I Don’t Need a Lawyer to Start a Corporation – Or Do I?
Many new business owners start out forming a corporation with the idea that they can do all the paperwork themselves and save on legal fees. It is true that the California Secretary of State provides a form meeting the minimum requirements for articles of incorporation, the first document a new California corporation needs to draft several other documents for it to be validly incorporated, most of which cannot be found on the website of the California Secretary of State. However, legal considerations for corporations extend far beyond just filling out a few forms. Seeking advice about the issues below, and more depending on your corporation’s specific situation, may save you time and trouble later.
Before even starting to draft articles of incorporation, business owners should consider in which state to incorporate. Many businesses operating in California choose to incorporate in California for convenience and because it is the least expensive option for business that will be located in California. However, in some instances, incorporating in another state may be appropriate.
The incorporation process can be delayed by naming issues. Name availability may be checked with the Secretary of State in the state of incorporation to ensure that another entity does not already have the same name or a conflicting name. Also, trademarks and fictitious business names may need to be checked. See California Business and Professions Code § 14200, et seq.; United States Code, Title 15, § 1051, et seq.; California Business and Professions Code § 17900, et seq. The business must then determine whether the corporation’s name could use a trademark without permission or be too similar to an existing corporation’s name.
Depending on the corporation’s line of business, its founders may need to file additional paperwork or include specific information in its corporate documents. For example, professional corporations must include specific information in articles of incorporation, bylaws, stock certificates, and other corporate documents, all of which are specific to the specific profession to be practiced.
Businesses thinking about incorporating also should become familiar with the legal requirements for officers and directors before designating these positions in their initial formation paperwork. Officers and directors must follow specific legal requirements governing fiduciary duties to the corporation, so selecting competent management for the corporation at the outset is crucial. See, e.g., California Corporations Code § 304. Again, depending on the corporation’s line of business, specific legal issues may apply or arise more frequently that can be addressed before or upon formation of the corporation to avoid expensive and time-consuming legal action down the road.
Forward-thinking businesses seek out legal advice before problems arise. Protect yourself and your business by seeking out an experienced business attorney to help you form your corporation. Michael Leonard, Esq., of San Diego Corporate Law, named a “Rising Star” for 2017 by SuperLawyers, has years of experience helping clients form corporations. To schedule a consultation, e-mail San Diego Corporate Law or call Mr. Leonard at (858) 483-9200.