Legal Question in Business Law in New York

Re: S Corporation

I am not sure what your motivations are in regard to the "ownership" in clinic 2 based upon the information that you have provided in your email. If your concern primarily revolves around compensating the new partner for the risk sharing (i.e., sharing the carrying costs/exposure of opening the new clinic while maintaining the old) then there are other ways to accomplish that goal which don't require either setting up a new corporation (or LLC) or voiding your S Corp status. You should consider the use of SARs (Stock Appreciation Rights), salary performance bonuses, profit sharing, etc.

If there is a problem because he/she is inserting capital to begin the new clinic then, of course, the entire picture changes. At that point you might consider a Teaming Agreement, a LP or LLP/LLC as a method of maintaining the legal entity that operates Clinic 1 while encompassing the structure of the new venture.

Consideration also has to be given to shielding the assets and value of Clinic 1 in the event that Clinic 2 is not successful. An insurance review is essential at this point.

Consideration also must be given to what happens to ownership/equity on retirement, death, divorce, personal bankruptcy, non-entity litigation or other life changing events occurring in your new partner's life (or yours).

You are welcome to call me for a free phone consultation if this does not answer your question at (973) 650-5646.

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Re: S Corporation

You could have a formal agreement covering the terms of your agreement, or create a separate entity, like a LP or LLC for the 2nd clinic. Your "S" corp could be a partner in the entity, for your share, and the new partner also. Your share of the entity's profits/losses then just flow into your original "S" corp's return. If you want to discuss this, call me at 973-377-3313.

Re: S Corporation

There are a number of ways this can be done. Any way will likely require a change to the Operating Agreement but not necessarily to the S corp's state filings. If you would like to discuss this further I welcome a call at 212.366.1324.

Re: S Corporation

There are ways to do what you want, but the expense and effort involved probably will not justify it. You will have to have a stockholders agreement in the S-corp that sets forth provisions regarding income and loss allocation. There will inevitably be aspects that do not work quite as well as you would like. For example, if a malpractice suit is succesful against one clinic, and the loss is uninsured, it is unclear how to shield the assets of the other clinic from liability. I suspect that whatever concern is motivating you to use the same S-corp can be addressed through the use of another legal entity much more efficiently. If you would like to discuss this further, please do not hestitate to give me a call at (212) 695-6400.

Best of luck.

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WARNING: This information is not intended to constitute legal advice and should

not be relied upon for any purpose in lieu of consultation with appropriate

legal counsel in your own jurisdiction.

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