By Gary S. Joiner

In recent years, the number of business entity forms available under Colorado law has doubled, adding limited liability companies ("LLC's"), limited liability partnerships ("LLP's") and limited liability limited partnerships ("LLLP's"), to the basic group consisting of general partnerships, limited partnerships and corporations.

The factors which have most frequently been used to differentiate between these various types of business entities are: (1) the extent to which the entity shields its owners from personal liability for the debts or obligations of the entity; (2) the management structure of the organization and the extent to which management may be centralized among a group consisting of less than all the owners; and (3) the income tax treatment of the organization and whether or not its profits or losses may be passed through to the owners without first being subject to tax at the entity level. However, as a result of changes in the statutes governing certain of these entities adding flexibility to their structure, and as a result of the elimination of certain tax rules which often had a major impact on choice of entity decisions, business planners now consider many of the forms of business organization to be interchangeable.

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By Miriam Abrams Goodman

To maximize protection of your personal assets from liabilities associated with your business properties and operations, ALWAYS observe the following basic formalities.

(This is not meant as an exhaustive list; corporations and other specific types of business organizations have additional requirements that are beyond the scope of this simple checklist).

1. Have proper company formation documents prepared and registered with the appropriate government authorities, and update these documents as the law requires.
2. Hold title to company property in the company's name, not your individual name.
3. Maintain the company's records in a careful, business-like manner.
4. Maintain separate operating and investment accounts for the company. Do not mingle personal expenses and assets in these accounts.
5. Disclose your business capacity in all dealings with vendors, customers, tenants, the public, the government....everyone. Stationery, checks, invoices, deeds, leases, contracts, tax returns, advertisements, business cards, and any other form of communication must inform other parties that they are dealing with a limited liability entity and they are dealing with you not as an individual but in your representative capacity. Always disclose your representative capacity (President, General Partner, Manager, etc.) when signing any document related to company business.

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This publication is intended to provide accurate and authoritative information on the subject matter covered. It is distributed with the understanding that the publisher and distributor are not rendering legal, accounting or other professional service, and assume no liability in connection with its use. Copyright © 2003.

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• Choosing the Best Form for Your Colorado Business Entity
• Basic Business Entity Maintenance Guidelines
• Designated Broker Policies
• Delinquent Payroll Taxes and the Trust Fund Recovery Penalty
• Meet the Attorneys

By Jonathan A. Goodman

Question:  I am aware that Colorado's Designated Brokerage legislation requires all brokerage firms, even one person offices, to have a brokerage relationship policy. What are the issues which should be addressed in such a policy?

General Theme

The drafting of an agency policy requires the balancing of a variety of considerations. The policy should create predictability without being unduly rigid. (Yet flexibility enhances complexity.) The policy should be specific without being unnecessarily complicated. It needs to strike a balance between the company's need to control the behavior of employed licensees without setting a standard of care so high that the policy creates a liability trap. (Avoid hoisting by one's own petard.). Though not necessarily a zero sum choice, some issues require a balancing between the goals of risk reduction and income maximization. Brokers must balance all of these considerations in crafting their policy.

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By William A. Robinson

Question:  Can officers and directors of a corporations be held personally liable for delinquent payroll taxes?   Yes, they can.

If you currently are or are considering becoming a corporate officer or director, you should be aware of the possibility of personal liability for unpaid employee withholding taxes. Under the tax laws of this country (i.e., the Internal Revenue Code), employers are required to collect (through withholding) certain taxes from their employees, the taxpayers. The withheld sums are commonly referred to as 'trust fund taxes,' reflecting the Code's provision that such withholdings or collections are deemed to be a 'special fund in trust for the United States.'

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David A. Farus

Mr. Farus received his Juris Doctor from Harvard University, in 1981. His practice emphasizes Real Estate and Business Law.

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William A. Robinson

Mr. Robinson received his Juris Doctor from the University of Colorado, in 2002. His practice emphasizes Litigation, Real Estate and Corporations.

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