Delaware Corporation and Business Entity Laws, Essay Example

Summary of Applicable Facts

CIA wishes to change from nonprofit status and has inquired about their options.  The business specializes in education for the automotive industry.  The current CEO would like to remain in control.  He also has concerns about the status of those working for the company being considered independent contractors rather than as employees.

The have received a grant as a nonprofit agency.  Their current independent contractor agreement seems to be ill informed.  This presents the need to establish the legality of their current contracts and the implications that this will have on any changes.

Issues

First of all, there is an issue regarding the limitations of a nonprofit business.  Due to the fact that the company wishes to convert its title, there are various implications that must be considered.  These implications present the challenge that will be present within the analysis that must be considered.

Second, there is an issue regarding the differences in the law between not-for profit and for-profit corporations.  This is due to problems concerning the structure of the business and the legality of the conversion.  One of the major issues that must be considered is the change in how taxes will be viewed.

Law

The major law applicable to the first issue of the case is Title 6 of the Commerce and Trade Act, Subtitle II, dealing with Other Laws Relating to Commerce and Trade, Chapter 19: Delaware Uniform Unin-Coroporated Nonprofit Association Act which demonstrates the conditions under which a nonprofit entity may act.  This presents the importance of analyzing the underlying considerations that are lain out within the text.

Delaware General Corporation Law (DGCL) dictates the general mandates of a corporation’s tax status.  This law determines the underlying rules and regulations that a company must abide by in order to maintain this status.  These regulations present an important opportunity to demonstrate analyses the regulations that are associated with this problem.  This is important to consider in presenting an analysis of the issue.

Analysis

In understanding the major laws that are associated with Delaware nonprofit entities, it should be understood that there are important aspects that demonstrate the challenges related to implementing policies.  This is important in regards to the need to reestablish a newly defined tax code.  Delaware provides various opportunities for those of nonprofit status to be provided with various tax breaks.  It should also be considered that Delaware provides greater exemptions for its nonprofit entities than for those that are for profit.

The major distinction between for profit and nonprofit entities in Delaware seems to be in the ability to maintain liability standards in consideration of various issues that might be faced in the company.  This presents a major issue in regards to the desire to change status from nonprofit to for profit.  However, unlike many other jurisdictions, Delaware does not make any major distinctions between for profit and nonprofit entities.

References

Delaware Corporation And Business Entity Laws. (2015). State of Delaware.  http://www.corp.delaware.gov/Delaw.shtml.

Chapter 19: Delaware Uniform Unin-Coroporated Nonprofit Association Act. (2015). http://delcode.delaware.gov/sessionlaws/ga139/chp079.shtml.

Converting a Corporation to an LLC in Delaware. (2015). Nolo. http://www.nolo.com/legal-encyclopedia/converting-corporation-s-corporation-llc-delaware.html

24 CFR 200.194 – Placement of nonprofit organization on Nonprofit Organization Roster. (2015). Legal Information Institute. https://www.law.cornell.edu/cfr/text/24/200.194.