Ed Byrne, VP & CFO
47-680: American Pad & Paper LLC , or Ampad , is a manufacturer of office products, including writing pads , specialty papers, filing products and envelopes. Some products are marketed under the Ampad brand name, others are produced for brands including Staples and Wal-Mart . The company makes over 2500 products, including pads in a variety of sizes, paper grades, colors, and bindings. Its headquarters are located in Richardson, Texas , United States . with four factories in North America, including facilities in
94-409: A corporation , LLCs are required to register in the states they are "conducting (or transacting) business". Each state has different standards and rules defining what "transacting business" means, and as a consequence, navigating what is required can be quite confusing for small business owners. Simply forming an LLC in any state may not be enough to meet legal requirements, and specifically, if an LLC
141-437: A " shareholder ". Additionally, ownership in an LLC is represented by a "membership interest" or an "LLC interest" (sometimes measured in "membership units" or just "units" and at other times simply stated only as percentages ), rather than represented by " shares of stock " or just "shares" (with ownership measured by the number of shares held by each shareholder). Similarly, when issued in physical rather than electronic form,
188-577: A $ 350 million budget shortfall in February 2017, which "threatened the viability of [the state's] schools and infrastructure". In response, in June 2017, the extreme tax cuts were rolled back to 2013 levels. By 2017, pass-through businesses earned the "majority of business income" in the United States and "owners of S-corporations and partnerships now earn about half of all income from businesses." According to
235-510: A September 2017 article in The New York Times , about "95 percent of companies in the United States are structured as pass-through entities, generating the bulk of the government’s tax revenues." On December 2, 2017 the U.S. Senate passed a tax overhaul bill as part of the proposed Tax Cuts and Jobs Act of 2017 that reduced taxes on pass-through business income by allowing them to "deduct 23% of their income". The Senate added features to
282-454: A business formed as an LLC rather than a corporation. An LLC with either single or multiple members may elect to be taxed as a corporation through the filing of IRS Form 8832. After electing corporate tax status, an LLC may further elect to be treated as a regular C corporation (taxation of the entity's income prior to any dividends or distributions to the members and then taxation of the dividends or distributions once received as income by
329-475: A document evidencing ownership rights in an LLC is called a "membership certificate" rather than a "stock certificate." In the absence of express statutory guidance, most American courts have held that LLC members are subject to the same common law alter ego piercing theories as corporate shareholders. However, it is more difficult to pierce the LLC veil because LLCs do not have many formalities to maintain. As long as
376-498: A foreign corporation that is capitalized for the purpose of carrying out the transaction. Variants of Boss Transactions are referred to as Son of Boss Transactions. According to a report published by Brookings in May 2017, in the early 1980s almost all business income in the United States was generated by C corporations . In terms of Income tax in the United States C corporations are taxed separately from their owners. In December 2004
423-542: A personal liability in cases where distributions to members render the LLC insolvent. The first state to enact a law authorizing the creation of limited liability companies was Wyoming in 1977. The law was a project of the Hamilton Brothers Oil Company , which sought to organize its business in the United States with liability and tax advantages similar to those it had obtained in Panama . From 1960 to 1997,
470-416: A similar entity called a professional limited liability company ( PLLC ). An LLC is a hybrid legal entity having certain characteristics of both a corporation and a partnership or sole proprietorship (depending on how many owners there are). An LLC is a type of unincorporated association , distinct from a corporation. The primary characteristic an LLC shares with a corporation is limited liability , and
517-456: A variety of governance and protective provisions for the corporation and its shareholders, most states do not dictate detailed governance and protective provisions for the members of a limited liability company. In the absence of such statutory provisions, members of an LLC must establish governance and protective provisions pursuant to an operating agreement or similar governing document. Flow-through entity A flow-through entity ( FTE )
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#1732854944519564-508: A year, Holley's business filled a whole floor of a commercial building on Holyoke's Main Street. By 1894, the business grew to occupy an entire building, at the corner of Winter and Appleton Streets in Holyoke, and in 1909, the size of its facilities there were nearly doubled. By the end of World War II, the company had expanded outside of Massachusetts and established international footholds. Known as
611-419: Is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation . An LLC is not a corporation under the laws of every state; it is a legal form of a company that provides limited liability to its owners in many jurisdictions. LLCs are well known for the flexibility that they provide to business owners; depending on
658-578: Is a legal entity where income "flows through" to investors or owners; that is, the income of the entity is treated as the income of the investors or owners. Flow-through entities are also known as pass-through entities or fiscally-transparent entities . Common types of FTEs are general partnerships , limited partnerships and limited liability partnerships . In the United States, additional types of FTE include S corporations , income trusts and limited liability companies . Most countries require an FTE (or its owners) to file an annual return reporting
705-400: Is formed in one state, but the owner (or owners) are located in another state (or states), or an employee is located in another state, or the LLC's base of operations is located in another state, the LLC may need to register as a foreign LLC in the other states it is "transacting business". For U.S. federal income tax purposes, an LLC is treated by default as a pass-through entity. If there
752-419: Is generally regarded as income or expense of the participants under the transparency principle." FTEs are based on conduit theory or pipeline theory which is defined as a "method of integrating the taxation at the entity and participator level under which income or deductions flow through from the entity to its participators. The entity is in effect regarded as an extension of the participators. A partnership
799-515: Is generally taxed according to the conduit system. The conduit system may be contrasted with the classical system." In the United States, pass-through entities include "sole proprietorships, partnerships and S corporations that ... pay taxes at the individual rate of their owners" as well as income trusts and limited liability companies . According to CNN Money , in the United States, most "businesses are set up as pass-throughs, not corporations" which "means their profits are passed through to
846-501: Is not a sole proprietor if one elects to treat the LLC as a corporation. In the United States, sole proprietors "must report all business income or losses on [their] personal income tax return; the business itself is not taxed separately. The IRS refers to this as "pass-through" taxation, because business profits pass through the business to be taxed on your personal tax return. S corporation shareholders are subject to tax on their "pro rata shares of income" based on their shareholdings in
893-502: Is only one member in the company, the LLC is treated as a "disregarded entity" for tax purposes (unless another tax status is elected), and an individual owner would report the LLC's income or loss on Schedule C of his or her individual tax return. Thus, income from the LLC is taxed at the individual tax rates. The default tax status for LLCs with multiple members is as a partnership, which is required to report income and loss on IRS Form 1065. Under partnership tax treatment, each member of
940-630: The Financial Asset Securitization Investment (FASIT) which was a flow-through entity formed in the United States, was repealed. FASIT was an investment instrument in "non-mortgage receivable pools such as credit card receivables, automobile loans, construction loans, and finance leases." FASITS in existence on October 24, 2004 were exempted from the repeal. By 2005 the US Internal Revenue Service viewed Son of Boss as "an abusive transaction aggressively marketed in
987-479: The legal pad , and no other company has challenged this claim; however, no patent was filed for the invention, and details of the invention are largely absent, including the reason for the pads' yellow color, which costs 10 to 20 percent more than plain white to produce. Limited liability company A limited liability company ( LLC ) is the United States -specific form of a private limited company . It
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#17328549445191034-1056: The Ampad Holding Corporation, the company was purchased in 1986 by the Mead Corporation . In 1992, the newly formed holding company American Pad & Paper and Bain Capital purchased the subsidiary from Mead. Upon its formation, American Pad & Paper consolidated its 13 manufacturing and distribution facilities into six in 21 locations in the US. At the time, the company had more than 3,700,000 square feet (340,000 m) of production and warehouse space in California, Colorado, Georgia, Illinois, Massachusetts, Mississippi, New Jersey, New York, Ohio, Pennsylvania, Tennessee, Texas, Washington, and Wisconsin. The company continued to enjoy 53 percent compound annual growth in net sales, which increased from $ 8.8 million in 1992 to $ 200.5 million in 1996, when
1081-679: The Delaware Limited Liability Company Act provides that the managers and controlling members of a Delaware-domiciled limited liability company owe fiduciary duties of care and loyalty to the limited liability company and its members. Under the amendment (prompted by the Delaware Supreme Court's decision in Gatz Properties, LLC v. Auriga Capital Corp ), parties to an LLC remain free to expand, restrict, or eliminate fiduciary duties in their LLC agreements (subject to
1128-559: The Executive Vice President and COO of Clore Automotive. On June 8, 2010 Ampad was acquired by Esselte . In July 2014, it was sold to TOPS Products. On January 25, 2021, the company was the focus of attention for the dismissal of workers who demanded a fair salary increase and intimidation of administrative personnel, thus violating the clients' policies of respect for workers, good remuneration, excessive working hours The company claims its founder, Thomas W. Holley, invented
1175-550: The LLC and the members do not commingle funds, it is difficult to pierce the LLC veil. Membership interests in LLCs and partnership interests are also afforded a significant level of protection through the charging order mechanism. The charging order limits the creditor of a debtor-partner or a debtor-member to the debtor's share of distributions, without conferring on the creditor any voting or management rights. Limited liability company members may, in certain circumstances, also incur
1222-563: The LLC seriously and enacted their own LLC statutes. By 1996, all 50 states and the District of Columbia had LLC statutes. In 1995, the IRS came to the conclusion that the widespread enactment of LLC statutes had undermined the Kintner regulations, and in 1996 it promulgated new regulations establishing a so-called "check the box" (CTB) entity classification election system that went into effect throughout
1269-405: The LLC, as is the case for all partners of a partnership, annually receives a Form K-1 reporting the member's distributive share of the LLC's income or loss that is then reported on the member's individual income tax return. On the other hand, income from corporations is taxed twice: once at the corporate entity level and again when distributed to shareholders. Thus, more tax savings often result if
1316-461: The S corporation which is not itself taxed. FTEs included in the 2009 IBFD International Tax Glossary included the Bond and Bond Option Sales Strategy (BOSS) transaction] referring to an "investment strategy developed in the United States to generate tax losses without a corresponding economic loss. The transaction involves the use of a partnership or other flow-through entity that makes an investment in
1363-512: The United States and a plant in Matamoros, Tamaulipas , Mexico . Ampad was founded in 1888 by Thomas W. Holley, a paper mill employee, in Holyoke, Massachusetts . At the time, Holyoke was a major papermaking center. Holley began purchasing the rejects, or "sortings", from local paper mills, cutting the paper, inscribing rules on it, and binding it into pads which he could sell at a discount. Within
1410-522: The United States on January 1, 1997. LLCs are subject to fewer regulations than traditional corporations, and thus may allow members to create a more flexible management structure than is possible with other corporate forms. As long as the LLC remains within the confines of state law, the operating agreement is responsible for the flexibility the members of the LLC have in deciding how their LLC will be governed. State statutes typically provide automatic or "default" rules for how an LLC will be governed unless
1457-420: The United States, is sometimes different. When an LLC is formed, it is said to be "organized", not "incorporated" or "chartered", and its founding document is likewise known as its " articles of organization ", instead of its " articles of incorporation " or its "corporate charter". Internal operations of an LLC are further governed by its " operating agreement ". An owner of an LLC is called a "member", rather than
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1504-437: The bill to prevent abuse. In a November article, The New York Times reported that the tax bill would "[r]educe the pass-through tax rate to 25% regardless of income level. Since 95% of businesses are incorporated as pass-through entities Examples include "sole proprietorships, partnerships and S corporations that currently pay taxes at the individual rate of their owners." whose owners pay taxes as if it were personal income at
1551-587: The classification of unincorporated business associations for the purpose of U.S. federal income tax law was governed by the " Kintner regulations", which were named after the prevailing taxpayer in the 1954 legal precedent of that name. As promulgated by the Internal Revenue Service (IRS) in 1960, the Kintner regulations set forth a complex six-factor test for determining whether such business associations would be taxed as corporations or partnerships. Some of these factors had equal significance, so that
1598-629: The company announced it would be delisted from the New York Stock Exchange . After filing for Chapter 11 bankruptcy protection, Ampad was acquired in 2003 by an affiliate of Crescent Capital Investments, later renamed Arcapita . Ampad's current president and CEO , Donald Meltzer, joined the company in August 2005, having formerly served as vice president and general manager of the Roofing Systems Group at Johns-Manville , and before that as
1645-665: The company became publicly traded. The company made a number of acquisitions, including writing products company SCM in July 1994, brand names from the American Trading and Production Corporation in August 1995, WR Acquisition and the Williamhouse-Regency Division of Delaware, Inc. in October, 1995, Niagara Envelope Company, Inc. in 1996, and Shade/Allied, Inc. in February 1997. On January 8, 1999, unable to sustain profitability,
1692-507: The implied covenant of good faith and fair dealing). Under 6 Del. C. Section 18-101(7), a Delaware LLC operating agreement can be written, oral or implied. It sets forth member capital contributions, ownership percentages, and management structure. Like a prenuptial agreement, an operating agreement can avoid future disputes between members by addressing buy-out rights, valuation formulas, and transfer restrictions. The written LLC operating agreement should be signed by all of its members. Like
1739-457: The late 1990s and 2000 primarily to wealthy individuals." The IRS began a "settlement initiative" which "required taxpayers to concede 100 percent of the claimed tax losses and pay a penalty of either 10 percent or 20 percent unless they previously disclosed the transactions to the IRS." By 2013, "only 44 percent of the income of business owners was earned through C-corporations." Starting in 2013, Kansas Governor Sam Brownback undertook what
1786-421: The members) or as an S corporation (entity level income and loss passes through to the members). Some commentators have recommended an LLC taxed as an S-corporation as the best possible small business structure. It combines the simplicity and flexibility of an LLC with the tax benefits of an S-corporation (self-employment tax savings). Some legal scholars argue that corporate income taxes are intended to limit
1833-400: The operating agreement provides otherwise, as permitted by statute in the state where the LLC was organized. The limited liability company has grown to become one of the most prevalent business forms in the United States. Even the use of a single member LLC affords greater protection for the assets of the member, as compared to operating as an unincorporated entity. Effective August 1, 2013,
1880-443: The owners, shareholders and partners, who pay tax on them on their personal returns under ordinary income tax rates." In other words pass-through businesses are not "taxed like corporations and instead pay taxes on business income as if it were personal income." A sole proprietor is "someone who owns an unincorporated business by himself or herself." However, if one is the sole member of a domestic limited liability company (LLC), one
1927-560: The power of corporations and to offset the legal benefits corporations enjoy, such as limited liability for their investors. There is concern that LLCs, by combining limited liability with no entity-level taxation, could contribute to excessive risk-taking and harm to third parties. Although there is no statutory requirement for an operating agreement in most jurisdictions, members of a multiple member LLC who operate without one may encounter problems. Unlike state laws regarding stock corporations, which are very well developed and provide for
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1974-634: The presence of only half of them would result in classification as a partnership. Accordingly, the Wyoming Legislature tailored its statute to grant LLCs particular corporate features without exceeding this threshold. For several years, other states were slow to adopt the LLC form because it was unclear how the IRS and courts would apply the Kintner regulations to it. After the IRS finally decided in 1988 in Revenue Ruling 88-76 that Wyoming LLCs were taxable as partnerships, other states began to take
2021-403: The primary characteristic it shares with a partnership is the availability of pass-through income taxation . As a business entity, an LLC is often more flexible than a corporation and may be well-suited for companies with a single owner. Although LLCs and corporations both possess some analogous features, the basic terminology commonly associated with each type of legal entity, at least within
2068-404: The revenue. Technically, for tax purposes, flow-through entities are considered "non-entities" because they are not taxed; rather, taxation "flows-through" to another tax return. According to International Bureau of Fiscal Documentation [ fr ] (IBFD) a pass-through entity or flow-through entity (FTE) is a "non-taxable entity, such as a partnership, under which the income or expense
2115-427: The shares of income allocated to owners, and to provide each owner with a statement of allocated income to enable owners to report their shares of income on their own tax returns. In the United States, the statement of allocated income is known as a K-1 (or Schedule K-1 ). Depending on the local tax regulations, this structure can avoid dividend tax and double taxation because only owners or investors are taxed on
2162-410: The situation, an LLC may elect to use corporate tax rules instead of being treated as a partnership, and, under certain circumstances, LLCs may be organized as not-for-profit. In certain U.S. states (for example, Texas), businesses that provide professional services requiring a state professional license, such as legal or medical services , may not be allowed to form an LLC but may be required to form
2209-594: Was described by The Atlantic in a June 2017 article as the United States' "most aggressive experiment in conservative economic policy". From 2013 to 2017, 300,000 businesses as pass-through income entities, benefited from the complete tax exemption. [T]ens of thousands of Kansans were able to "claim their wages and salaries as income from a business rather than from employment." Brownback's tax overhaul created pass-through income tax exemptions as well as trimming income tax, eliminating some corporate taxes. From 2013 to 2017, Kansas experienced budget shortfalls culminating in
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