Legal Question in Business Law in New York

Re: S-Corporation status and dual entities

With respect to your concerns about legal exposure in the event of a lawsuit, what matters is the actual involvement of the parent company in the business of the subsidiaries. This area of law is more fact-specific than many others. Under some limited circumstances, courts have been known to "pierce the corporate veil" and reach out to the ultimate shareholder (such as the parent company, for example). Failure to maintain corporate formailities or to keep financial and other affairs separate between related companies, undercapitalization and fraud may contribute to such a finding in the event a judgment or trade creditor decides to go after the assets of the entity on the top of the corporate pyramid. This is a fairly complex area of corporation law, and on top of it, certain obligations and liabilities may be incurred by the parent company either expressly or by operation of law, so make sure you obtain legal advice before you start operating your business. Finally, restructuring your companies in some situations may constitute a fraudulent conveyance. What the subs are called in relation to the parent makes little difference in comparison to the factors I outlined above.

Your question about tax savings from leasing assets and transferring employees should be posed to a tax accountant or tax attorney.

This reply is in the nature of general information, is not legal advice and should not be relied upon as such.