Whether you are starting a small business or running an established company, it is vital to understand business laws and regulations. But that is easier said than done. My goal is to provide business-related legal services so that you can spend more time dealing with the actual business and less time with legal intricacies of operating your business. My services include:

Business formation

You have a new and innovative product or service and you are interested in forming a new business. You may have concerns about liability, taxes, investors and other considerations. As your small business lawyers, we will assist you in deciding whether your startup business should organize as a limited liability company (LLC), partnership, S corporation or C corporation. We will form the most appropriate business organization for your new business and register the business in all jurisdictions in which it will conduct business.

Mergers and acquisitions

If your business is fortunate to thrive and become a merger or acquisition target, we can represent you as the seller; or if you are on the other side and looking to acquire a business, we can assist with the due diligence in purchasing a business. We will review various approaches in purchasing a business through merger or acquisition. We will discuss with you various structures in purchasing the stock or purchasing the assets of an acquisition target. In either case, your business will need thoughtful and comprehensive representation in all aspects of a merger or acquisition.

Government contracting

Government contractors face numerous issues when contracting with the government. And with a hands-on approach and substantial experience, we will help you navigate those legal issues. We prepare teaming agreements, subcontracts and joint venture agreements and can handle a variety of other government contract matters. As government contract lawyers for your small business, we can assist you in applying for programs for HUBZones, service-disabled veteran-owned small businesses or women-owned businesses. If your company is facing debarment or suspension because of allegations of corruption or bribery, we can assist in your defense before the U.S. government or the World Bank.

Business transactions

Once you have an ongoing business, however organized, you will have a host of various commercial transactions. We prepare agreements with lenders, lessors, partners, customers, employees, and consultants. We provide business legal services for your company, preparing confidentiality agreements, nondisclosure agreements, licensing agreements, distribution, employment agreements, independent contractor agreements, lease agreements, and many others. We will help you understand what each part of these agreements require and make sure that these agreements provide protection to you and your business.

Corporate law

Once your startup business has been created, your company will have ongoing requirements to maintain its separate status. We will assist in guiding you on how to prepare corporate minutes or resolutions of the company to maintain the corporate form and other steps to protect the limited liability of your company. You will also have to make sure that your bylaws or operating agreement continues to reflect the needs of the business organization. We are available to assist you in addressing these issues. And once your company is ready to raise additional capital from investors, we can work with you to determine whether you are subject to securities laws or fall within one of the exemptions.

Business disputes

Few businesses are immune to business disputes. If your small business was well-advised, you have an agreement that will provide guideposts on how to resolve your business dispute. If you are unable to settle your dispute, you may have a dispute resolution mechanism such as mediation or arbitration in the agreement. An alternative dispute resolution mechanism such as arbitration or mediation generally can provide a relatively quick resolution of your business dispute. If not, then you may have to consider litigation. We handle business disputes, including pre-litigation matters, mediation, arbitration and litigation.

Anti-corruption compliance

Every company should have procedures and policies to minimize its exposure to allegations of corruption or bribery. An integrity compliance program (ICP) is essential for businesses doing work internationally for the United States government or work financed through one of the development banks. We can assist in reviewing or preparing an ICP to assure that is consistent with the anti-bribery and anti-corruption guidelines from the World Bank. If your company is facing debarment or suspension because of allegations of corruption or bribery, we can assist in your defense before the U.S. government or the World Bank.

Non-profit law

We work with organizations to obtain their tax exempt status under Section 501(c)(3) of the Internal Revenue Code. There have been recent changes to obtaining 501(c)(3) status and we have worked with organizations in submitting successful applications on the simplified track by filing a 1023-EZ and the more rigorous 1023 application for larger organizations. Nonprofits also face similar legal challenges to assure that they comply with business requirements and additional requirements to assure that they do not jeopardize their tax exempt status. As a law firm for nonprofits, we work with nonprofit organizations to guide them through these issues.

FAQ Small Business Attorney in DC

What is considered a small business?

Almost all our clients fall within the definition of small business/startup as determined by the Office of Advocacy of the U.S. Small Business Administration. Under this definition, a small business has fewer than 500 employees. Small businesses encompass about 99.9% of all business organizations in the United States.

Which industries do you serve as a small business attorney?

Most of our clients are service providers such as consulting companies, law firms, accounting and bookkeeping services, cybersecurity consultants, video production companies, and lobbyists, just to name a few. We also represent foreign and domestic manufacturers and software developers.

As a small business lawyer in DC, we represent some retail operations, such as bookstores and restaurants. We also represent numerous nonprofits with varying missions. Our government contractors clients hold various IDIQs (Indefinite Delivery, Indefinite quantity Contracts) and GSA schedules.

In which areas of the law does a small business or startup need legal assistance?

Most times, small businesses/startups need the services of outside general counsel. As outside general counsel for small businesses, we can handle most matters as a small business attorney that small businesses generally encounter. Usually, anything with the word agreement or contract is within our practice areas. This includes operating and shareholder agreements, which are used for small businesses and startups that are formalizing their relationships with their owners. Once a business is formed, then we prepare and review a host of other agreements, such as service agreements (which may be referred to as client agreements or consulting agreements), independent contractor agreements (which may be referred to as subcontracting agreements), employment agreements, teaming agreements, purchase and sale agreements, merger agreements, option agreements, license agreements, lease agreements, and the list goes on.

What factors should a small business and startup look for in retaining the services of a lawyer for small businesses?

With our extensive experience of working as a small business attorney in DC for decades now, background and experience should come right at the top of the list when looking for a small business lawyer. We think that accessibility and communication are essential for a successful relationship between an attorney and a client. Hourly rate is important but not as important as quality of service.

What kind of experience do you have in advising small businesses as an attorney?

Keith Rosten has not only legal experience but also business and practical experience that allows him to relate to the trials and tribulations of a small business owner. Keith has BigLaw experience before working for small and medium-sized businesses, first at his own law firm focused on small businesses and then with Berliner Corcoran & Rowe LLP.

Keith has substantial business experience. He received an MBA from the Tuck School at Dartmouth College. During his business studies, he worked on several group projects with small businesses, including a furniture manufacturer, a manufacturer of leak location precision equipment, real estate developer. After business school, Keith operated a successful real estate business in California and overcame numerous issues, such as asbestos abatement and underground storage tank remediation.

Keith worked as a legal adviser to a government contractor and was a legal adviser to a major initiative in Russia. Keith ran another small business, selling and marketing solar energy equipment. The business had an e-tailer component, hosted the largest solar energy forum online, and sold solar energy equipment to the government. Keith negotiated two GSA schedules for the business and obtained HUBZone certification for the business. Keith was also president of the Dartmouth Entrepreneurial Network – Washington, a networking organization for small businesses in the greater Washington, DC community.

Keith has also volunteered for Compass Pro Bono, working with local business professionals to conduct long-term consulting engagements for local nonprofits in fundraising, governance, and strategy.

With this breadth of legal and business experience, Keith is attuned to some of the challenges facing small businesses, which allows him to provide effective advice and guidance.

As a small business lawyer, do you take in-person meetings only?

Yes. We are located in downtown Washington DC and host many of our clients. For those clients who cannot come into our offices, we usually meet over Zoom or by telephone.

How do you charge for your services as a small business attorney?

We charge our clients based on hourly fees. We usually provide a budget of how much certain matters cost so that startups and small businesses know in advance the ballpark cost of the matter.

What if a client does not like our services?

Clients can terminate our services anytime if they don’t find it satisfactory.

Should my small business lawyer or startup lawyer be in the same state as me?

No, not always necessary and may depend on multiple factors. For example, though we are an expert small business lawyer in DC, we have also provided consultation to other cities’ clients.

Careful When LLC Taxed as S Corp

Your startup business is organized as a LLC and you have consulted with your small business lawyer and tax adviser about whether you should elect to be taxed as a S corporation. Your startup lawyer has filed the papers to organize your LLC in Washington DC or elsewhere. You decided to make the S corp election to save self-employment taxes—a good reason for many small business owners.

All is well and good, except that there are looming traps for the unwary. When you talk with your tax adviser or your startup attorney, you want to come prepared and understand that the S corp election may pose some financial risks for you. This article describes some of the looming risks for those business owners who have elected for their LLC to be taxed as a S corp. This article is not meant to provide tax or legal advice, rather to highlight some of the issues that you as the small business owner may face and will want to make an informed decision with you small business attorney or tax adviser.

Related articles:

Starting a LLC: Tax as a Corporation or Partnership

Checklist for Starting a Business

Conversion from S corporation to partnership not tax free.

There may be some reasons for organizing as a S corporation because of the self-employment taxes or because it is easier to convert an S corporation to a C Corporation. The first word of caution is that even if a S corporation is the logical choice when you form your business, it may not work for you later on down the line. If your company is organized as a S corporation or a LLC taxed as a S corporation, you may have to consider converting to a LLC taxed as a partnership. If you have a LLC taxed as a S corporation, you need to let the IRS know.

If your small business is organized as a S corporation, you can convert from a S corporation to a LLC. In some states, all you need to do is file a form. In other states, you will need to create a new LLC and merge the S corporation into it. In the District of Columbia, a S corporation may convert to a LLC by approving a “plan of conversion.” The biggest concern is the tax consequences. The conversion to a LLC taxed as a partnership will be treated as a liquidation and may trigger a gain on all of the built up appreciation. If there has been any embedded gain in the company, the conversion could be rather painful.

Investor contributions to the LLC.

Investor contributions of appreciated property

For many startup businesses that we see at Rosten Law, the partners are the investors and they contribute cash in proportion to their membership interests. The partners intend to spend roughly an equal amount of time on the new business. This common fact pattern does not pose a risk at least at the startup phase. But if you diverge a little from this general pattern, then it can get complicated. What if one of the partners contributes real property that has appreciated in price or puts into the business patents or appreciated securities. Or what if one or more of the partners incurs non-recourse debt to purchase a piece of property

For some new businesses, an investor may make a contribution of appreciated property. Whether there will be tax consequences depends on whether the new business receiving the contributions of appreciated property is a single member or multi-member LLC. If you have a single member LLC, then contributions of appreciated property when you form the LLC do not trigger federal income tax to you or to the LLC. The basis in the property for the one contributing the property is the same as immediately before the contribution.

But when you have a multi-member LLC, how you are taxed depends on whether you have elected to be taxed as a S corporation or a partnership. If the LLC is taxed as a partnership, the Internal Revenue Code has formulated special rules. The gain before the business formation is allocated to the partner who has contributed the property. If the LLC sells the property, the pre-formation gain is allocated to the individual partner who contributed the property and any gain after the formation is allocated to the LLC members according to their percentage ownership. The property is treated as if the contributor sold the property to the business at the time of formation. If you have a LLC taxed as a sub S, there are not these special rules. So if you are the LLC member contributing appreciated property to a new business, it is more advantageous for the LLC to be taxed as a S corporation, but for the remaining members, it is more advantageous for the LLC to be taxed as a partnership.

For an existing business, contributions of appreciated property to a LLC taxed as a partnership do not have tax consequences. Regardless of whether the contributor is a new or existing member of the LLC, there is no tax liability when the investor contributes appreciated property. For a sub S, there are certain restrictions regarding when the contribution is not taxable. The Internal Revenue Code requires that the contributor own stock having at least 80 percent of the combined voting power of all classes of stock for the transfer to the sub s to be considered a taxable transfer.

Contributions of services by LLC members

Many businesses want to have a structure to provide appropriate incentives to attract the best and brightest talent. The way that businesses provide these incentives through an LLC is to provide prospective employees with equity in the LLC by issuing what is known as “profits interests.” These profits interests share of the increase in value of the LLC over a specific period of time. Vesting can be attached to this interest. In a partnership, a member may receive a “profits interest” for contributions of past or future services.

A LLC taxed as a sub S may only have one class of stock and accordingly cannot grant a profits interest to members. This can be a major issue if you are trying to bring in a new member to your LLC treated as a sub S. Let’s say you want to bring in a new partner who wants to join but only if he or she gets a stake in the LLC. If you have a LLC taxed as a partnership, you can give him a profits interest—not so with a S corporation. Let’s say you have a $1 million company and you want to give him 10% interest, and boom, he or she will be hit with taxes on $100,000. Consequently, if you are considering giving a profits interest to members of your LLC in exchange for past or future services, then you may not want to elect to be taxed as a sub S.

Don’t fret if you already have a LLC treated as a S corporation as there are certain measures that you can take to mitigate this but you are going to need a good tax adviser and small business lawyer to guide you through the process. A S corporation may grant restricted stock and stock options, which may be an alternative.

Debt of the LLC

There are a number of other technical rules differentiating the treatment of S corporations and partnerships. They may not be the decisive issue in determining whether you elect S corporation treatment for your LLC, but they do show that you will need a capable tax adviser. For example, there rules regarding the members’ basis in the company based on debts incurred by the LLC. If your LLC is taxed as a partnership, the members may include a share of the LLC’s debt in their ownership interests in the LLC. For a sub S, in contrast, the members may include a share of the debt of the LLC only to the extent that it is recourse liability, that the member bears the “risk of loss” for the liability. Sounds complicated? That is why you have a tax adviser. But it probably won’t tilt the decision to elect partnership taxation in and of itself.

Distributions of the business property by the LLC

If the LLC has property that it then distributes to members, then whether the transfer is taxable depends on whether the LLC is taxed as a partnership or a S corporation. Distributions from a partnership are not taxable events. Distributions of property by a sub S are treated as sales of that property and the gain is taxable to the owner. The rules favor taxation as a partnership but probably again will not be in and of themselves compelling enough to want to be taxed as a partnership.

Selling and purchasing membership interests

If you are thinking ahead and envision selling membership interests in the LLC, here is a tax rule that you will want to keep in mind. This may come up in the context of a merger or acquisition of your LLC so you need to be aware of the tax consequences of the purchase and sale of membership interests. This is a rule that favors treatment as a S corporation for sellers of membership interests, and treatment as a partnership for purchasers of membership interests.

Say you are selling interests in your LLC, the gain from the sale can be either ordinary income or capital gain—a very big difference. If the assets sold are ordinary income assets like inventory or receivables, then if the LLC is taxed as a partnership, the gain is ordinary gain. If taxed as a corporation, the sale is a capital gain.

From the perspective of the purchaser, the purchase of membership interests in a LLC taxed as a partnership may be more favorable. If purchasers make an election, they can get a stepped-up basis in the assets of the LLC and reducing their tax liability when the assets are sold. With a S corporation, the purchaser does not have the choice.

And let’s say that the LLC redeems the ownership interests of their owners, the other owners receive an inside basis step up.

Tax planning is essential before making an election to be taxed as S corporation

This article was not intended to provide an exhaustive list of differences between taxation of a partnership and taxation of a S corporation. Rather, this article was intended to highlight some of the differences. You may have a good idea of your exit strategy for your new business. If you think that you will be able to take it public in a few years, or that you will stand to benefit for minimizing self-employment taxes, then there may be good reason to make the election to be taxed as a corporation. This article intended to point out some of the countervailing considerations and you should discuss your particular needs with your small business attorney and tax adviser.