Category: Uncategorized

JOHN CUNNINGHAM’S LLC CONSULTING SERVICES

By , May 27, 2016 10:34 am

John Cunningham provides consulting services on LLC legal, tax and practice issues by phone and e-mail to LLC lawyers forming LLCs, converting non-LLC entities to LLCs, and representing clients involved in internal LLC disputes. His hourly rate for these services is $400. When lawyers call him to obtain forms for particular LLC formations, the process usually takes about 15 minutes and the fee is $100 payable by check or credit card.

You can contact Mr. Cunningham for these services by e-mail at lawjmc@comcast.net and by phone at (603) 856-7172.

For Mr. Cunningham’s bio, please click here.

JOHN CUNNINGHAM’S LLC LEGAL SERVICES AND SEMINARS

By , October 16, 2015 12:34 pm

John Cunningham forms LLCs, converts corporations and other non-LLC entities to LLCs, and handles other LLC legal and tax matters for his clients, including disputes among LLC members and managers. In handling these matters, he frequently co-counsels with other lawyers.

John also teaches nationally acclaimed seminars on LLC law, tax and practice in person and by Skype for bar associations, law firms, accounting firms and business groups. In connection with his seminars, he provides attendees with extensive seminar outlines and forms.

If you wish to contact John about his legal services or seminars, you can reach him by phone at (603) 856-7172 and by e-mail at lawjmc@comcast.net.

John is licensed to practice law in New Hampshire and Massachusetts.

USING SINGLE-MEMBER LLCs TO CREATE PARENT/SUBSIDIARY STRUCTURES

By , November 27, 2010 4:17 pm

Protecting business assets through parent/subsidiary structures—overview. As a general rule, business entities that own valuable business assets and conduct business operations that could lead to third-party claims should not conduct these operations directly.

Rather, unless there are significant considerations to the contrary, it should hold these assets directly but should conduct its operations through a wholly owned subsidiary entity, and it should lease, lend or license its assets to this subsidiary. Under a properly structured parent/subsidiary structure of this kind, if the subsidiary’s operations give rise to a third-party claim, the parent, if it has not participated in the subsidiary’s operations, should not be subject to the claim and its assets should not be at risk for the claim.

Companies that decide to create parent/subsidiary structures must choose between two types of entities as their subsidiaries—namely, single-member LLCs and single-shareholder corporations. In most cases, the better choice is single-member LLCs. These entities, like single-shareholder corporations, can provide their parents with a strong statutory liability shield. However, because single-member LLCs are subject to no significant statutory formalities, they are simpler to manage than single-shareholder corporations (which are subject to numerous such formalities) and they face a lesser risk of veil-piercing than single-shareholder corporations.

In addition, under applicable default statutory rules, the very simple management structures that can be provided for in the operating agreements of single-member LLCs owned by entities is generally much more user-friendly than the default statutory management structure of single-shareholder corporations.
Illustration. To illustrate the parent/subsidiary structure outlined above:

XYZ, Inc. manufactures and sells widgets. Its annual gross sales receipts are $20 million. It owns tools, vehicles and equipment (its “Hard Assets”) worth $5 million; it owns valuable patents, trademarks, copyrights and trade secrets (its “Intellectual Property”); it has average receivables during its fiscal year of about $ 1million; and it maintains in its bank account about $1 million as operating capital.

As long as XYZ’s board is willing to accept the modest additional complexities involved in operating through a subsidiary rather than through XYZ as a single unitary entity, XYZ should restructure itself as follows:

• It should create a single-member LLC (“XYZ Operations”—
which I’ll refer to here simply as “Operations”) to conduct
all of its product design, manufacturing and sales
operations.

• It should lease its hard assets to Operations.

• It should license its Intellectual property to Operations.

• It should lend to Operations the operating cash that
Operations needs.

Finally, in order to document its separateness from Operations and thus to minimize the risk of claims from business activities of Operations, XYZ should formalize all of its significant relations with Operations in written agreements that contain arm’s-length terms. These agreements should include a lease agreement; a licensing agreement; a loan and security agreement; a licensing agreement; and, last but not least, an operating agreement governing the relationship between XYZ as the parent of Operations and Operations as its subsidiary.

The operating agreements of single-member LLCs owned by entities. What should be the goals of the operating agreement between XYZ and XYZ Operations? I will address this question in my next post in this blog.