The first significant changes to DC Code Title 29 Business Organizations takes effect January 2012:
Corporations -
The statutory close corporation (which relaxes many corporate formalities) is eliminated, promoting the corporate form as a choice meant for larger enterprises with a division between shareholders and management’s board of directors. Effective next year, If no written shareholder agreement exists, the board has control and, if none exists, the shareholders must elect a board to govern. If not set forth in the bylaws or articles or incorporation, the shareholder agreement should be a separate document, noted on all outstanding shares.
Tax Tip – For simplification, many small closely held corporations may consider drafting a shareholder agreement to eliminate the board of directors and, subject to tax implications, convert to an Limited Liability Company (LLC).
Limited Liability Companies –
The new law provides for changes that take effect January 2013, though an existing LLC may opt to be subject to the new laws as of next year. The operating agreement no longer must be in writing, so subsequent verbal understandings may act to amend a written agreement. The new act provides for the creation of series LLCs – a discrete membership interest in an asset class within an LLC, afforded its own limited liability. The series concept eliminates the need to create additional LLCs to protect separate assets.
Tax Tip – For a series LLC interest to be entitled to limited liability, assets must be accounted for separately and separate tax returns should be filed.
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