1. Incorporating in the United States What type of entity and where?

2. Common Corporate Forms

3. The Basics: C-Corporation Ownership:  Entity is owned by shareholders, with no minimum number  Accommodates multiple types of stock (i.e., Common or Preferred)  Distributions must be proportionate to stock ownership within each class Liability:  Stockholder’s liability limited to amount of capital contribution  Therefore, protected from corporate creditors Tax Considerations:  Taxed at both the corporate and stockholder level

4. The Limited Liability Company

5. The Basics: LLC Most Common for Foreign Investors Ownership:  Instead of Stockholders, LLC ownership is determined by Membership  Members can include individuals, corporations, or foreign entities/individuals  Profits do not need to be distributed according to ownership percentage Liability:  Members enjoy limited liability protection, Liability potential is generally limited by a Member’s investment into the LLC Membership Interests is generally protected from the claims of creditors Advantages:  Not subject to “double taxation” like a C-Corporation  Flexible Corporate Structure (i.e., ownership, agreements, distributions)  Less corporate formalities No requirement that management be by a board of directors  Available to Foreign Individuals and Entities (unlike other corporate forms)

6. Businesses That Often use LLCs Real estate ownership entities Businesses with foreign investment Closely held investment companies  Can treat every investor differently Start-up entities with venture capital financing Closely held family businesses Professional firms

7. Example: Unequal Distribution Real Estate Ventures, LLC Partners agree to Equal Ownership BUT, only Lucas and Juliana actually work the business Nicholas is the “nervous” investor who only invests In a C-Corp, all profits would have to be shared equally in same class But, an LLC Operating Agreement can grant Lucas and Juliana greater percentage in profits than ownership interest LucasJulianaNicholas

8. Example: LLC Liability Real Estate Ventures, LLC enters into a contract with Harper Properties, Inc. Real Estate Ventures breaches the contract Harper Properties sues Real Estate Ventures for USD$1,000,000 If LLC formalities were followed, Lucas, Juliana and Nicholas need not worry Personal Assets remain protected Note: Real Estate Ventures’ assets are also protected from personal liability of its members.

9. Other Aspects of an LLC Some states require more than one member for full extent of protection  Example: In Florida, to properly maintain limited liability, an LLC must have at least two members Still protected from company debt in single member LLC But, personal creditor may foreclose upon your interest in a single member LLC if the judgment creditor shows that it’s judgment will not be satisfied within a reasonable amount of time. Subject to self-employment tax for members who are actively involved in management of company  Exception is for rental income, as such income is treated as passive income for real-estate ventures.

10. Florida or Delaware?

11. Florida, LLC vs. Delaware, LLC FloridaDelaware State Corporate Income Tax 5.5% of taxable income over $5,000.00 8.7% Personal Income tax None2.2% - 6.75% Franchise Tax NoneYes, based on size. Annual Entity Fee $138.75 Fee$250.00 tax State Sales Tax 6%None Dedicated Business Court Not really.Yes. If you’re buying in Florida, a Florida company probably makes most sense.

12. Conclusion: What Entity and Where? The Answer:  It depends on your particular circumstances.  BUT, it is not as easy as filing out a form on-line and forgetting about the rest. If you want the full protection of the corporate shield, you must follow ALL corporate formalities. Call or email for further information:  Alexander D. Brown, Esq. Office: 954-760-4909 Email: adb@trippscott.comadb@trippscott.com