The Duty of Care for a Corporation Versus a Limited Liability Company There are many reasons why you might want to form a San Diego limited liability company instead of forming a San Diego corporation. Among those include: LLCs require fewer corporate formalities like annual shareholder meetings, etc. LLCs [...]
How Does the Secretary of State Determine Business Name Availability? As many know, when you form a corporation here in San Diego or anywhere in California, you must specify the name of the corporation (or LLC or Limited Partnership). According to Cal. Corp. Code, § 201(b), a business name [...]
Employers are Responsible for Their Employees' Negligence and Wrongful Acts If your San Diego or California business has employees, then your company is responsible for the accidents, mistakes, and bad behavior of your employees. The legal origin of this principle is the doctrine of respondeat superior. Here is a [...]
Tips for Avoiding Unconscionability in Your San Diego Business Contracts Here in San Diego and in California, there are a few circumstances in which courts will not enforce a contract or contract provisions. One such circumstance is when the contract is deemed to be "unconscionable." Here is a quick [...]
Using Business Contracts to Limit Possible Damages Recoverable in Litigation Under California law, it is possible to use contract language to limit your San Diego business's liability for damages in the event of future litigation. In general, these are called "Limitation on Damages" clauses and, with exceptions, such provisions [...]
Sexual Harassment Lessons From a New Maryland Law San Diego and California businesses are aware that sexual harassment is not allowed and is not to be tolerated in California workplaces. The #MeToo movement has highlighted the issue and among the goals of the movement is to remove the cloud [...]
Some Tips on Getting Out of a "Bad" Contract In general, San Diego and California businesses want to honor their contracts. But, maybe you ended up signing a "bad" contract. Every business does it at some point; it is nearly inevitable. The contract can be bad for any number [...]
"No Waiver" Clauses in San Diego Business Contracts Many sophisticated business contracts in San Diego and California contain what are called "no waiver" clauses. The intent of these clauses is to prevent an accidental or inadvertent waiver of contractual rights in the event of breach of contract. Usually, “no [...]
"At-Will" Employment in San Diego In San Diego and California, with some exceptions, all employees are "at-will" employees that can be fired "for cause" or "for no reason at all." One exception is if your San Diego business or company has agreed to an employment contract with an employee [...]
Do San Diego Business Contracts Now Need to Conform to the Three Gender Options? In October 2017, California Governor Jerry Brown signed the Gender Recognition Act. This Act adds "non-binary" as a choice for California residents when required or asked to designate a gender for state documents like a [...]
What is "Piercing the Corporate Veil?" If you a shareholder of a San Diego or California corporation, generally speaking, the corporate entity will shield you from personal liability for the business debts and obligations of the corporation. However, under some circumstances, the courts will not allow the corporation to [...]
San Diego Corporate Law: 5% Interest in Restaurant Not a "Security" As we have written here at San Diego Corporate Law, if you are selling and/or offering "securities" in California, you must comply with both federal and California securities laws -- the Corporate Securities Law of 1968 (Corp. Code, [...]
San Diego Employee Non-Disclosure Agreements: What Should They Contain? The purpose of San Diego and California non-disclosure agreements ("NDA") is to protect your business and its commercially valuable trade secrets. Trade secrets and confidential information are often the key to keeping and expanding your company's market share. We have [...]
Medical Corporations: Company Policies May Help Avoid Malpractice Lawsuits Every San Diego and California physician and healthcare provider must carry malpractice insurance. The same is true for any medical corporation under which the physicians and healthcare providers offer services. However, malpractice lawsuits are bad for business even if there [...]
What is a Certificate of Qualification? If you are a San Diego corporation, to become incorporated, you had to file and obtain articles of incorporation from the California Secretary of State. You also have annual filing and tax requirements with the California Franchise Tax Board. By contrast, if you [...]
Shareholder Derivative Actions (Part III): "Demand Futility" Doctrine As we discussed in Part I of this series, shareholders of San Diego corporations can bring lawsuits on behalf of the corporation against other shareholders and against members of the board of directors. These are called shareholder derivative actions. As we [...]
Shareholder Derivative Actions (Part II): What Happens After the Demand Letter? As we discussed in Part I of this series, shareholders of San Diego and California corporations can bring derivative lawsuits against members of the board of directors. Technically, these are lawsuits filed on behalf of the corporation seeking [...]
Shareholder Derivative Actions (Part I): The "Demand" Requirement Under California law, San Diego corporations have a duty to take actions that are in the best interest of the company and the investors. Failure by the board to do this will lead to litigation, in particular, shareholder derivative actions. However, [...]
Non-Solicitation and Non-Acceptance of Business Clauses are Not Enforceable in San Diego As many San Diego and California businesses know, non-compete agreements are not enforceable in California. That is, except for a few limited circumstances, you cannot enforce any agreement by which an employee agrees not to compete against [...]
San Diego Medical Corporations: What is the Doctrine of Fair Procedure? In San Diego and in California generally, there is a judge-created common law legal principle called the "doctrine of fair procedure." In general, the doctrine protects an individual, like a physician, from being fired, excluded, or expelled in [...]
Using San Diego Affiliated Companies to Protect Intellectual Property Under some circumstances, there is value to using or creating an affiliated company to protect intellectual property from risks associated with other parts of an ongoing business. Under California law, the same group of individuals or entities can own more [...]
What is an Integrated or Partially-Integrated Contract? Merger Clauses Part II When dealing with complex San Diego business contracts like business purchase agreements, it is not uncommon for there to be several drafts and re-drafts of the final contract. As we discussed previously on this blog, a well-drafted business [...]
How Insurance Can Make a Buy-Sell Agreement "Easy" for Death or Disability For small San Diego and California businesses, it is important that the owners agree early in the process to a buy-sell agreement. This applies whether you are running your business as a general partnership, a corporation, a [...]
Can I Still be Liable for Rent if I Vacate My San Diego Commercial Space Early? Under California law, a commercial tenant who breaks a commercial lease by vacating the space early can be held liable by the landlord for unpaid rent. Commercial tenants should remember that commercial leases [...]
Confidentiality Clauses in San Diego Business Contracts (Part I) It is not uncommon to find confidentiality clauses in business contracts. Such clauses come in two varieties - confidentiality with respect the agreement itself and/or the contents of the agreement, and confidentiality with respect to commercial information and trade secrets [...]
Non-Compete Agreements in San Diego: When are They Valid? In general, under California law, a current employer cannot restrict an employee from leaving and taking another job, even with a competitor. In many states, employers are allowed use so-called "Restrictive Covenants" or a "Non-Compete Agreements" to prevent an employee [...]
Franchise Provisions to Avoid in San Diego Are you thinking of buying a franchise? We here at San Diego Corporate Law have noticed a strong uptick in franchise companies advertising for new franchisees. Starting up a new business can be exciting and we certainly encourage the entrepreneurial spirit. We [...]
Common Places to Find a Buyer for Your San Diego Business Are you in the market to sell your San Diego business? Finding a buyer can be one of the more complicated challenges. You are definitely going to need a trusted and experienced corporate lawyer to help you with [...]
San Diego Corporate Formalities: Proper Notice of Meetings of Shareholders and Directors Under California law, corporations are required to have an annual meeting of shareholders and to hold regular meetings of the board of directors. In this article, we discuss the importance of proper notice of the respective meetings. [...]
What are "Liquidated Damages" in San Diego? A provision for liquidated damages is a way to specify damages in the absence or inability of actually calculating damages, or when such damages would be difficult to calculate. The advice and counsel of a good corporate lawyer is needed if you [...]
When is the Right Time to Convert From Sole Proprietorship to a Corporation? Research and observation shows that, when they succeed, businesses have certain natural stages of growth. Many a San Diego business might start off as a sole proprietorship. That is, the business is/was just you (with the [...]
San Diego General Partnerships: What Happens if a Partner Leaves? In San Diego, a general partnership can be formal or informal. Under California law, in simplest terms, a partnership exists if two or more persons or entities jointly own a business for the purpose of making money. If the [...]
Top Five Mistakes to Avoid When Starting Your New San Diego Business Congratulations! You have made the decision to finally start your own San Diego business - maybe on your own or with some good friends or trusted colleagues. This is exciting, but of course, risky. We here at [...]
San Diego Corporate Formalities: Annual Shareholders' Meetings In San Diego and elsewhere in California, corporations are required to have an annual meeting of shareholders. For small companies, it may seem pointless and a waste of time. However, complying with corporate formalities is important. Remember that one of the main [...]
Closing a San Diego LLC Sometimes when you set up a new San Diego Limited Liability Company ("LLC") with the expectation of going into business, something goes wrong. Maybe the deal falls through, or during due diligence, something is discovered that makes the deal unworkable or shows that the [...]
Tips for Picking a Good Company Name: Lessons From Trademark Law One of the trickier aspects of starting a new San Diego business is picking a good company name. As we discuss below, it is generally a bad idea to pick YOUR personal or family name as the name [...]
What is a Voidable Conveyance? (Part I) In general, your San Diego business must honor its payment obligations to its creditors. Creditors are, of course, lenders and financial institutions, but also can be your landlord, suppliers, and others to whom payment is due. In general, if your business fails [...]
Should Your San Diego LLC be Member-Managed or Manager-Managed? Under the California Corp. Code, § 17701 et seq., when you form a Limited Liability Company (“LLC”) to run your San Diego business, you choose how the LLC is managed. The three choices are: Single-member LLC Member-managed -- managed by [...]
What is a UCC Lien Filing? If your San Diego business is contemplating a small business loan or a business line of credit or some similar form of general financing, then your lender will require some sort of collateral. In a residential housing example, when you take out a [...]
San Diego Businesses: Tips for Avoiding Litigation Litigation is expensive and time-consuming. It is costly in terms of legal bills, litigation costs, and lost productivity. Furthermore, if there is an adverse result, then there are the costs of paying the judgment. Litigation can kill a startup and seriously undermine [...]
Five Advantages of Using Trade Secret Law to Protect Your Intellectual Property Your San Diego business owns a lot of intellectual property ("IP") even if you do not really think of some of your assets as IP. As we have discussed before, many aspects of businesses can be legally [...]
What is a "501(c)(3) Corporation?" Being a "501(c)3 corporation" means your corporation/organization has been designated as a tax exempt charitable organization by the federal Internal Revenue Service ("IRS"). In general, saying that a corporation is a "501(c)(3)" is equivalent to calling the organization a "non-profit" organization ("Non-Profit") with the [...]
San Diego Businesses: Using Stock Options as Employee Compensation If you run your San Diego business as a non-public corporation, one method of compensating your employees for their hard work - particularly upper management employees - is by issuing shares of stock as part of their compensation package. This [...]
New IRS Audit Regime in Effect: Reviewing Your Partnership/LLC Agreement Effective January 1, 2018, new guidelines went into effect with respect to partnership audits by the Internal Revenue Service. See Forbes article here. While no partnership or LLC that has chosen to be taxed as a partnership wants to [...]
How to Grow Your San Diego Small Business Growing and expanding your San Diego small business can be challenging. We here at San Diego Corporate Law are a small business too and we are constantly looking for ways to find new clients and serve our existing clients better. Here [...]
Does My San Diego Business Need an Employee Handbook? If you have employees, then, yes, your San Diego business needs an employee handbook. As we have written previously, employee handbooks ("EH") do not have to be complicated. Basically, EH combine into one "book" all the various information that you [...]
Every Business Needs a Good Contract Management Method Even if you are just starting your new San Diego business, you are already beginning to accumulate contracts. Contracts are anything whereby you and your business agree to obligations that can be enforced in a court of law or court of [...]
E-Commerce Means Needing a Terms of Service Agreement for Your Website If you are running a San Diego business, you need a Terms of Service, sometimes called a Terms of Use, Agreement for your website. This is essential for two broad reasons - controlling how users access and use [...]
San Diego Franchise Law: Types of Franchises Everyone is familiar with franchises. Many of the businesses that we buy from are franchises, including fast food and other restaurants, stores, gas stations, etc. A franchise is a type of business where you, the local "franchisee," pay an annual franchising fee [...]
What is a Certificate of Tax Clearance? If you are involved in the sale or purchase of a San Diego business, among the many documents that will be needed at the closing are various Certificates of Tax Clearance from various California and county taxing authorities. Here is a quick [...]
Buying or Selling San Diego Business Assets? California’s Bulk Sales Act If you are planning on selling your San Diego business or if you are in the market to purchase one, you should be aware of the California Bulk Sales Act (hereinafter "CBSA"). See Cal. Comm. Code, §6101(a)(3). The [...]
San Diego Mergers and Acquisitions: Common Reasons Why Acquisitions Fail Mergers and acquisitions ("M&A") and other efforts to sell and buy businesses in San Diego are almost always complex. Even the smallest business with the most straightforward of business models involves an array of questions with respect to financing, [...]
Importance of Corporate Bylaws for San Diego Corporations If you are running your San Diego business through a corporation or if you are thinking of starting up a new San Diego corporation, your company must have bylaws. Here are a few important facts about San Diego corporation bylaws. San [...]
Due Diligence and Selling/Buying a Business: Data Breach Disclosures On February 21, 2018, the Federal Securities and Exchange Commission ("SEC") issued new guidance on public corporation cybersecurity disclosures; note that the SEC focuses on publicly-held corporations. However, the new SEC cybersecurity guidelines are relevant to small, closely-held corporations, and [...]
Selling Your San Diego Medical Practice? Focus on These Areas to Maximize Your Value Are you in the market to sell your San Diego medical practice? If so, please contact us here at San Diego Corporate Law. We have the legal experience to help. Along with contacting us, here [...]
Five Ways to Avoid a Nasty Business Divorce You start up a new business here in San Diego with some friends and colleagues. Everything seems great at the beginning, but despite everyone's best efforts, it is just not working out because of different visions of where the business should [...]
Buying a San Diego Business: How to Avoid Successor Liability If you are thinking of buying a business in San Diego or elsewhere in California, it is important to know what liabilities and debts of the seller you are agreeing to pay and what liabilities and debts you are [...]
Nine Keys to a Successful San Diego Business Joint Venture In San Diego, a business joint venture comes into being when two or more businesses join together to engage in some limited business activity. As an example, two businesses might join together to build a small shopping center or [...]
California Business Control Structures: Comparing Corporations to Partnerships Sometimes it can be confusing to figure out who is in control of San Diego and California businesses. Part of the confusion results from the fact that businesses can be run in so many different structures such as sole proprietorships, partnerships, [...]
Who Can Work for a San Diego California Professional Corporation? Professional corporations can be created specifically for doctors, nurses, and healing arts practitioners under the Moscone-Knox Professional Corporation Act. See Cal. Corp. Code, §§ 13400-13410. When formed, the professional corporation becomes a legal entity separate and apart from the [...]
Six Tips for Conducting Due Diligence When Buying a San Diego Franchise Franchising is big business. According to data from the International Franchise Association (IFA), in 2016, there were about 732,800 franchise businesses across the US employing over 7.5 million people and producing an estimated $675 billion in revenue. [...]
San Diego Startups and Royalty Financing Every new San Diego and California startup needs some sort of working capital to get the business up and running. The usual method is some combination of self-financing, locating venture capital or investment financing, or finding an angel investor. Another less-well-known is something [...]
Tips on Winning an Independent Contractors/Consultant Tax Audit If your San Diego or California business has independent contractors and/or consultants, you may be subject to an audit by taxing authorities to determine whether you have purposely or inadvertently misclassified your employees as independent contractors/consultants. This is NOT an audit [...]
Buying or Selling a San Diego Business: Dealing With the Commercial Lease If you are buying or selling a business in San Diego, one of the most important aspects of the transaction is often handling the transfer/assignment of the commercial lease. Many businesses in San Diego and California rent [...]
San Diego Business Law: Using an "Account Stated" to Ensure You Get Paid We wrote recently about how San Diego and California businesses can use written contracts to help them get paid fully and paid in a timely fashion. In this article, we address how your business can create [...]
Flexible Disclosure Options Under Regulation D - Rule 504 In general, any securities to be offered or sold in San Diego or in California must be registered to comply with both federal and California securities laws -- the Corporate Securities Law of 1968 (Corp. Code, §§ 25000-25707) and the [...]
San Diego Corporate Law: Revisiting What is a Security and Securities Fraud Offerings and sales of securities in California are governed by both federal and California securities laws -- the Corporate Securities Law of 1968 (Corp. Code, §§ 25000-25707) and the federal Securities Act of 1933 (15 U.S.C. § 77b). If you are offering [...]
San Diego Corporations: What are Fractional Shares? As the name would imply, a "fractional" share of stock means a fraction, part, or portion of a whole share. Thus, a one-half share is considered a "fractional" share. See Cal. Corp. Code § 407. Here is a quick primer on how [...]
Update on California Shareholder's Right to Inspect Records If you own shares of stock in San Diego or anywhere else in California, among your rights as a shareholder is the right to inspect and review the corporate books and records. This right was originally a common law right, but [...]
San Diego Closely Held Companies: 10 Must-Have Provisions in Your Buy-Sell Agreement A buy-sell agreement is a contract made among the owners of a business or company that governs how, under what circumstances, and at what price a given owner's interest in the business/company may be purchased by the [...]
How do I Convert My San Diego LLC into a San Diego Corporation? If you are currently operating your San Diego business as a California LLC, you may at some point wonder if you can convert to a corporation. The answer is "yes." There are various reasons that your [...]
San Diego Corporate Law: Pros and Cons of Making an "S Corp" Selection One of the questions that is often asked by entrepreneurs is, “Should my corporation be a ‘C Corporation’ or an ‘S Corporation’”? Here is some basic information on the difference and the pros and cons of [...]
What is a Pre-Incorporation Agreement? If you are thinking about starting up a new business in San Diego with some friends, or maybe you have decided it is time to move from a partnership into a more formal corporate entity, it is often wise and useful to have a [...]
Your San Diego Corporation Minute Book: What Should be Included? Corporate formalities are important. Remember that one of the main purposes of forming a corporation for your San Diego or California business is to take advantage of the corporation's limited liability shield. That is, the owners of the corporation [...]
What Should be in Your Severance Pay Agreement? Many San Diego and California businesses have employees. Occasionally, despite the best wishes and efforts of the business owners, employee layoffs and terminations are necessary. This happens for many reasons. Sales were just not high enough, changes in consumer preferences and [...]
Reviving Your San Diego Corporation We recently published an article about the importance of paying your franchise tax to the California Franchise Tax Board. Basically, paying your taxes is important to make sure your corporation does not get suspended. A corporation is a legal entity that has a separate [...]
California and San Diego Businesses: What is a Statute of Limitations? For San Diego and California businesses, there are laws that limit the amount of time that any person has the right to file a lawsuit. Such laws are called statutes of limitations. The time periods vary depending on [...]
San Diego Business Law: What is the Joint Employer Doctrine? Let's say you are running a pharmacy in San Diego. Let's call it San Diego's Best Drug Store. Like many businesses, San Diego's Best Drug Store has customers who want over-the-phone, on-demand, and speedy delivery of their products. Many [...]
San Diego Business Law: Preventing Raids on Your Employees (Part II) We wrote earlier about steps to take to prevent raids on your employees when a high-level, managerial employee is departing. See here. A recent case out of Wisconsin gives us an opportunity to review, update, and provide additional [...]
San Diego Businesses: Finding Workers in the "Gig" Economy Most San Diego and California businesses know about the so-called "gig" economy. Maybe you have hired a few "gig" workers here and there. In general, a "gig" worker is a short-term independent contractor. Given certain structural elements in the national [...]
San Diego Corporate Law: Keeping Biometric Data Private and Secure We wrote recently about how all San Diego and California businesses must ensure the privacy and security of customer data. See our discussion here. As we noted, your computers and networks are prime targets for criminals seeking to hack [...]
San Diego Business Law: What is a Breach of Warranty? All San Diego and California businesses want to "do good" by their customers, want to provide products and services that meet their customers' needs and keep them happy. This is the basic method of running a successful business and [...]
New California Labor Law: Impacts on Selling/Buying Your San Diego Business As the calendar turned to 2018, many new California laws went into effect. See LA Times news report here. Among the new laws was a provision that now prohibits private and public employers from seeking information on a [...]
Checklist for Limiting Personal Liability When Running Your San Diego Business When you are in business, there are many steps that you can take to limit your personal liability and your family's liability for business debts and obligations. We here at San Diego Corporate Law can help you with [...]
Selling or Buying a Business? Valuation Methods When you want to sell your San Diego small business or professional practice, or if you are in the market to purchase, at some point, everyone will have to decide how much the business is worth. This is obviously important for the [...]
Top Reasons Partnerships Fail Surely everyone can agree that starting a business or being in a San Diego business with friends as partners can be rewarding at a personal or emotional level as well as an economic level. You and your friends enjoy each other’s company, share common visions [...]
What is the Legal Doctrine of "Surviving The Closing?" When you are buying or selling a San Diego business, there will be a sales contract. Among the provisions of sales contract will be various “representations and warranties” made by the various parties. A “representation” is a factual statement. A [...]
Buying a San Diego Business? Four Must-Have Seller Representations and Warranties When you are buying a San Diego business, there will be a sales contract that sets out all of the covenants and conditions of the sale. In the sales contract, your trusted and experienced California corporate attorney has [...]
San Diego Corporations: What are Shareholder Rights? When you become a shareholder of a San Diego corporation or any corporation in California, you become an owner of some interest in the company. As an "owner," you have certain rights, just like the owner of land has certain rights, like [...]
San Diego Business Law: What is an Unpaid Internship? Unpaid internships can be beneficial to both the young intern and to the San Diego business "hiring" the intern. But businesses must be careful because under some circumstances, the "intern" might be considered an "employee" who must be paid for [...]
#MeToo Gets a Victory: Confidential Settlements Will No Longer be Tax Deductible Sexual harassment continues to be in the news. As we wrote recently, sexual misconduct in Hollywood and in the media has been a huge continuing story. It seems like new allegations are made every day. Indeed, it [...]
San Diego Corporate Law: What is an Incorporator? When you want to create a corporation for your San Diego business, you can hire what is known as an "incorporator." Your trusted and dedicated corporate attorney can be your incorporator; in fact, most often the incorporator is your corporate attorney. [...]
After You Incorporate, What Next? Congratulations on your newly incorporated San Diego, California corporation. Filing the incorporation papers with the California Secretary of State is not the end of the process. There are several important steps to take after you have become an "Inc." Here is a quick list. [...]
San Diego Businesses: Checklist for Protecting Your Computer From an Angry Administrator We have written recently about the need to protect your digital and virtual assets. One of many possible threats is a rogue or angry or vindictive recently-fired network administrator. Bad situations do happen; Uber recently was forced [...]
California Corporation Law: Can Minority Shareholders be "Controlling" Shareholders? As we have discussed, it has long been the law in San Diego and California that majority shareholders of corporations and other corporate entities owe fiduciary duties to other shareholders and owners. Among those duties are: Duty of loyalty to [...]
Franchise vs. Licensing Agreement: What is the Difference? Most of us are familiar with franchises. Many fast food restaurants and retail stores are franchises. Services can also be franchises, like tax preparation companies. In general, a franchise is a business form where you pay a fee to the franchisors [...]
What is a Buy-Sell Agreement for a San Diego Business? For small businesses with only several owners, a buy-sell agreement establishes up front the terms and conditions under which owners can be bought out, and at what price and under what conditions. Buy-sell agreements are essential for closely-held and [...]
Five Pitfalls to Avoid if You are Starting a New San Diego Business Launching your new San Diego startup is exciting and opens a new chapter in your life and in the lives of your family and your business partners. But, everyone knows that starting a new business can [...]
Doing Your Due Diligence When Buying a San Diego Business Doing Your Due Diligence When Buying a San Diego Business When contemplating buying a San Diego business, as the buyer, you must always engage in what is called "due diligence" before finalizing the purchase. Basically, due diligence is research [...]
California Mergers and Acquisitions: Reasons to Assume the Target's Debt In the news recently is the announcement by fast-food chain Arby's Restaurant Group that it will acquire Buffalo Wild Wings for $2.4 billion in cash. The deal calls for Arby's to pay $157 per share in Buffalo Wild Wings [...]
