What is a California General Partnership? A California general partnership is a simple and intuitive concept. When two or more people own and operate a business without a formal corporate structure, they are a general partnership. Put another way, a California general partnership is very similar to a [...]
Advantages for California Businesses Using Arbitration Clauses As a mechanism for alternative dispute resolution, arbitration has many advantages for California businesses. Serious consideration should be given to including arbitration clauses in all California contracts. What is Arbitration? Arbitration is an out-of-court process for settling disputes that might commonly [...]
Using a California Employment Contract to Achieve Non-compete Goals It is well-known that non-compete agreements in California are unenforceable outside of a couple of limited circumstances. However, a well-drafted California employment agreement can accomplish many of the goals that businesses seek to achieve with a non-compete agreement. Most [...]
Five Steps for Preventing Raids on Your Employees Staffing talent is often one of the most valuable assets for California companies. Preventing raids on your employees is important, particularly when a high-level, managerial employee is departing. The last thing you want is a flood of other employee departing, [...]
What is a Fictitious Business Name? When you conduct business in California under any name other than your name or the exact name of your California corporation or California LLC, you are operating under a “fictitious business name.” For example, if you incorporated as "ABC Smartphone Store, Inc.," [...]
Can a California LLC Have an Oral Operating Agreement? Sometimes, new business owners are leery of forming a California Limited Liability Company ("California LLC") as opposed to a California corporation or California partnership because they are daunted by the need for an operating agreement. Most good operating agreements [...]
The Importance of a Custom-Drafted Operating Agreement for a California LLC California Limited Liability Companies ("LLCs") are governed by their operating agreements. California LLC operating agreements do not have to be formalized or even in writing (however, it is a good idea to do so!). The California Corporations [...]
Basic Differences and Similarities Between a California Corporation and a California LLC When forming your California corporate entity, you have many options including forming a California corporation or creating a California limited liability company (" California LLC"). Most people are familiar with the idea of how California corporations work [...]
Checklist of Licenses, Registrations, Permits, and Tax Numbers to Operate Your Business in California As we wrote recently here, nearly every business needs some kind of business license or permit to operate in California. Here is a checklist of licenses, registrations, permits, and tax numbers that you might need. [...]
Commercial Leases 101: What New Business Owners Need to Know Starting your own business is both exciting and nerve-wracking. You are exerting a tremendous amount of energy and creativity, but there are so many details. Finding your perfect retail or office space is just as important and involved. It [...]
Laws You Must Consider When Advertising in California Your new startup has to advertise and market in order to seize market share. If your business wants to retain market share, you are going to need to market your products or services and advertise as well. Marketing is supposed to [...]
Personal Guaranties Put Your Personal Assets at Risk Almost every company has financing, particularly small companies. Almost as often, the lender requires that the company owners -- the principals -- sign personal guaranties for the loan amounts. Some personal guaranty agreements are quite onerous and give the lender: The [...]
Pros and Cons of Buying a Franchise If you have been thinking of starting a business or buying a business, it is likely you have also thought about buying a franchise. A franchise is a type of business where you pay a franchising fee and the owners or "franchisors," [...]
How to Verify “Accredited Investor” Status for 506(c) Offering As we discussed here, using Rule 506(c) under Regulation D has some significant advantages, the most important of which are the ability to engage in general solicitation and advertising and the non-requirement that the investors have a preexisting relationship with [...]
Checklist of Legal Issues When Buying or Selling a Business There are many legal issues to consider when buying or selling a business. It is a complicated and confusing process. You are going to need a talented and skilled corporate attorney to help. Here is a quick checklist of legal issues [...]
When to Create a Corporation for Your Child’s Business My first foray into entrepreneurship was a retail business selling designer sunglasses, windproof lighters, and just about any other $10-$100 items I could get my hands on back in the early 1990’s. Before the internet, there was a special telephone [...]
Merger and Acquisition Lessons from Walgreens and Rite Aid There are two important lessons to be learned from the recent efforts by Walgreens to buy Rite Aid: Never give up. You have options; if you cannot accomplish a stock purchase, then go for an asset purchase. Background As recently [...]
Bad Actors Under Rule 504 of Regulation D Regulation D provides an exemption from registration under the Securities Act of 1933 for the offer and sale of securities. As you may know, the Securities and Exchange Commission made significant changes to Regulation D that took effect in 2017. [...]
Six Good Reasons to Sell Your Business NOW Running your own business may have been a lifelong dream, but there is no denying that running your own business is a lot of hard work. Frankly, the charm may have worn off for your business, your business may have [...]
Are You an Accredited Investor? Accredited investors are a unique category of investors who are allowed to invest in certain types of securities that preclude unaccredited investors. The federal government regulates the sale of securities under the Securities Act of 1933. Many people think of "securities" only as [...]
What is the California Franchise Tax? Under California law, all corporate entities must pay an annual franchise tax. The minimum amount due is $800. The tax is collected by California Franchise Tax Board and applies to the following: LLCs (Limited liability companies); S-Corps (Subchapter S corporations); Corporations; Professional corporations [...]
Formalize Your Business Structure to Avoid an Accidental Partnership When you work with another person or a group of people, if you do not formalize your business entity (as a corporation or otherwise), then, by default, you may unknowingly create a partnership under California's Uniform Partnership Act (“CUPA”). [...]
Mergers and Acquisitions: Assignment of Contracts If you and your company are planning to acquire or merge with another company, one of your main due diligence tasks will be to review all the various company and business contracts to ensure that they are assignable to the new business entity. [...]
Does Your Business Need Employee Non-Disparagement Agreements? Businesses are increasingly dependent on having a good reputation in the market-place. Moreover, as the labor market tightens, having a good reputation as an employer and as a place to work is becoming increasingly important. As such, many businesses are now [...]
For Group Practitioners: Tips for Selling Your Part of the Medical Practice When selling any medical practice, including solo practices, there are many important steps to take such as getting an appraisal, advertising, getting your financials in order. For group practitioners, there are some extra considerations. Here are a [...]
California Businesses: Are Your Websites ADA, Unruh Act, and DPA Compliant? Nearly every successful business has a website and an internet presence. Arguably, no business can succeed in today's competitive marketplace without a web presence. Recent case law and legal trends demonstrate that businesses must now consider whether [...]
The Importance of Paying Your California Franchise Tax Every year, companies that are organized as California corporations, California S-Corps, California limited liability companies (LLCs), and California limited partnerships (LPs) must pay taxes to the California Franchise Tax Board. Failure to do so causes your company to lose its [...]
California Business Contract Basics Offer, Acceptance, and Consideration The basics of contract formation are offer, acceptance, and consideration. These are the three components of what is called a "meeting of the minds”. An offer is an expression by words or action to another person or entity of your [...]
Intellectual Property for California Companies Intellectual property (IP) rights are often the most valuable asset possessed by a California company. As we previously discussed here, almost every aspect of your business has legally protectible and valuable IP characteristics including: Your business name; Distinctive packaging; Logos; Source codes; Sales literature; [...]
Will Midwives Soon be Able to Form California Professional Midwife Corporations? California State Senator Jerry Hill has introduced new legislation, SB 798, that would add a licensed midwives corporation to the list of permitted professional corporations in California. The bill would also add licensed midwives to the lists of [...]
Conflicts of Interest in Small Businesses Conflicts of interest arise often in small businesses, so identifying them and having a policy in place to prevent them are crucial. Generally, a conflict of interest refers to a situation where a principal in the business, such as an officer or director, [...]
When Businesses Owners Face Personal Liability for Corporate Actions Directors and officers of a corporation who participate in or personally direct tortious conduct can be found personally liable, rather than being shielded from liability by the corporation. To be personally liable, the director or officer must “authorize, direct, or [...]
Risks and Rewards of Taking a Political Stance for You and Your Business Businesspeople today often take political stances and air their views in the news media, but doing so may negatively affect their businesses. When considering whether you or your business should express political views to the public, [...]
California Business Licenses and Permits: Which Ones Do You Need? Nearly every business needs some kind of business license or permit to operate. Which licenses you need may vary depending on your location, type of business, products sold, customer base, and more. In California, the state government runs some [...]
The Advantages of Limited Partnerships Limited partnerships offer many advantages over other entity types, especially for businesses in which one partner wants to provide funding but not run the business on a daily basis. A limited partnership differs from a standard partnership because it has at least one general [...]
Do You Owe a Duty of Care to Investors in Your Business? Many California business owners owe duties of care to their investors under California law. Generally, the duty of care requires business owners to act in good faith and in the best interests of the business. It is [...]
Professional Corporations in California Californians employed as professionals and seeking to start a business should consider incorporating as professional corporations. You may have seen the initials “P.C.” at the end of a doctor’s office or lawyer’s firm name, which indicates that the firm is a professional corporation. Professional corporations [...]
California Startups Must Disclose Financial Information to Shareholders Many startups organized as private corporations keep the value of corporate shares a well-protected secret. Telling the public that share values have soared in recent years or that they recently dropped after a new product announcement could greatly affect a company’s [...]
Introduction to Privacy and Business Ownership Many first-time business owners worry about the privacy of their personal information. For a savvy entrepreneur, running a business does not have to mean disclosing everything about your life to the public. Instead, use a variety of legal, financial, and common sense strategies [...]
Payment of Finder’s Fees for Securities Sales in California California’s new law permitting payment of finder’s fees to middlemen in securities purchases creates new business incentives within the state. However, the law contradicts a long-held Securities and Exchange Commission policy against finder’s fees. Essentially, California has legalized payment of [...]
Employment Contracts for Savvy Techies Who Want to Hit It Big Technology companies who want to make it in an already cutthroat industry can gain an edge by learning what to look for and what to include in employment contracts. Negotiating salary and starting a new position mean plenty [...]
How Can I Prevent Employees from Leaking Ideas? “Loose lips sink ships.” This common saying describes the fate of businesses whose employees, either inadvertently or on purpose, share ideas with others without permission. Competitors may learn of the ideas or even pay employees for them and then use them [...]
My Investor Is Being Too Hands On. Is There Anything I Can Do? Investors getting very involved in the business can cause problems for business owners who want to retain control. On one hand, without the investor, the business would not have the money to fund its operations. On [...]
What to Promise Investors and What to Keep to Yourself If You Want to Stay Out of Court Promoting your business to investors could land you in court if you run afoul of the detailed and complicated California and federal laws surrounding sale of securities. This post focuses on [...]
One of My Startup Partners Wants Out - and Wants His Investment Back. What Do I Do? Learning that your startup partner no longer wants to work with you and wants back the money they invested in the startup is not easy. It is also often not easy to [...]
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 [...]
Changing Your Startup’s Product Midway Through - and How It Could Cause Legal Troubles If you work for a startup, you know that your target audience’s needs can change on short notice, and so you may need to adapt your product or service to fit the market. You may [...]
Examples of Biotechnology Agreements and Why They are Important The growing biotechnology industry can be a minefield of legal issues for scientists and the companies they start, seeking to protect their investments and grow their business. One common topic that every biotech founder should consider is how to prevent [...]
What Is the Difference Between Federal Securities Laws and California Securities Laws, and How Do They Apply to Me? Both the state of California and the federal government have laws about securities on the books, but the two sets of laws differ significantly. Federal and California securities laws cover [...]
Protect Your Business from Data Security Breaches After hearing about the many data security breaches in the past few years, you may have wondered how breaches can be prevented, either at a business you own or the ones you patronize. Though hackers are becoming more sophisticated, smaller businesses need [...]
Beginning a Business Relationship with a Vendor In the rush to court a new vendor, companies may be tempted to quickly sign a standard form agreement and begin work immediately. If you find yourself caught up in the rush, take a step back, properly investigate, and negotiate your relationship [...]
Fair Use of Copyrighted Material Generally, the owner of a copyrighted work has the exclusive right to reproduce, distribute, perform, and display the work, and to prepare derivative works based on it. 17 U.S.C. § 106. Fair use is a broad exception to this exclusive right. It allows the [...]
Director and Officer Liability in the Corporation Corporations shield their directors and officers from liability for corporate actions, unless a director or officer personally directed or participated in tortious conduct. See, e.g., Frances T. v. Village Green Owners Ass’n. (1986) 42 Cal.3d 490, 503-504. The term tortious conduct refers to [...]
What Are the Most Important Contract Terms for Tech Companies? Technology companies, especially those with active websites or e-retail portals, will want to have a well-drafted set of contracts in place to keep their business running smoothly from a legal perspective. These contracts cover a variety of topics: terms [...]
California Law on Non-Competition Agreements In California, both a state statute and numerous court decisions say that non-competition agreements are not enforceable, and delving into the reasons why can help business owners understand how to work around needing them. The term “non-competition agreement” generally refers to a contract between [...]
How Does the San Diego City Business Tax Affect Me? Businesses operating in the city of San Diego, California, must obtain a business tax certificate and pay the city business tax. San Diego Municipal Code § 31.0101, et seq. The law applies to any person engaging in a business [...]
Out-of-State Corporations in California Corporations that are incorporated in another state and are doing business in California should be mindful of compliance with California law. For example, out-of-state corporations must ensure they are properly registered to do business, that they familiarize themselves with laws regarding company employees working in [...]
Can I Use Electronic Signatures on a Contract? Whether you can use electronic signatures to bind parties to a legally enforceable contract in California depends on the parties’ agreement and the method of signature. Be careful to fulfill the below requirements, or a court might find that the agreement [...]
Insurance Basics for New Business Owners The current litigious business climate makes obtaining appropriate insurance a must for new business owners. Insurance can help cover the costs of a burglary, an injury to an employee, or some lawsuits, among other liability situations. Paying the insurance premiums now does not [...]
How to Protect Your Rights as a Landlord in a California Commercial Lease While many may be familiar with residential landlord-tenant law, they may not realize that there is a significant difference between what is permissible in the residential lease compared to what is permissible in the commercial lease. [...]
What is a “Unilateral Contract”? Ordinarily a contract is defined as an agreement between two or more parties “which creates an obligation to do or not to do a particular thing. Its essentials are competent parties, subject matter, a legal consideration, mutuality of agreement and mutuality of obligations.” Black’s Law Dictionary 291-292 [...]
San Diego’s New Minimum Wage Ordinance On July 28, 2014 the City of San Diego issued a Press Release from the office of the Council President, Todd Gloria, announcing an increase in the City’s minimum wage and providing sick leave for worker’s within the City. Press Release, San Diego Increases [...]
I used crowdfunding for my startup. What happens if my business fails? So you have a really cool idea for a startup, but you don’t have the money you need to launch it. Your last $5 paid for two slices of pizza last night. You’re certain your product will [...]
A competitor is interfering with my business. What can I do? You have an idea for a tech startup and the software you’re developing is awesome. Founded along with a college buddy, the company grows quickly once you both graduate. You incorporate and secure an investor. You use some [...]
When can I revoke an offer in California? Most people, even the savviest entrepreneurs, second-guess their decisions every now and then. Especially when it involves money. The whole you-have-to-spend-money-to-make-money adage is likely true for startups who incorporate and ultimately put a product out on the market. But an entrepreneur [...]
The Defense of Duress - What is it? The defense of duress is not unusual in criminal cases. It’s when a defendant says he or she was forced to commit a crime by another person. In criminal law, an offense is sometimes excused if a jury believes the defendant [...]
San Diego's Minimum Wage Increases: What You Need to Know In March, the California Legislature approved a plan to raise the state’s minimum wage to $15 per hour by January 1, 2022. The move made the state the first in the country to significantly boost its pay and encouraged [...]
Which is the better business entity: sole proprietorship or corporation? Entrepreneurship is an exciting journey. It’s a dream put to action on your own terms. The possibilities feel endless — and they are. That being said, a lot goes into starting your business. Entrepreneurs early on should think about [...]
How long will it take to form my corporation? Entrepreneurs, including those who have created a tech startup in the state of California, should consider forming a corporation as their business grows. But before you get started, it’s important to understand the timeline and process involved. Let’s say, for [...]
Why is my Landlord Asking me to Sign an Attornment Agreement? Before you can understand why you are being asked by your landlord to sign an “attornment agreement,” you must understand what attornment agreement is. Black’s Law Dictionary defines the term “attornment” by reference to “feudal and old English law,” as [...]
Can I Get Punitive Damages for Breach of Contract? Black’s Law Dictionary defines the terms “[e]xemplary or punitive damages” as “damages on an increased scale, awarded to the plaintiff over and above what will barely compensate him for his property loss, where the wrong done to him was aggravated by circumstances [...]
Can I Assign my Contract in California? The simple answer is, as it is in response to many questions in the law, it depends. It first depends upon how the term “assign” is used. In McCown v. Spencer (1970) 8 Cal.App.3d 216, 225, 87 Cal.Rptr. 213, the California Courts of Appeal [...]
What Can I Do if my Vendor Tells Me He Won’t Perform His Obligations? You entered into a requirements contract (see https://sdcorporatelaw.com/business-newsletter/what-is-a-requirements-contract/) with your vendor to purchase 500 widgets per month for the next 24 months. In month 14 of your contract, your vendor calls and tells you that beginning [...]
What Kind of “Writing” Satisfies the Statute of Frauds? California Civil Code Section 1624, commonly referred to as the Statute of Frauds, provides that certain “contracts are invalid, unless they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or the [...]
Do I Have to Incorporate my Architecture Firm? Like most business people, architects start practicing their trade without giving much thought to how they might best take advantage of the many forms of business available to them. They generally hang out a shingle (if they are not working for [...]
My Contract has Been Breached – Do I Have to Perform my Promises? California Civil Code Section 1440 provides, “[i]f a party to an obligation gives notice to another, before the latter is in default, that he will not perform the same upon his part, and does not retract such [...]
What is “Consideration”? We’ve all signed countless contracts in the past for a variety of reasons and most of them contain, usually in the first few paragraphs, the phrase “for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged.” For the most part, we generally pay [...]
Do I Need to Register my Business With the California Employment Development Department? “The Employment Development Department (EDD) administers California’s payroll taxes, including Unemployment Insurance, Employment Training Tax, State Disability Insurance (including Paid Family Leave), and California Personal Income Tax withholding. Employers conducting business in California are required to register [...]
I Don’t Want to Pay for Worker’s Comp – Do I Need It? Frequently those contemplating hiring employees ask whether they must obtain and pay for worker’s compensation insurance (sometimes referred to as “worker’s comp”) for their employees. Those same people sometimes believe that they do not need to [...]
What is California’s Victims of Corporate Fraud Compensation Fund? The Victims of Corporate Fraud Compensation Fund (“VCFCF”) is governed by California Corporations Code Sections 2280, et seq. and California Code of Regulations, title 2, division 7, chapter 12, sections 22500 through 22507. The fund was specifically created to provide “limited restitution to [...]
Tips for Forming the California Joint Venture A “joint venture” has been defined as, “[a] legal entity in the nature of a partnership engaged in the joint prosecution of a particular transaction for mutual profit…” A one-time grouping of two or more persons in a business undertaking. Unlike a [...]
What is a Registered Agent? When forming business entities, the term “registered agent” is frequently used, and there are many registered agent services available for hire in each state. So what does a registered agent do? In California, the term generally refers to the “registered agent for service of [...]
Tips for Preparing the Operating Agreement in California Pursuant to California Corporations Code Section 17701.10(a) the limited liability company’s (“LLC”) operating agreement “governs all of the following: (1) Relations among the members as members and between the members and the limited liability company. (2) The rights and duties under [the California Revised Uniform [...]
What is a Fictitious Business Name Statement? A “fictitious business name” has been defined as “[a] business name that DOES NOT include the surname of the individual owner, AND EACH of the partners or the nature of the business is not clearly evident by the name.” Fictitious Business Names, Ernst [...]
How Can I Ensure my Corporate Name is Available for Use? After deciding to incorporate your business, one of the first steps of incorporation is to decide upon a legal name for the business. For each prospective name, it is important to determine whether the name you have chosen [...]
Must I Register my Delaware LLC in California? The California Uniform Limited Liability Company Act (California Corporations Code Sections 17701.01, et seq.) governs the existence of all foreign and domestic limited liability companies in California. California Corporations Code Section 17701.02(j)defines a foreign limited liability company as: “an unincorporated entity formed [...]
What is a Certificate of Limited Partnership? In California, the Uniform Limited Partnership Act of 2008 (California Corporations Code Sections 15800, et seq.) governs the creation limited partnerships. Pursuant to California Corporations Code Section 15902.01(a), to create a limited partnership, the partners must first enter into a partnership agreement, then [...]
When Does the Risk of Loss Pass to a Purchaser of Goods in California? As with many things in law, the answer to a question like, “When does the risk of loss pass to a purchaser of goods in California?” is “It depends”. When one enters a store and [...]
What is a Requirements Contract? Many entrepreneurs engaged in the manufacturing of goods for sale must rely on others to provide the raw materials from which those goods are manufactured. When the manufacturing process relies on small quantities of these raw materials, or where these raw materials are common [...]
What is a Contract of Adhesion? Whether we realize it or not, we have all agreed to a contract of adhesion dozens, if not hundreds of times. Indeed, each time we agree to the terms and conditions attached to the latest update to our iPhone’s operating system, we are [...]
What Should be in an Agreement for the Sale of Goods? While the California Commercial Code (California’s version of the Uniform Commercial Code) may govern the sale of goods in California, where the prices for the goods exceeds $500.00, an agreement not in writing may not be enforceable. To [...]
How to Write Your Business Plan All business owners and potential business owners probably understand that they will need a business plan at some point. Hopefully, they also understand that the earlier a business plan is prepared, the better for the business because, let’s face it, the business plan [...]
Why am I Being Asked to Sign a Personal Guarantee? We’ve all heard that one purpose for incorporating a business is to protect the owner’s personal assets from any debts incurred by the business. Although that reason is completely valid, in some instances, forming a corporation may mean that [...]
Buying an Existing Business: What You Need to Know Many entrepreneurs go into business for themselves by deciding what type of business they wish to start and then starting their business by doing all of the “leg work” for the business on their own. These self-starters generally enjoy not [...]
How do I Sell a Franchise in my Business in California? The California Franchise Investment Law (California Corporations Code Sections 31000 – 31516) (the “Franchise Investment Law”), along with Chapter 3, Subchapter 2.6, Sections 310.000 through 310.505 of the California Code of Regulations govern how franchises are sold in California. [...]
What Protections Do I Have as a Franchisee in California? On October 12, 2015, Governor Jerry Brown signed Assembly Bill 525 amending the California Franchise Relations Law (“CFRL”). The bill gave franchisees additional rights against termination of their franchises, provides significant remedies for terminations and non-renewals imposed improperly by [...]
What is a 501(c)(3) Corporation? Many times we hear radio and television advertisements seeking contributions in which a claim is made that an organization is a “501(c)(3) corporation.” These advertisements generally tell the listener to check with his or her tax advisor to determine whether donations are tax deductible, [...]
How to Draft Your Shareholder Agreement for the Professional Law Corporation so You’re Not Left Holding the Bag – The Attorney’s Fee Provision As California attorneys should already know, California follows the “American Rule” when it comes to awarding attorney’s fees in litigation, meaning that each party in a [...]
How to Protect Your Rights as a Landlord in a California Commercial Lease While many may be familiar with residential landlord-tenant law, they may not realize that there is a significant difference between what is permissible in the residential lease compared to what is permissible in the commercial lease. [...]
What Constitutes a Material Misrepresentation in a Securities Offering? California Corporations Code Section 25401 provides: “It is unlawful for any person to offer or sell a security in this state, or to buy or offer to buy a security in this state, by means of any written or oral communication [...]
