Business Law

Ask a Business Lawyer. Get Business Law Questions Answered ASAP.

Ask a Lawyer,
Get an Answer ASAP!

Business Law
This answer was rated:

I want to start a chain of hotels nationwide. I want to be

I want to start a...
I want to start a chain of hotels nationwide. I want to be able to have different investors invest in separate locations without piercing veil and getting mixed up w/ other locations/investments. What is the best way for me to set this up? Here is what I want to know:

1.) Do i set up a parent company, then each location is its separate company? Or no, all can be under 1 company?

2.) What is the best type of entity for this arrangement of multi-investors w/ multi-locations?

3.) If I want a combination of short term and long term investors how do i set this up? Short term = similar to a promissory note and return on $ but no ownership. Long term = ownership for longer holds.
Show More
Show Less
Ask Your Own Business Law Question
Answered in 9 minutes by:
8/15/2013
Richard - Bizlaw
Category: Business Law
Satisfied Customers: 10,702
Experience: 30 years of corporate, litigation and international law
Verified

bizlaw :

Hello, I will try to help you. Please remember I just report or interpret the law, so the outcome may not be what you hoped for. Will all the hotels be under the same management? Will they also be part of the same franchise such as Marriotts or not? How much money are you looking to raise for each location? Will all the investment be raised through private placements or will you be looking to a public offering?

bizlaw :

I will check back in 10 minutees

Customer:

hello?

Customer:

Hi! In answer, I am just getting started so I have not completely decided the definitive answer to some of your questions. Let me try:

Customer:

1.) To start, yes all locations will be under same management. 2.) Yes, I would like to imitate the setup of a Marriott or Hilton so they would all be under one franchise; I would like to keep the majority of franchise ownership internal and not with investors. 3.) The amount raised per location will vary. Have not decided yet because each location will be a different size. 4.) I need to clarify what you mean by private placement vs public offering. Please detail.

bizlaw :

A private placement would be one with less than 35 investors. If you are looking for more than that then you would be doing some type of public offering and what is required differs signficantly.

Customer:

hi

Customer:

less than 35 for now total for sure, but does it matter if it is less than 35 total or per locations? is that enough info to answer my questions?

bizlaw :

One last question, will the inside investors who are in every hotel own a majority of each hotel?

bizlaw :

If the core investors will own a majority of each hotel, then you could have a parent and separate subsidiaries. If they will not be majority controlled by the core investors then you would have separate companies but each company would sign a management agreement so the management was provided by the same management group. The management agreement would be what holds all the companies together. As for having short and long term investors, that is a little trickier. You should keep the total number of investors to 35 or less. The short term investors who would be receiving notes would be one group. The long term investors would receive stock. To raise funds from each group of investors you would need a separate offering memorandum for each explaining the risks and nature of the securities they would receive. You can do these as regulation D offerings.

bizlaw :

If I have answered all your questions, please rate my answer excellent as that is how I am compensated. If you have more questions, please let me know. If the answer was especially helpful you can provide a bonus.

Customer:

1.) I am starting the business and intend to be the majority owner for every hotel opened, so yes, I guess I would be the "inside investor" (correct?) and I would own majority in each hotel. Given this, what is the best way to protect myself and set up as much corporate veil as possible? Should I still do a parent co? If so, what entity should that be (i.e. corp, LLC, etc.)?

Customer:

2.) What type of entity would the subsidiaries be?

Customer:

3.) Given what I have said, how would a management co. come into place if I want to have active participation in leading management as well?

Customer:

4.) I will keep investors to 35 or less. Were you implying per parent co. or per subsidiary or TOTAL?

Customer:

5.) You mentioned short term investors being one group and long term another. When you say group is this another entity? Or you mean to treat them as a group in a particular way with my offerings?

Customer:

6.) Which entity does regulation offerings D refer to?

Customer:

7.) Given all of the above, can recommend the best state to set these entities up in? I know some states have better tax advantages for setting up parent companies etc. and others may have better advantages with protection. Have any recommendations as to which states are good for these type of setups? I heard Deleware was good for special series LLC and Wyoming good for holding companies (owning land). Any ideas?

Customer:

P.S. Thank you for help so far. I will be sure to rate highly once finished :)

bizlaw :

1 - You could do a parent company. I think it would be better to do a straight C corp. To have subidiary pass through entities you have to own all of or the vast majority of the shares of an S corp subsidiary. If you use LLCs the fact that income is taxed to the members may impose a cash distribution obligation to at least cover the taxes that you may not want to be restricted by. Also your intercorporate dividends will be largely shielded from tax.

bizlaw :

2 - I suggest C corporations as subsidiaries for the reasons I said above.

bizlaw :

Since they are majority owned subsidiaries you can exercise your control to determine management. Under this scenario you can pick management and do not need to have a management contract. The management contract option will remain as an option and may be necessary to satisfy the requirements of major hotel chains who may insist on experienced managers.

bizlaw :

The 35 investors should be per individual hotel..

bizlaw :

5 short term investors would be offered notes as their investors. Long term investors would be offered stock. The notes and stock could be in the same hotel but the description of the risks for the two types of securities are different and could be markedly different. The notes offered to investors in one hotel would all be the same type of note. But there is no need to make the notes in a second hotel the same as the first.

bizlaw :

6 - The regulation D exemption is available for all the entities since what they are issuing will be considered securities. The three states often looked at are Delaware, Nevada and Wyoming. However, since you are doing a chain of hotels I would form in Delaware because their corporate law is very well developed and investors would be very familiar with that state. Second I would do Nevada.

bizlaw :

If I have answered all your questions, please rate my answer excellent as that is how I am compensated. If you have more questions, please let me know. If the answer was especially helpful you can provide a bonus.

Richard - Bizlaw
Category: Business Law
Satisfied Customers: 10,702
Experience: 30 years of corporate, litigation and international law
Verified
Richard - Bizlaw and 87 other Business Law Specialists are ready to help you
Ask your own question now
Customer reply replied 4 years ago

New Subject, same topic:


 


When I set these corporations up, do i have to set up under same name in each state or no, i can set up under whatever name i want, but what's most important is that the brand is licensed to the corporation for use.


 


For example, if i own a franchise of McDonalds, would i create XYZ corporation and use the McDonalds logo/brand as a license OR would i have to incorporate as McDonalds #1, 2....500 etc. in each state AND use license.


 


I am just trying to understand if the actual name of the corporate entity matters so much or is just being able to use the brand whats important.


 


If the brand transcends state lines, then it sounds like whats most important is trademarking my name (as Hilton, McDonalds, etc.) did and then i license the usage of that name out to subsidiaries under whatever corporate name setup, correct?

In your situation, you would license the brand. The corporation could have whatever name it chose but it would do business under the brand name. You definitely have to trademark your brand name. The owner of the brand name would be the parent company. In fact you might want to have the brand name owned in a separate entity and license it to the corporations.

 

If I have answered all your questions, please rate my answer excellent as that is how I am compensated. If you have more questions, please let me know. If my answer was particularly helpful you can pay a bonus.

Ask Your Own Business Law Question
Customer reply replied 4 years ago

what type of corporation would own licensing? a c corp again in deleware? also.when it comes to the ownership of land...like mc donalds owns its land, is that again another corp (which type) or can i consolodate any of these?


 


to summarize i have:


1 parent c corp that owns majority and sets up offers w investors


1 licensing corp that owns all brands (parent owns 100per)


1 mgmt corp to manage properties or is this the corp that would set up offers w investors and parent solelyserves to own and collect ownership/stock?


min 1 subsidiary corp that own locations and have max 35 investors eachs

YOu could have a separate subsidiary that owns the land. However, since each hotel will have separate investors those investors probably would want their hotel to own the land on which it is situated. On the management, you can have the voting power of the parent which controls the board of directors of each corporation simply hire management for each hotel. There would be no independent management agreement. Another option is to have a management company handle the management of the hotels and then there would be a management contract between the management company and each hotel.

On the number of investors, it is a little more involved than just 35 investors. There are also restrictions on how those investors are obtained. YOu will need a lawyer familiar with securities to assist you in making sure your comply with the applicable laws on securities solicitation.

If I have answered all your questions, please rate my answer excellent as that is how I am compensated. If you have more questions, please let me know. If the answer was especially helpful you can provide a bonus.
Ask Your Own Business Law Question
Ask Richard - Bizlaw Your Own Question
Richard - Bizlaw
Richard - Bizlaw
Richard - Bizlaw, Attorney
Category: Business Law
Satisfied Customers: 10,702
10,702 Satisfied Customers
Experience: 30 years of corporate, litigation and international law

Richard - Bizlaw is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

Mr. Kaplun clearly had an exceptional understanding of the issue and was able to explain it concisely. I would recommend JustAnswer to anyone. Great service that lives up to its promises!

Gary B.Edmond, OK

My Expert was fast and seemed to have the answer to my taser question at the tips of her fingers. Communication was excellent. I left feeling confident in her answer.

EricRedwood City, CA

I am very pleased with JustAnswer as a place to go for divorce or criminal law knowledge and insight.

MichaelWichita, KS

PaulMJD helped me with questions I had regarding an urgent legal matter. His answers were excellent.

Three H.Houston, TX

Anne was extremely helpful. Her information put me in the right direction for action that kept me legal, possible saving me a ton of money in the future. Thank you again, Anne!!

ElaineAtlanta, GA

It worked great. I had the facts and I presented them to my ex-landlord and she folded and returned my deposit. The 50 bucks I spent with you solved my problem.

TonyApopka, FL

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

< Previous | Next >

Meet the Experts:

Infolawyer

Infolawyer

Attorney

1,851 satisfied customers

Experienced lawyer

Dimitry K., Esq.

Dimitry K., Esq.

Attorney

1,611 satisfied customers

Run my own successful business/contract law practice.

MShore Law

MShore Law

Attorney

1,233 satisfied customers

Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements

RGMacEsq

RGMacEsq

Attorney

751 satisfied customers

Licensed Texas General Practice Attorney

Barrister

Barrister

Attorney

646 satisfied customers

17 years practicing attorney, JD, BA, MBA

Ely

Ely

Attorney

577 satisfied customers

Counselor at Law.

J.Hazelbaker

J.Hazelbaker

Attorney

393 satisfied customers

Experienced and trained in the area of business law.

< Previous | Next >

Related Business Law Questions
I sit on the board of directors for a corporation that has a
I sit on the board of directors for a corporation that has a bar business. Our treasurer and president took it upon them selves with no majority vote/ no vote at all to cash in investments. Discussion… read more
Asad Rahman
Asad Rahman
Attorney
J.D.
2,283 satisfied customers
I have a Tennessee corporation LLC that is being sued in
I have a Tennessee corporation LLC that is being sued in Colorado. If they want to pierce the veil of the LLC do they have to pursue that in Tennessee or can they do that in Colorado? … read more
Ray
Ray
Lawyer
Doctoral Degree
30,828 satisfied customers
Wanting to expand my business from one corporation to 2 or 3
wanting to expand my business from one corporation to 2 or 3 for further protection for each individual business. looking for someone to help … read more
Ely
Ely
Attorney
Juris Doctor
577 satisfied customers
Is there a rule which requires that a corporation (or LLC)
Is there a rule which requires that a corporation (or LLC) must have a lawyer in a civil case?… read more
Damien Bosco
Damien Bosco
3,370 satisfied customers
I have a C corporation the hold 7 apartments, me and my
I have a C corporation the hold 7 apartments, me and my partner want to open a new entity and transfer over half of the appartments so he can eventually stay with 3 and my 4. what would be the correct… read more
Legal Eagle
Legal Eagle
Attorney
Doctoral Degree
7,307 satisfied customers
If a corporation, like Lowes contracts a person to do my
if a corporation , like Lowes contracts a person to do my work and the contractor messes it up do I sue the company, the contractor, or both? … read more
P. Simmons
P. Simmons
Attorney
Doctoral Degree
35,283 satisfied customers
Is a US C corporation owned by a foreigner treated as a
Is a US C corporation owned by a foreigner treated as a foreign person when the corporation sells real property in the US?… read more
PaulmoJD
PaulmoJD
Attorney At Law
Doctoral Degree
106 satisfied customers
California, privately held C Corporation, I own 100 shares,
California, privately held C Corporation, I own 100 shares, 100% ownership, of corporation and would like to issue 100 shares to my son, thus creating 50/50 ownership. What is the process (easiest) to… read more
TaxAttorneytoHelp
TaxAttorneytoHelp
Owner
Doctoral Degree
2,542 satisfied customers
Converting my llc business to a c corporation and looking
Converting my llc business to a c corporation and looking for a lawyer to sign the paperwork … read more
Richard - Bizlaw
Richard - Bizlaw
Attorney
10,702 satisfied customers
I need to convert my LLC to a domestick stock corporation or
Hello, I need to convert my LLC to a domestick stock corporation or domestic stock and agricultural cooperative corporation. I need help with the purpose statement. Also, what is the difference betwee… read more
Damien Bosco
Damien Bosco
3,370 satisfied customers
I have C-Corporation company in California,USA. Currently my
Hi AllI have C-Corporation company in California,USA. Currently my business is software consultancy only. But going forward, I would like to perform business in selling few products (via dropshipping … read more
Ray
Ray
Lawyer
Doctoral Degree
30,828 satisfied customers
My S corporation is a member of an LLC which has other
My S corporation is a member of an LLC which has other members in it as well. Can my S corporation be the listed manager of the LLC in Illinois? All the members agree to having the S Corporation as th… read more
RGMacEsq
RGMacEsq
Attorney
Doctoral Degree
751 satisfied customers
My friend has an existing C corporation in interior design.
My friend has an existing C corporation in interior design. Last year we decided to join forces we both took on an executive role in the corporation, hired a paycheck company and got to work. She agre… read more
Roy Hadavi
Roy Hadavi
Attorney
Juris Doctorate
980 satisfied customers
IS A "C" CORPORATION REQUIRED TO HAVE AN OPERATING AGREEMENT
IS A "C" CORPORATION REQUIRED TO HAVE AN OPERATING AGREEMENT WITH ITS SHAREHOLDERS OR OFFICERS?… read more
TaxAttorneytoHelp
TaxAttorneytoHelp
Owner
Doctoral Degree
2,542 satisfied customers
When I register a C corporation in CA, am I required to use
When I register a C corporation in CA, am I required to use my legal name or may I use a different name other than my legal name? Thanks.… read more
Infolawyer
Infolawyer
Attorney
Doctoral Degree
1,851 satisfied customers
I have a C corporation in Memphis Tennessee. A part of my
I have a C corporation in Memphis Tennessee. A part of my business model is to acquire wrecked, damaged and older classic cars, restore and resell these cars. I am a legal business but do not wish to … read more
Michael Bradley
Michael Bradley
JD
1,191 satisfied customers
When registering a C corporation in CA, if I don't like to
When registering a C corporation in CA, if I don't like to use my legal name anywhere on the documents, what options I have. Thank you.… read more
Phillips Esq.
Phillips Esq.
Attorney
Juris Doctor
18,316 satisfied customers
Can an LLC be a partner in a C Corporation? Will that harm
Can an LLC be a partner in a C Corporation? Will that harm the LLC original status? Any advice?… read more
socrateaser
socrateaser
1,031 satisfied customers

DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

The responses above are from individual Experts, not JustAnswer. The site and services are provided “as is”. To view the verified credential of an Expert, click on the “Verified” symbol in the Expert’s profile. This site is not for emergency questions which should be directed immediately by telephone or in-person to qualified professionals. Please carefully read the Terms of Service (last updated February 8, 2012).

Show MoreShow Less

Ask Your Question

x