai Native Mandarin speaker

5 Kenneth Der, CPA, CFP Individual, corporate, trust tax returns and financial planning Founder and President of FAS Corp for 10 years Financial operations, risk management, controllership, operational analysis, internal controls, and corporate strategy Cisco Systems, Digital Equipment Corporation, and Price Waterhouse Coopers Adjunct at Babson College for 4 years MBA, UC Berkley BA, Tufts MST, Bentley Board member of AACA

6 Richard Soo Hoo, CPA Partner, FAS Corp Tax planning-business, individual, corporate, LLC, partnerships, non profits, estates, trusts, international, accounting services, retirement plans, audits Financial executive with extensive experience in financial operations, risk management, controllership, operational analysis, internal controls, and corporate strategy Dassault, National Grid, Getronics/Wang, Millipore/Waters, Texas Instruments, and Price Waterhouse Coopers MBA, Stanford BA, Harvard

7 Corporate & Business Law

8 Setting Up a New Entity Why is it Important to Have a Legal Entity? Liability Credibility Holding Intellectual Property Allows for Multiple Owners Disadvantages of Partnerships

9 What Type of Entity is Best For Your Business? “C” Corporation “S” Corporation Limited Liability Company or “LLC” Sole Proprietorship Partnership or Limited Partnership Delaware Entity

10 Management Issues Who Is The General? Fiduciary Duties Exit Strategies Bringing in Partners

11 Tax Planning for Entrepreneurs FAS Corporation

12 Tax Treatment of Start-Up Cost

13 Incorporating a Business Tax considerations Funding the corporation with asset transfers Cost of incorporation Organization costs Start up costs Corporate filing and on going taxes at both federal and state levels Administration and structure Board of Directors Director Fees Directors and Officers Insurance Meeting minutes Formality Recording of minutes

14 Tax Consideration When Forming a Corporation Contributed capital Cash for stock Transfer of assets for Stock under section §351 A nontaxable transaction to contributor as long as no cash or debt is received by the contributor Basis of the stock is the basis of the asset that is transferred Under section §267, related party rule: a loss is on a sale to the business is prohibited If the asset has declined in value consider other alternatives to contributing capital so as not to lose the loss for tax purposes

15 Tax Free Incorporation Conditions Non recognition of gain or loss on the transfer of assets and liabilities to a newly form Corporation ( C or S Corp) is mandatory when all the following are met: One or more persons transfer property to the new corporation The transfer is solely for stock( no debt, warrants or preferred stock) Other assets received is deemed “boot” and gain is recognized Control The persons making the transfer, taken as a group, must own at least 80% of the corporation immediately following the exchange( Voting powers and shares outstanding)

16 Corporation - Considerations IRS may not recognize the Corporation Was the Corporation under capitalized Cash flow issues Tax issues Was the Corporation used for personal reasons Co-mingling of personal and corporate assets Were transactions at “Arms Length” Was the purpose to convert personal expenses to business Must ensure that the Corporation has a legitimate business purpose and can pass the scrutiny of a true business vs. a hobby

17 Comparison of Single Owner Business Sole Proprietor C CorpS CorpSingle – Member LLC Admin SimplicityYesNo Fair Ability to transfer ownership No- Can transfer business assets Yes Yes- Becomes a multimember LLC Ability to raise capital Limited to owners capital and ability Very Good: Can have unlimited shareholders Good: Can have up to 100 Shareholders Very Good: Can add unlimited members Ability to shelter Income from Income tax Poor: all income is taxed at the owners marginal tax rate Fair: Marginal rates compressed compared to individuals Poor: all income is taxed at the owners marginal rate Ability to shield owner from Liability NoneLimited to capital invested Ability to shelter income from SE/Payroll tax PoorGoodFair: IRS can reclassify distributions as wages Poor: all income is subject to SE tax


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