The Special Events Advisor: A Business and Legal Guide for Event Professionals

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Overview

The only book that offers all the business information creative event professionals need to start an event business and operate it legally, efficiently, and in a totally professional manner.

  • Starting an event business
  • Buying an event business
  • Partners and shareholders
  • Financing with banks and leasing companies
  • Planning
  • Operating an event business
  • Client service
  • Contracts
  • Employee issues
  • Insurance
  • Labor unions
  • Landlord-tenant issues
  • Trucking
  • Intellectual property
  • Accounting
  • Legal liability
  • Ethics
  • Exit strategy

"Beyond the glamour of running an event business lie the challenges of contracts, insurance, and labor unions; David’s unique book turns the passion of events into a smartly run business."
–John Baragona, Publisher/President, Event Solutions magazine

"David Sorin mines his extensive experience in special events to give clear, in-depth information about crucial business issues that no event professional can afford to ignore. The Special Events Advisor is a rich resource for both industry newcomers and veterans."
–Lisa Hurley, Editor, Special Events Magazine

"The Special Events Advisor is an impressive work that should be on every event planner’s bookshelf."
–Richard Aaron, CMP, CSEP, and President, BizBash Media

"It is great to have a book about business practices relevant to the special events industry specifically. The Special Events Advisor is an essential tool both for those starting a special events business and for event professionals who want to review their business practices. Highly recommended!"
–Alice Conway, CSEP, Director, The Event Management Certificate Program, The George Washington University

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Product Details

  • ISBN-13: 9780471450108
  • Publisher: Wiley
  • Publication date: 8/18/2003
  • Edition number: 1
  • Pages: 302
  • Product dimensions: 7.40 (w) x 9.60 (h) x 0.80 (d)

Meet the Author

DAVID SORIN, JD, CSEP, is an attorney and consultant to companies in the special events industry. He has been involved with many high-profile events, including the 1996 Olympic Games in Atlanta. He has been active in event industry organizations for many years, and has served as president of the International Special Events Society. He also speaks regularly at professional venues such as The Special Event, Event Solutions Expo, and the International Special Events Society’s Conference for Professional Development.

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Read an Excerpt


The Special Events Advisor



A Business and Legal Guide for Event Professionals


By David Sorin


John Wiley & Sons



Copyright © 2003

David Sorin
All right reserved.



ISBN: 0-471-45010-3



Chapter One


Starting an Event Business

Small opportunities are often the beginning of
great enterprise. -Demosthenes


So, you have decided to make the leap from talented amateur to full-time
professional events person. For years, everybody has said you
throw the best parties, and now you want to do it for a living. Friends
have promised that their companies will give you all of their events.
You have events on the books before you have books. Where do you
begin? How do you start a business?

First and foremost, you must decide on the form of the business.
Realistically, the options have narrowed somewhat over the years.
Whereas in the past, sole proprietorships and partnerships were somewhat
popular, mostly due to the fact that there were no separate corporate
and individual taxes, just individual, today they are fairly rare.
The big reason for this is that both leave the owner(s) open to personal
liability. This means that any debts of the business become debts of
the owners personally, and any liabilities of the business can become
personalliabilities.


* CORPORATIONS

Most businesses are corporations. A corporation is a legal business
entity established under the corporate laws of the state in which it is
formed. It is formed for a particular business purpose and is governed
by rules called by laws. The corporation is a legal entity separate from
the individual shareholders. It keeps its own books and records and
finances separate from those of the individual shareholders. Its big
advantage is that a shareholder's liability is limited to the amount
invested in the business itself. A corporation is normally formed by
filing Articles of Incorporation or a similarly titled document with
the state. Therein, the corporation will have a fictitious name, and a
document registering that name is also usually filed.

Thereafter, a form must be filed with the Internal Revenue Service
to obtain an Employer Identification Number. This will be the number
under which all tax filings and returns will be submitted to the
IRS. Once the EIN is in hand, the business can open its bank accounts
and begin its business activities.


* C Corporation

The C corporation is the most common form of business. A C corporation
is one in which taxes are paid pursuant to Subchapter C of the
Internal Revenue Code. As a taxpaying entity, the C corporation is
required to pay federal taxes on its taxable income at the corporate
level prior to making any distributions to shareholders. Many states
also have a state tax on corporate income for which the corporation is
responsible. Distributions to shareholders are taxed again.

C corporations are allowed to issue more than one type of stock
(common and preferred) with different voting rights and dividend
rights. There is no limit on the number of shareholders.

Certain legal formalities are required of the corporation, such as
holding annual board meetings and annual shareholder meetings and
keeping books and records according to state corporate law. Separate
corporate bank accounts should be maintained. Likewise, federal and
state tax returns must be filed.

As long as the required corporate steps are followed and corporate
assets are kept separate and not commingled with personal assets (i.e.,
the corporation is not just a device or alter ego of the shareholders),
corporate shareholders are protected by the corporate veil. The veil is
a concept that separates the corporation as a legal entity from the
individual shareholders. If the corporation is sued for any reason, the
individual shareholders should be protected from any personal liability
for the actions or omissions of the company. Liability is limited to
each shareholder's capital investment in the corporation.

Because shareholders do not directly pay taxes on undistributed
corporate profits, they do not need an additional dividend to cover
the tax. Therefore, additional capital can be left in the business for expansion.

Susan has started an event planning business and has set it up as a
C corporation. In her first year, the company loses $15,000. The loss
stays in the company, and none of it is attributable to Susan's personal
tax situation. The next year her company earns $25,000 in profit. She
keeps it in the company to cover the cost of a bigger office space, and
the company pays corporate tax on the profit. This has no impact on
Susan's personal income.


* S Corporation

An S corporation requires the filing of a Subchapter S election with
the IRS. By so filing, S corporations elect to be taxed under Subchapter
S of the Internal Revenue Code. S corporations have limitations regarding
number of shareholders and business purpose, but they are
popular because all income passes through to the shareholders and
there is no separate federal corporation tax. In the earliest stages of
the business (and sometimes later on, although hopefully not) they
have the additional advantage of allowing all losses to pass through to
the shareholders. That may not hold true for state taxes, though.

Say Tom opens a party rental business, which he sets up as a Subchapter
S corporation. In the first year of business, the company loses
$75,000. Tom is able to apply the loss against any personal income he
may have, thus lowering his personal tax liability (federal). In year 2,
Tom's company makes $75,000, which Tom wants to leave in the business
to purchase new tables and chairs. Under Subchapter S, he has to
personally pay taxes on the $75,000, even if it is not distributed to him.
This can be personally burdensome, and therefore the company can
distribute the amount of the tax to him as a dividend to cover his tax
liability.

Tom should now determine whether he wants to maintain the Subchapter
S status. If his company is making money every year but
needs to keep that profit in the company to grow the business, he will
need to take a dividend every year to pay tax on the income attributed
to him that he doesn't receive. He may want to speak with his accountant
about dropping the S election and becoming a C corporation.

Just like a C corporation, an S corporation has a distinct legal
identity, and all records must be kept separate and apart from those of
the shareholders. All other corporate formalities must be followed to
maintain the corporate shield from personal liability. Even if followed
carefully, the possibility of personal liability exists if financial institutions
require personal guarantees for financing. In such cases, any
shareholders giving the guarantee are personally liable to the financial
institution only.


* Limited Liability Company (LLC)

The most recent business form to gain approval under federal and
state law is the limited liability company. It is a totally new form-not
corporation, not sole proprietorship, not partnership. The owners are
called members, not shareholders. It is now authorized in all 50 states
and by the Internal Revenue Service. An LLC is created by filing a
form with the appropriate department within state government.

LLCs are gaining popularity because they combine some of the
best advantages of corporations and sole proprietorships and the benefits
of a Subchapter S corporation, but without some of the restrictions.
(See Table 1.1.) They offer the limited liability protection of a
corporation, meaning the owners are not personally responsible for
the debts and liabilities of the business. They are also pass-through
tax entities, meaning that their income or losses pass through to the
owners.

The philosophy behind the LLC is that the members should be free
to contract, to agree among themselves, how the company is to be
managed and to have that agreement stand up in court. This business
form also offers substantially less red tape. Corporations require meetings
of the board, meetings of the shareholders, corporate resolutions,
corporate minutes, and other record keeping. LLCs have no such
requirements. The operating agreement can contain any procedures
and rules that the parties desire. The LLC offers simplicity of operation
and very little ongoing maintenance.

At the same time, an LLC can have an unlimited number of owners,
as opposed to the restrictions on a Subchapter S corporation. It
can be owned by foreigners or by C corporations, other S corporations,
many trusts, partnerships, or another LLC.

Decisions about the form of the business should be based on discussions
with both an attorney and a certified public accountant.
While many attorneys do have some tax knowledge, they do not
always view matters from the same perspective as an accountant. Further,
the accountant may have a better sense of personal financial
considerations.

An individual starting a business will probably want the attorney
to draft the necessary paperwork, just to make certain that all filings
are taken care of according to law. Attorneys will often maintain the
company books and records, making certain that all legal requirements
are met year in and year out. Shareholder and board meeting
minutes, corporate resolutions, and other important documents need
to be created and regularly updated. Many companies can handle this
on their own if they so choose. One way or the other, the records must
be kept current.

Once the company form is determined, the accountant needs to be
involved to set up the company's books and to set up the requisite
accounts with the taxing authorities. Both the Internal Revenue Service
and the state government require that filings be made, some quarterly
and some annually.

The outside professionals can train internal personnel to perform
many of the necessary tasks, which will minimize the expense of legal
and accounting hours. However, the professionals should be kept
involved in the life of the company, reviewing its status periodically to
make sure all is well. Further, over time, conditions change and the
outside professionals can make recommendations to alter the structure
based on those changes. A subchapter S election may be dropped,
or a line of business may be organized into a separate entity.

So, while setting the company up is important, it is not necessarily
final. It is important to remember that a company is a living,
breathing entity, one that may change many times and in many ways
over the course of its existence. Change can be good and healthy for
the organization. Although many naturally resist change, it should be
welcomed as progress.


* SUMMARY

* Business forms vary, so careful thought should go into the
choice.

* The key issues are legal liability and tax liability.

* Corporations (both S and C) and LLCs are the best combinations.

* You don't need a lawyer to file the papers, but legal and
accounting advice in choosing a business form are important.
Don't be penny-wise and pound-foolish. Doing it right from the
beginning will save time and money.

* Once formed, the company needs to be maintained-books and
records and yearly filings need to be kept up.

(Continues...)






Excerpted from The Special Events Advisor
by David Sorin
Copyright © 2003 by David Sorin.
Excerpted by permission.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

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Table of Contents

Introduction.

Chapter 1: Starting an Event Business.

Chapter 2: Buying an Event Business.

Chapter 3: Partners and Shareholders.

Chapter 4: Financing: Working with Banks and Leasing Companies.

Chapter 5: Planning.

Chapter 6: Operating a Business.

Chapter 7: Client Service.

Chapter 8: Contracts.

Chapter 9: Employee Issues.

Chapter 10: Insurance.

Chapter 11: Labor Unions.

Chapter 12: Landlord-Tenant Concerns.

Chapter 13: Trucking.

Chapter 14: Intellectual Property.

Chapter 15: Accounting.

Chapter 16: Legal Liability.

Chapter 17: Ethics.

Chapter 18: Exit Strategies.

Chapter 19: The Last Word.

Chapter 20: Important Documents Checklist.

Appendix: Sample Documents.

References.

Index.

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