Corporate Structuring

Corporate Structure

Corporate Structure, known as Entity Theory, is a foundational concept in accounting and corporate finance that treats a business as a distinct legal and financial entity separated, isolated, and independent from other entities. Entity Theory also addresses business and individuals. Businesses are separate from owners, shareholders, or managers. This separation enables corporations to take risks. Entity Theory underpins how corporations must operate in any given global location as separate legal entities (e.g., LLCs, C-corps, S-corps), how it must be governed through boards, officers, and bylaws, and how it is taxed with capital structures that separate equity and debt. Most importantly, entity structure creates boundaries that act as firewalls preventing propagation of liabilities across entity boundaries. The “firewall of protection”, also referred to as “corporate veil”, are not absolute and can be pierced adversely affecting entities and individuals. The complexity of doing business in the new economy requires additional strategy for entity structures. This is especially true for individuals who want to protect themselves and their entrepreneurial activities. Our entities structuring services can limit risk and liability.

It also influences how businesses handle M&As (mergers and acquisitions), financial reporting, strategic planning, governance, security, and the many potential indirect sovereignty issues.

Our Corporate Structure Services guides you through requirements gathering and strategy goals for your company.

Regulatory Guidance & Global Trade

For individuals, Entity theory protects personal assets when operating through a business entity. For businesses: It enables clearer financial reporting, easier fundraising, and prevention of risk propagation across entity boundries. If you’re thinking about starting a business or curious about how these structures affect decision making, we can walk you through the pros and cons for different entity types in specific commerce chains across entities.

There are many hidden risks and include being involved with entities listed by the Office of Foreign Assets Control (OFAC) which enforces U.S. sanctions by maintaining a list of prohibited entities and individuals (e.g., SDN list). Ramifications for global businesses require Mandatory screening of all transactions and counterparties against OFAC lists. Extraterritorial reach includes non-U.S. companies using U.S. dollars or banking infrastructure must comply. There are Risk of penalties for Violations that can lead to multimillion-dollar fines, reputational damage, confiscated assets, and loss of access to markets including businesses risk increase and costly operational complexity that include real time integration sanctions screening tools and geo-blocking mechanisms to avoid inadvertent violations. OFAC’s scrutiny has intensified, especially around alternative financial messaging systems like Russia’s SPFS, which some institutions may use to evade sanctions. In addition to U.S. governance, many countries have similar enforcement agencies which must also be addressed.

With the changes in tariffs and geopolitical alliances, commerce is very complicated for Canada, Mexico, and South America which represent growth areas like China in the 1980s. If you are thinking about globalization, many hidden barriers exist e.g., varying security-encryptions standards across the globe, data sovereignty, manufacturing requirements, and the inherent inability to control a commerce chain because of the risk of OFAC listed entities involvment.

We provide guidance and experience to prevent catastrophic consequences to prevent violations by “financial firewalling” your corporate structure and advise and/or provide technology that aids your compliance. Ask us about an audit or technology assessment. There is no set price or duration but our $200 engagement will calibrate the effort and levels of mitigation.