Latest Articles from Jeramie Fortenberry
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Using LLCs to Protect from Inside and Outside Liability
Because LLCs protect against both inside and outside liability, they are usually a better choice than corporations.
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Holding Company Structure for LLCs
If each LLC is properly formed and operated, the legal protection offered by the holding company structure is well-settled. LLCs protect assets and limit liability. Forming a single LLC protects the owners (members) from personal liability for debts and obligations of the LLC. As long as the LLC is properly formed (including a well-drafted operating agreement)…
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Charging Order Protection for LLCs
The operating agreement can include provisions to further protect members from outside liability. Charging-Order Protection A charging order is a judicial remedy that allows creditors of an LLC owner (member) to seize any distributions that would be made to that member. To obtain a charging order, a creditor must obtain a successful judgment against a member…
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Texas Series LLCs
Texas is one of a handful of states that recognize series limited liability companies. A series LLC is similar to to a corporation with several subsidiaries or an LLC holding company structure. The series LLC comprises a parent LLC and other LLCs that are distinct from each other for liability purposes. The parent LLC controls the…
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Excess Benefit Transactions for Nonprofit Organizations
As stated in our discussion of inurement, the prohibition on private inurement is absolute. In theory, even one dollar of private inurement could result in loss of tax exemption. Because of the harshness of the penalty, private inurement was infrequently invoked. This effectively meant that most inurement was not penalized. To address this enforcement deficiency,…
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Responsibilities of Non-Profit Officers and Directors
Non-profit board members are responsible for the organizations that they govern. And although the duties that officers and directors of a non-profit organization owe to each other and to the organization are determined primarily state law, Congress and the IRS have each become increasingly involved in recent years. The IRS has taken the lead in…
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What is Private Benefit? Nonprofits Need to Know
Private benefit has been defined as “nonincendental benefits conferred on disinterested persons that serve private interests.” The concept of private benefit is not explicitly stated in the Internal Revenue Code. It is derived primarily from the Treasury regulations, which provide that an organization is not organized and operated exclusively for one or more charitable purposes…
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The Inurement Prohibition & Non-Profit Organizations
Non-profit organizations are subject to what is known as the nondistribution constraint. Simply stated, this means that non-profit organizations cannot distribute profits to those who control it. The nondistribution constraint is the fundamental distinction between non-profit organizations from for-profit organizations. In the Internal Revenue Code, the nondistribution constraint is embodied in the prohibition against inurement. “Inurement” is an arcane…
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Conflict-of-Interest: What Non-Profit Organizations Need to Know
The laws of most states require officers and directors of non-profit organization to discharge their duties in accordance with his good faith belief that they are acting in the best interests of the organization. Doing so protects them from liability acts or omissions in connection with their responsibilities. But, as a general rule, officers and…
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Taxation of LLCs and Partnerships
Unlike C corporations, the income of LLCs and partnerships is subject to a single level of tax at the partner level.