The late 20th century brought a new era of federal-tribal relationships and a policy of self-determination to Indian country. Indian Tribes are increasingly asserting control over their land, resources, and governance of their communities. Tribes are involved in a wide range of economic activities from tourism, gaming, energy, agriculture, forestry, manufacturing, federal contracting, and telecommunications. In many parts of the country, Tribes are becoming regional economic and political power houses. They are the largest employer in many counties. Tribal governments and tribal businesses engage in a wide range of business and financial transactions. The unique legal status of tribes is only now beginning to be used by Tribal governments to contribute to their business and economic development efforts. This century marks a new era for tribes using their sovereign status and governmental authority to achieve economic self-sufficiency and cultural preservation. There are still high levels of poverty and unemployment in Indian country and a lack of the basic infrastructure crucial to the building blocks of economic success. There are, however, increasingly more examples of tribes breaking their dependence on federal programs and creating the necessary legal infrastructure to build the foundations for successful economic development.

As tribal business transactions become increasingly more sophisticated and involve nonIndian partners, investors, and lenders, there is a need to understand the basic methods for doing business in Indian country. In particular, in the energy industry, Indian tribes are shifting from being passive owners of their energy resources by evaluating ways in which they can own, develop, and produce their resources. Tribes are increasingly looking at ways to develop their resources in a manner that gives them an active ownership interest in the development of the project, often with a non-Indian business partner.

There are unique factors that a tribe should consider when deciding how to structure a business transaction or how to partner with a non-Indian business. This Handbook provides a general guide to the key factors that an Indian tribe should consider when structuring a business or project. It will look at the basic structures available to tribal governments when organizing for economic development activities and will consider whether business formation should occur under tribal, federal or state law. It will also consider the tax consequences of each type of business structure. The Handbook will assist tribal managers in determining which structure will work best to protect tribal assets, preserve tribal sovereignty, and maximize the use of tax and other incentives available for tribal economic development. This guide is general in nature. You should consult legal counsel and accountants to determine the best business structure for your particular circumstances.

Tribal governments are distinct political entities in our federal system of government. They have the power of self-government and exercise sovereignty over their members and territory. Their sovereignty pre-dates the Constitution and is derived from the fact that they owned all the land that is now the United States. The U.S. Constitution acknowledges the sovereign status of Indian tribes in the Treaty Clause, in the 14th Amendment as "Indians not taxed," and in the Commerce Clause. The sovereign nature of Tribes has been recognized in the Constitution, treaties, court decisions, and the course of dealing with tribes. As sovereign Nations, Indian tribes have powers and capabilities not available to individuals. This Handbook will assist you in evaluating the different forms available for organizing economic development and to begin to take steps to achieve financial and economic independence.

When developing a new tribal enterprise, an important consideration is the applicable law and regulations governing its formation and operation. In Indian country, business entities can be formed under tribal law, state law or federal law. Your choice of law and the entity that is chosen will have consequences on issues relating to tax, financing, and sovereign immunity. It will also determine how you can maximize risks and liability. An important consideration for tribes is how to preserve tribal control and to protect tribal assets while providing a business partner or lender with certainty.

A tribe, because it is a sovereign nation, can form a governmental entity to perform business functions. This entity can be an instrumentality of tribal government, a political subdivision of the tribe, or an agency or division of the tribe. A tribe can also form a separate business entity formed under federal, tribal, or state law.

When choosing a business structure, there are many things a tribe should consider regarding business issues and tribal governmental issues. One of the key factors is how to preserve tribal control while also insulating business decisions from tribal governmental decisions or tribal politics. Another critical factor for tribes is how to preserve tribal assets and limit exposure to business liabilities. Other factors are: how to effectively manage the entity, how to maximize tax benefits, how to minimize financial risks, the location of business operations--on or off the reservation, what assets will be pledged, how the business will be capitalized, which structure enables the preferred method of equity or debt financing, and the requirements of one’s business partner or lender. This Handbook looks at key attributes to consider as you determine the ideal structure for your business. These include:

• Organizational considerations

• Sovereign immunity

• Legal Liability

• Federal tax treatment

• Financing considerations.