Legal Entity Establishment: Choosing the Right Legal Form for Your Georgia Startup

By Kent Bailey, Esq. – kbailey@thriftlegal.com

#GAStartUpLawyer

Choosing the proper legal form is one of the single most important decisions in the infancy of an Entrepreneur’s startup endeavors.  It will guide how decisions regarding the operation of business will be made, the exposure to liability of select members, and rules regarding taxation.  It is fair to assume that most, if not all, entrepreneurs have a sound foundation in the principles of business.  A large stumbling block for many of these same entrepreneurs is wading through the complexities of choosing the correct legal entity for their Georgia business.

Choosing the correct business formation depends on a variety of factors that are case specific to each small business owner’s individual situation and objectives.  Each entity carries with it its own pro’s and con’s that must be carefully weighed against the would be business owner’s needs, with an eye for optimizing success of the organization.  What follows are the most common entities and some information regarding each of them.

Sole Proprietorship

A Sole Proprietorship is the easiest type of business to form.  The business usually operates in the name of the owner.  There is no formal filing with the state to create this legal entity, and a business and or occupational license is all that is required to begin.  While this is the easiest business form to create, it also carries one of the largest drawbacks.  Personal and business activities are not distinguished in a Sole Proprietorship, meaning that all income from the business passes through to the owner or sole proprietor.  There is also no shield from liability, meaning that the business owner is personally liable to all debts of the business.

Partnership

Similar to a Sole Proprietorship, a partnership can be very simple to form, and is merely an agreement regarding a business relationship between two or more people who join to carry on a trade or business.  Where a Sole Proprietorship has a single owner and decision holder, a Partnership has at a minimum two members who are responsible for the carrying on of the business.  These partners contribute capital, labor, or skill to the organization and in return share in the profits and losses.  Generally speaking, a Partnership carries with it unlimited liability and pass through taxation, although some exceptions to this exist.  While a formal, written partnership agreement is not necessary to create a partnership in Georgia, it is strongly recommended.

C – Corporation

A C Corporation differs from a Sole Proprietorship or Partnership in that it is a unique legal entity that exists distinctly and separately from its owners.  It requires more steps to be properly formed, and must be registered with the Secretary of State in Georgia.  Ownership of a corporation is governed by shareholders of the entity who appoint a board of directors to oversee corporate decisions and policies.  This board of directors can elect officers of the company to manage day to day affairs.  In a start-up or small business, these officers are also typically the shareholders.  With the drawback of the C Corp. being the complexity of the organization, the benefit of this entity is the legal separation of assets and liability from the owner.  Income from the Corporation is taxed to the corporation then sent to the individual in the form of a distribution.  This is referred to as “double taxation” however the benefit of this formation is that the liability of the corporation does not extend to the personal assets of the owner.

S – Corporation

An S – Corporation is comprised of the same formation that exists for a C – Corp. above save for one difference.  S – Corp. Status is an election made to have the corporation’s income and expenses taxed to the owner’s via “pass through” discussed above.  It offers the same liability safe havens as a general corporation, but avoids the “double taxation” that exists within a C – Corp.  There are limitations as to who may qualify for organization under an S – Corp.

Limited Liability Company

A Limited Liability Company; or LLC is a hybrid entity that combines the limited liability characteristics of a corporation with the beneficial tax structure of a partnership.  While requiring more formality and steps to create than a Sole Proprietorship or Partnership, an LLC enjoys the same flexibility that these entities share with regards to pass through taxation and ease of ownership decision making.  LLC’s also enjoy the benefits of corporate formation with regards to limitation of liability, while avoiding the rigidity of double taxation, required shareholder meetings, complex decision making, or issuance and management of stock.  Limited Liability Companies are popular among small business owners in the state of Georgia.

For more resources on starting your Georgia business, reference the Secretary of States “First Start Business Guide”, at http://sos.ga.gov/admin/files/First_stop_business_guide.pdf.  If you wish to retain legal help in evaluating, starting, or managing your Georgia small business or start-up, contact Thrift & McLemore by email at info@thriftlegal.com or by phone at 678-671-4031 to discuss how we can assist you in creating your Georgia business today.

Please visit us on the web at www.thriftlegal.com.

#GAStartUpLawyer

Thrift & McLemore Announces Kent Bailey as a new Attorney Hire

Please join us in congratulating Kent Bailey on becoming the newest attorney in our Atlanta office.

Mr. Bailey was admitted to the Georgia Bar in 2017, receiving his JD from Georgia State University College of Law that same year.  Prior to law school, Kent worked for a publicly held consulting corporation as well as a privately held petroleum retailer here in Atlanta.  He brings his background in corporate negotiation and financial analytics to Thrift and McLemore where he applies these skills to the practice of law.  Mr. Bailey received his BBA in Economics from The University of Georgia’s Terry College of Business.

Attorney Kent Bailey

Armada Hoffler Announces Two Mixed-Use Developments in Baltimore, Atlanta (Credit: REBusiness)

BALTIMORE AND ATLANTA — Armada Hoffler Properties Inc. (NYSE: AHH), a commercial real estate developer and investor based in Virginia Beach, is participating in two new mixed-use projects in Baltimore and Atlanta. The REIT’s wholly owned subsidiary, Armada Hoffler Construction Co., will serve as general contractor for both developments.

 

The Interlock is a public-private partnership between S.J. Collins Enterprises and Georgia Tech. The mixed-use development will be located in Atlanta’s West Midtown district about a mile from Georgia Tech’s campus.

In Baltimore’s Inner Harbor East district, Armada Hoffler is developing Wills Wharf, a 12-story mixed-use building that will anchor the 27-acre Harbor Point development. Armada Hoffler co-developed the other components of Harbor Point with Beatty Development Group, including the 500,000-square-foot Exelon mixed-use tower, the 260,000-square-foot Thames Street Wharf office building and Point Street Apartments.

Situated on the waterfront of the Inner Harbor, the $117 million Wills Wharf project will span 325,000 square feet of office and retail space and will feature a 156-room Canopy by Hilton hotel on the top four floors. Armada Hoffler expects to deliver the building in the first quarter of 2020.

“Wills Wharf represents the latest evolution of a relationship with the principals of Beatty Development Group that has spanned over two decades,” says Louis Haddad, president and CEO of Armada Hoffler Properties. “We are excited to continue our relationship with Beatty Development Group in leading Baltimore’s urban renaissance and creating the city’s newest contemporary mixed-use neighborhood.”

In Atlanta, Armada Hoffler is providing mezzanine debt to help fund the office and retail portions of The Interlock. The project is a public-private partnership between master developer S.J. Collins Enterprises and Georgia Tech, which will serve as the ground lessor and anchor office tenant. The development will be located at the corner of Howell Mill Road and 14th Street in Atlanta’s West Midtown district, about one mile northwest of Georgia Tech’s campus.

The Interlock will include 200,000 square feet of office space, with Georgia Tech committed to occupy 50,000 square feet. The project will also include 90,000 square feet of retail space, 350 apartment units, 70 single-family townhomes and a 125-room boutique hotel. No construction timeline or price was disclosed, but Armada Hoffler expects to break ground by the end of the year.

“We are excited to forge a new relationship with Georgia Tech and to expand our strategic partnership with S.J. Collins,” says Haddad. “The Interlock represents the latest in our portfolio of investments in high-profile, mixed-use, public-private partnerships in the Southeast. We look forward to expanding our geographic reach into West Midtown Atlanta.”

Founded in 1979, Armada Hoffler Properties currently has seven other projects in its development pipeline across the Carolinas and Mid-Atlantic. The REIT’s stock price closed on Monday, July 30 at $15.08 per share, up from $13.26 a year ago.  — John Nelson

Porsche’s Airport Hotel Is Pampering Dogs with Dinner and Drinks (Credit: Eater Atlanta)

Solis Two Porsche Drive hotel and Apron restaurant are going the extra mile with their menu offerings for dogs flying the friendly skies

Porsche’s posh Solis Two Porsche Drive hotel located at Hartsfield-Jackson International Airport now offers “Sit, Stay, Solis” for guests traveling with their dogs. The Porsche Experience Center hotel provides an in-room dog bed, a dedicated dinner menu, and even a happy hour for dogs at Apron restaurant.

Upon check-in, guests traveling with their dogs will receive a dog bed, crate, and food and water bowls to keep their canines comfortable in their hotel rooms. Owners can then take their pups down to Apron’s dog-friendly patio for a special menu developed by executive chef Derrick Green with treats, ice cream, and “pupsicles.”

Once a month, Apron is hosting “Puptails on the Pawtio” where dogs are treated to grooming and training sessions while their owners listen to guest speakers and attend book signings. On-site adoptions days are also in the works. The next dog adoption day is scheduled for Saturday, August 18 with Lifeline Animal Project.

A $75 non-refundable pet fee is required upon check-in at the hotel. There is no weight limit for dogs staying at Solis Two Porsche Drive. Sorry, only two pets per room.

https://atlanta.eater.com/2018/7/23/17602122/two-solis-porsche-drive-dog-friendly-menu-atlanta

This Year’s Atlanta Metro Export Challenge to Launch With July 18 Event

The Atlanta Metro Export Challenge, which has distributed hundreds of thousands of dollars since 2016 to help local exporters with their global sales journeys, is returning again this year with backing from JPMorgan Chase

Administered by the Metro Atlanta Chamber but open to firms from the 29-county region, the challenge will hold an information session and kickoff meeting at the NanoLumens office in Peachtree Corners at 4 p.m. July 18. 

There, potential participants will hear about how the challenge has helped companies hone their strategies and receive the financial boost needed to enhance existing sales or jumpstart international growth. 

And this recap won’t just be coming from the organizers: previous winners from the last two years will be on hand to provide their first hand testimonials about the experience. 

Many have said that the challenge — and the broader thinking it fosters — has catapulted their companies into positive new territory. 

One example is Triatek, which won last year’s pitch competition to the tune of $20,000 — and that was after the first-round victory that saw the maker of ventilation systems for hospitals and research labs take home $5,000. 

Triatek was bought by Johnson Controls Inc.  shortly after its export-challenge victory, and company leaders say having a global footprint, a process accelerated by the challenge, contributed substantially to its being seen as a promising acquisition target. 

Cars 360, another export-challenge winner with app used to take 360-degree photo for car sales listings, was acquired by Carvana, the company seeking disrupt the car dealership process through technology and simplicity. 

For interested companies, here’s how the process works: Companies apply for a grant by outlining practical plans on how they would use $5,000 to generate more export sales. Thirty will be selected as first-round winners, receiving reimbursements for expenses in sums up to that amount. Then, those winners will be invited back later in the year for a pitch competition for the possibility of winning an additional $5,000, $10,000, or $20,000. 

Start the application process here, and register for the informational event here

Editor’s note: Global Atlanta is an organizing partner of some Atlanta Metro Export Challenge events.

Scenic Mountain RV Park nominated for second-consecutive year (Credit: Union Recorder)

Credit: Union Recorder

Editor’s Note: This is the fourth and final entry in our series spotlighting the four finalists for the Milledgeville-Baldwin County 2018 Small Business of the Year Award. The winner will be announced at the annual Chamber gala Saturday evening.

For almost five years now Scenic Mountain RV Park and Campground has been under the ownership of Butch Shaffer. 

And for two years in a row, the 72-space park has been selected as a finalist for the Milledgeville-Baldwin Chamber of Commerce’s Small Business of the Year Award. 

Scenic Mountain boasts tons of amenities for both its short- and long-term guests. There’s a pool to help kids and adults escape the Georgia heat, fire pits to keep them warm when it’s cold, and full hook-ups (water, electric, and sewage) that help make RVs and campers feel like home.

Alicia Dallago, marketing manager for Scenic Mountain, was asked by the owner, Shaffer, to come onto the staff about four years ago. She is originally from Argentina but lived in Pittsburgh, Pa. for 40 years where she and Shaffer met. Dallago’s accent is very different from the Southern twang commonly heard around Milledgeville, and she admitted to being a little nervous about going into business in an unfamiliar area. 

“‘Wow!’ That’s my reaction,” Dallago said when asked how it feels to be chosen as a finalist for the second time. “It’s really a very, very nice feeling. Being a foreigner that talks funny and that came from the north to a small town, I had my doubts how I was going to be received, and oh my gosh was I wrong. I feel like I’m at home because well, I am home. Being nominated for the second time is just great.”

When Shaffer took over Scenic Mountain a little more than four years ago the park was in rough shape, as described by Dallago. Money was poured in to make the park less of a stopover and more of a destination.

“When we bought the park it was the kind of RV park where people would come for one night, leave early in the morning, and not think twice about staying longer,” Dallago said. “Now they come for one night and end up staying a week. They come back and bring their friends, too. They spend $40 a night here, but they also buy groceries, gas or diesel fuel, and they go to restaurants. It helps the economy of Milledgeville.”

One would think that the summer would be the busiest time of year for a campground. Kids are out of school, so it’s easier for families’ schedules to come together and allow for some time to get away. But the marketing manager said that Scenic Mountain is always busy with both short- and long-term guests coming to enjoy time out of their homes and away from their busy day-to-day lives. The local campground has also served as a sanctuary for those escaping the effects of hurricanes and tropical storms that land on the Georgia coast. Dallago said they have put evacuees anywhere that water and electrical hook-ups could be found. In the same vein, Scenic Mountain is in the process of creating a storm shelter for its guests for when hazardous weather makes its way through the area.

The park often receives compliments on its friendly staff, cleanliness, and spacious sites, according to Dallago, all of which are a point of pride for the local small business. The campground staff also seeks to get to know those making the park their temporary homes with potluck dinners and ice cream socials that take place on some of the bigger holidays throughout the year. 

“A lot of times RV park owners just check people in and don’t interact with their guests,” Dallago said. “Well, we really interact with our guests. Butch and I, a lot of times, drive around in our golf cart to say hello to everybody.”

Scenic Mountain strives to do business the old-fashioned way. Many RV parks and campgrounds accept reservations online, but Scenic Mountain chooses not to for a couple of reasons. Dallago and Shaffer like doing things with a more personal touch, but also because guests who planned on staying only one day often decide they aren’t quite ready to leave making it impossible to give someone who might reserve a particular space online that spot. Many would deem that as a good problem to have.

Scenic Mountain RV Park and Campground is located at 2686 Irwinton Road and can be reached by phone at 478-454-1013.

RV warranty lets manufacturer forgo covering repairs

Even though the buyer of the recreational vehicle described it as a “jalopy,” the 7th Circuit of Appeals found the warranty was built solidly enough to prevent the manufacturer from having to cover the repairs.

Nicholas Knopick bought a $414,583 Jayco RV at a dealership in Iowa in July 2012, but he signed the purchase documents and took title on behalf of Montana Freedom Rider LLC, a company he controlled. Almost immediately after the sale was complete, Knopick began having trouble with the unit. He said it leaked, smelled of sewage and the features were poorly installed.

Although Jayco repaired the RV twice at its manufacturing facility in Indiana, Knopick was not satisfied and sued the company. The U.S. District Court in for the Northern District of Indiana granted summary judgment to Jayco, and Knopick appealed to the 7th Circuit.

District Court Judge Jon DeGuilio ruled Knopick had no rights under the warranty because the RV was actually purchased by a business. The language in the two-year limited manufacturer’s warranty specifically states it does not cover any RV used for commercial purposes or purchased in a business’s name.

Before the appellate panel, Knopick argued Jayco waived the “business-purpose RV” exclusion by performing some repairs at no charge. The company was treating the vehicle as if it were covered by the warranty.

The 7th Circuit disagreed in Nicholas Knopick v. Jayco, Inc., 17-2285. The panel pointed out the warranty also included a provision that stated any fixes done on an RV bought by a business would be considered “good will” repairs and would not alter the terms of the warranty.

Under Knopick’s waiver argument, the appellate court said, merchants who go beyond their contractual duties would risk obliging themselves to perform new and broader duties. This could discourage amicable resolutions to minor commercial disputes.

“In business generally and in consumer markets, a contracting party’s willingness to go beyond her strictly enforceable legal obligations is a key commercial lubricant,” Judge David Hamilton wrote. “It facilitates trust, long-term relationships, repeat customers, and referrals.”

Top 10 Spots For Atlanta Dogs to Take Their Humans (Credit: Georgia Voice)

Atlanta has no lack of pet-friendly facilities. Below is a list of such institutions, carefully groomed to our exacting standards. At long last, the rewards for the contest of “Who’s a good boy?” may be listed.



ParkGrounds Coffee on Flat Shoals Avenue came from a simple notion: What if we built a cafe, and dogs came? ParkGrounds had a dream, and that dream involved building a fenced-in dog park. You drink coffee, the canines socialize.

Lucky’s Burger and Brew was named for the owners’ Golden Retriever. The interiors are stocked with images of its namesake. There are three locations, and the setup was designed to accommodate dogs. Featuring menu entries like the Dogfish Sandwich, it’s hard to argue against the thematic unity of Lucky.

The Piedmont Dog Park. There are three acres, and enclosures where the quadrupeds can go nuts in a the most sociable way. Stay for a while, and enjoy Atlanta’s blessing and curse, the omnipresent sun.

Joe’s on Juniper. The Midtown watering hole has tavern charm and dog relevance. Like many groovy Atlanta standbys, Joe’s comes complete with a lengthy catalog of cocktails and an impressive checklist of beers to consume. And, like many of these other institutions, they have an outdoor area for dogs.

Ladybird. The spot in front of Ladybird is called the Grove. You’ll be using it from here on out. Don’t worry. There are lots of other pet-dads and moms out there too. Look for it near the Krog and Ponce markets.

Perk-n-Pooch. Behind the Gwinnett College Building, between LA Fitness and Canton Cooks II, lives one of the crown jewels of the Atlanta dog scene. Perk-n-Pooch is a dog-wash and coffee cafe, but it’s so much more: a testament to the crossover appeal of human/dog interests, and the ingenuity of business innovation. You can wash your dog and score a shake. How can you beat that?

Park Tavern. The Tavern is a polestar of the Atlanta nightlife scene, and its famous hospitality extends to man’s best friend. Like the other entries in this list, there’s an outside area (see Park, Piedmont) and a decent view (see Atlanta, skyline of). Parking is your own concern. Regardless, your dog will still love you.

Publico Atlanta gets a nod on this list because it has a rare feature in Atlanta pubs: The patio has grass. Yeah, you heard me. That nature stuff? It’s back in style. Of course, there’s more, including a VIP menu, which ends up standing for “Very Important Puppy.” What’s on the list? Treats. Better still, the menu sales go to the Atlanta Humane Society.

Memorial Drive’s Grindhouse Killer Burgers doesn’t have actual grass in its patio area, but it has something close — Astro-Turf is soft stuff, after all. Throw in tins of complimentary water for the four-legged guests, and this is another picnic-table patio that’s worth your time.

Midway Pub on Flat Shoals Avenue is as pet-friendly as the rest of these entries, but I include it on the list because there’s a tiki bar on the weekends. I’d like to address that: a tiki bar and a dog-friendly patio. How often do those two elements cross over?

Thrift & McLemore Salutes Our Troops And Celebrates Our Veterans!

As we celebrate America’s Independence Day, we also salute our troops and thank veterans for their service.

We also recognize that disabled veterans need to know what resources are available to them so they can get the support they need and deserve.  In fact, there are many resources available for veterans with serious injuries.

The Reeve Foundation has a great Military and Veterans Program (MVP).  They help our service men and women, whether they are paralyzed through combat related, service related, or non-service related events.

Paralyzed Veterans of America provides updates on research and education for spinal cord injury, a great list of mobility resources, employment resources and more at www.pva.org.

PVA also partners with the Care Cure Community. You can find an online forum on their site where member of the SCI community can post questions and support others: http://sci.rutgers.edu/

The U.S. Department of Defense has a Warrior Care division with many available resources as well, including caregiver resources and adaptive sports programs for Vets.  Warrior Care has an annual event, Warrior Games, featuring multiple sporting events with athletes representing teams from the Army, Navy, Marine Corps, Air Force and U.S. Special Operations Command and British Armed Forces. For more information please click here to visit the site.

Operation Rise and Conquer is another great military program through the Adaptive Sports Center in Crested Butte, Colorado.  The center provides high-quality adventure activities for military service personnel, helping to empower and inspire wounded soldiers and veterans to regain confidence and trust in themselves and others.

We wish everyone a happy and safe 4th of July, and we thank our veterans for their service.

Craig and Ryan

 

Dealing With The Commercial Foreclosure Process (Borrowers and Tenants)

If a commercial borrower (or commercial tenant) falls behind on commercial building payments (or lease payments), the lender or lessor can declare a default and foreclose on the property.  The execution of a mortgage or deed of trust (or lease agreement) creates a security interest in the property that gives the lender the right to start foreclosure proceedings to force a sale of the property (or eviction) upon the borrower’s failure to pay the loan/lease according to terms.  The good news is that lenders don’t like foreclosures because they’re costly and difficult. The bad news is that lenders won’t hesitate to foreclose on past due loans (or leases) if they aren’t given better options.

If you are a commercial property owner facing foreclosure, or a commercial tenant with a landlord in foreclosure, it is important to keep in mind that there are many legal intricacies involved with foreclosures.  It may be beneficial to employ the services of Thrift & McLemore to help you navigate the process and ensure that you fully understand your rights under the law.

Commercial foreclosures are, in most cases, very similar to residential foreclosures.  The foreclosure may be nonjudicial or judicial depending on the state where the property is located and what the loan documents dictate.  With both nonjudicial and judicial commercial foreclosures, the process starts when the borrower defaults on the mortgage.  A default occurs when the borrower falls behind in payments or fails to do something that the loan documents require.  After the default, the lender may accelerate, or call due, the outstanding balance on the loan.  Typically, the lender must first send a breach letter to the borrower that outlines the reason for default and gives a time frame during which the borrower may cure the default and avoid acceleration.  Usually, the amount of time given to cure a default is thirty days, but this can vary depending on the terms of the mortgage.  Once the time period expires, if the borrower has not cured the default, then the lender may commence foreclosure proceedings.

Tenants’ Rights Following a Commercial Foreclosure

The rights of any tenants in a foreclosed commercial property will depend on the terms of the lease and the date on which the lease was signed.  The tenant’s interest could potentially be terminated by a foreclosure due to the legal concept referred to as “first in time, first in right,” which allows the purchaser of a foreclosed property to void a lease if the mortgage was executed before the execution of the lease.

Many commercial leases contain a subordination, non-disturbance, and attornment agreement, or SNDA.  Under the terms of an SNDA, the tenant agrees to subordinate its interest in the lease to any lender making a loan secured by the commercial property; the tenant agrees to attorn to, or recognize, any new owner of the commercial property as its landlord; and any new owner of the commercial property agrees not to disturb the tenant’s possession of the property as long as the tenant pays rent and complies with the terms of the lease.  For tenants, an SNDA provides some assurance that their rights to their premises will be preserved even if the property is foreclosed.

-Options in Dealing with Foreclosures

The chances are that a commercial building loan is only a part of bigger financial problems.  Rather than delaying, a borrower should develop a game plan to deal with the situation immediately.  Options include:
  • Reorganizing, consolidating or even eliminating debts through proceedings that may include bankruptcy
  • Trying to work out a compromise with the lender
  • Selling the building

-Negotiating with the Lender

A lender may be willing to compromise.  Possible options include the following:
  • Different payment terms (lower payments over a longer period of time)
  • Forgiving some late payments now in exchange for a longer period of payment
  • Lower payments in exchange for a higher interest rate over a longer payment period
  • Refinancing at a lower interest rate (to make payments lower)

-Deeds In Lieu of Foreclosure

If a lender is unwilling to compromise, consider offering to convey the property back to the lender voluntarily by a “deed in lieu of foreclosure” (sometimes called “deed in lieu of forfeiture”).  A lender may be hesitant to accept a “deed in lieu” if state law provides a borrower with a right to redeem property for a certain period of time (e.g., up to a year later).

Ratings and Reviews

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