Debunking Myths About the Advantages of Being a Sole Proprietorship Running your San Diego business as a sole proprietorship may seem like a good idea, but the so-called advantages of not being a corporation are myths. Here are some of the top myths debunked. No Wasted Time on Legal [...]
Board Qualifications: Why You Need Clearly Written Corporate Bylaws San Diego and California corporations are created by the filing of Articles of Incorporation with the California Secretary of State's office. Two documents establish and set out the manner in which any given corporation is governed — the Articles and [...]
Corporate Governance: Shareholders Have Nearly Absolute Right to Have Annual Meetings A recent decision by the California Court of Appeals has held that shareholders have a nearly absolute right to have annual shareholders meetings. See Ielmini v. Patterson Frozen Foods, Inc., Case No. F073377, F074088 (Cal. App. 5th Dist. [...]
Derivative Actions: Corporation Cannot Avoid the Lawsuit by Removing the Dissident Director Under California law, a member of a corporation's board of directors can sue, on behalf of the corporation, the other members of the board and the corporation if there has been misconduct or waste of corporate assets. [...]
San Diego Court Reporters Must Operate Through a California Professional Corporation, Says California Court of Appeals Many San Diego professionals, like doctors, nurses, attorneys and others, are eligible to form professional corporations under California law. See the Moscone-Knox Professional Corporation Act, Cal. Corp. Code, § 13400 et seq. An [...]
The Importance of Incorporating: A Shield Against Potential Liability One of the most important reasons for forming a corporation to run your business is obtaining a shield against potential personal liability. In general, once a corporation is formed, it becomes a separate legal entity. Thereafter, when the corporation signs [...]
Joint Venture Partners can be Legally Liable for an Obligation of the Joint Venture A recent case from the US District Court in San Francisco held that the partners of a joint venture agreement could be held liable for the debts and obligations of the joint venture and could [...]
Due Diligence When Acquiring a Medical Corporation/Physician Practice Acquisitions If you are thinking of buying a San Diego medical corporation/physician practice, it is important to conduct your due diligence to ensure that you are getting what you expect. You will need an experienced San Diego corporate attorney to provide [...]
Federal Court: Once a Corporation, Always a Corporation A recent decision by a federal court in Rhode Island reminds businesses that "once a corporation, always a corporation." This lesson is just as applicable to San Diego businesses as businesses on the east coast. See Morowitz v. United States, No [...]
Do California Shareholders Have the Right to Inspect Corporate Emails? In general, owners of stock in corporations are entitled to certain rights regarding inspection of corporate records. See Cal. Corp. Code,§§ 213, 1501, 1600 et seq. In general, small shareholders (under 5%) are entitled to less access — basically, [...]
Forming a San Diego Professional Psychology Corporation If you are a going out on your own as a psychologist, forming a California professional psychology corporation as the business entity for operating your practice is probably the best investment you can make in your new practice. Forming a California professional [...]
Corporate Governance: Thoughts About Proper and Improper Shareholder Votes In general, corporations are run as mini-democracies, at least in terms of important corporate decisions. The shareholders, for example, are the owners and they meet at least once a year to elect the directors of the corporation. Once elected, the [...]
Corporate Governance: Directors Cannot Vote by Proxy We wrote recently about use of shareholder proxies. As we discussed, San Diego and California corporations are owned by shareholders, but the management of the corporation is given over to the board of directors. As one court said long ago, "[t]he property [...]
What Happens if I do Not Pay My California Franchise Taxes? California corporations, limited liability companies, S-corps, and other types of business entities must pay annual taxes, called "franchise taxes" to the California Franchise Tax Board. The minimum amount owed is $800 each year, but this is just a [...]
Common Uses of San Diego Limited Partnerships Limited partnerships are commonly used here in San Diego and elsewhere in California. For example, films and other theater and musical productions are often produced through the use of limited partnerships. Limited partnerships are a type of business entity specifically allowed by [...]
California Medical Corporations: Advantages Over Partnerships If you are a licensed medical professional here in San Diego, or if you are another type of licensed professional like an attorney, you can form a corporation specifically designated for professionals under the Moscone-Knox Professional Corporation Act of 1968 (the "Act"). See [...]
Corporate Governance: What is a Shareholder Proxy? San Diego and California corporations are owned by shareholders. Typically, at least once a year, the shareholders meet to vote their shares -- usually one vote per share -- for members of the board of directors. The board runs the corporation in [...]
Business Identity Theft: As Destructive as Personal Identity Theft Once a corporation, s-corp, limited liability company, or other corporate entity has been formed, a new legal entity comes into existence. This new entity has an identity that is separate and apart from the identity of the owners. That business [...]
A Guide for the Annual Maintenance of Your San Diego Corporation or LLC After your San Diego corporation, s-corp, or limited liability company is formed, it is necessary and essential to ensure that your corporate entity receives the necessary annual maintenance. Regular maintenance is needed for any major investment; [...]
Employee Equity as Compensation: Corporations are Better Than LLCs In this article, we discuss another difference between corporations and limited liability companies ("LLCs"). Both are corporate entities and serve similar functions (such as providing a shield against personal liability for the owners). However, providing ownership equity as compensation is [...]
Alternative Methods of LLC-to-Corporation Conversion When San Diego founders start a business, there are often very good reasons to use a limited liability company ("LLC") as the startup vehicle. There are some tax advantages, there is the ease of corporate upkeep and maintenance, flexibility with respect to division of [...]
Can I Form a California Corporation to Get Rid of My Personal Credit Card Debt? The short answer is "no." You cannot form a California corporation to get rid of personal credit card debt. Any attempt to shift personal debt into a new corporate entity can be seen as [...]
Top Strategies for Narrowing Scope of a Personal Guaranty in California One of most important reasons for running your San Diego business as a corporation, limited liability company, or other corporate entity is to avoid personal liability for business debts and judgments. The corporate entity provides a shield that [...]
What is "Par Value" for California Corporation Shares of Stock? The concept of "par value" for shares of stock is a corporate legal concept that is "nearly dead," but not quite. "Par value" is the value set by a corporation -- in its articles of incorporation -- for the [...]
San Diego Corporations: What are Authorized Shares Versus Issued Shares? When you form a California corporation here in San Diego, you must decide up front how many shares of stock you want to authorize. "Authorized shares" are shares of stock that a corporation can issue if the board of [...]
One of the purposes of creating and using a loan out company is to protect the performer from personal liability if there is a contract dispute -- or some other misfortune like an accident. The corporate form shields the personal assets of the performer since only corporate assets can be seized by creditors if there is a lawsuit and a judgment.
Aside from a method of reaching customers, pop-ups have become a marketing product or service launch tool coupled with social media and influencers. Pop-ups are supposed to be "fun" and "interesting," but there are still a host of legal issues that must be navigated if your San Diego business is considering the idea.
With the new year approaching, now is the time to finally create a corporate entity for your business. Here are the top four reasons why NOW is the time:
In general, if two or more people are operating a business for the purpose of making a profit, they are operating a partnership. But, once the same people form a corporation to operate the business, then, by operation of California law, the partnership comes to an end and the former partners are now merely the joint owners of a corporation. In general, this is the "supersession doctrine."
Corporate Governance: What is a Quorum Requirement? In general, corporations in San Diego and in California are governed by the votes of the shareholders (owners) and by the votes of the board of directors. Once a year or so, the shareholders or owners meet and they vote to elect [...]
Forming Partnerships and Joint Ventures in California Under California law, general partnerships and joint ventures are created by the agreement among two or more persons/entities to run a business and share the profits. California statutes read as follows: "the association of two or more persons to carry on as [...]
Corporations Law: What Corporate Actions Require Board Approval? In general, corporations are run by their boards of directors. The California Corporations Code says, for example, that "the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of [...]
Top Three Legal Issues Concerning Medical Corporations California has corporate forms specifically designed for medical and healing arts professionals. Medical corporations differ from regular corporations in many ways, and as such, some legal issues are more important when establishing and running a medical corporation. In this article, we discuss [...]
Taxation and Legal Issues Concerning Founders' Shares Founders' shares are shares or ownership units of a company that are initially provided to a startup corporation or LLC. A person is considered a "founder" if he or she is one of the individuals who originally forms the company. These individuals [...]
Six Hallmarks of Good Company Board Minutes A California corporation acts through its board of directors. The shareholders -- the owners -- meet once a year to elect the board. The board then makes all the important decisions for the company. The board is required to meet at least [...]
Gender Quotas for Company Boards is Law Now in California Governor Brown recently signed Senate Bill 826, which required that publicly-traded companies headquartered in California must have women as members of their corporate board of directors. See USA Today report here. The final version of SB 826 requires that [...]
Officers can be Liable for Violations of California Wage and Overtime Laws One of the key advantages of incorporating your business is to shield yourself and your personal assets from liability with respect to business-related events and issues. This is true, normally, concerning employment issues. If an employee claims [...]
Compensation/Expensing Structures When Buying into a California Medical Corporation California law permits healing arts practitioners to create corporations intended for the unique needs of doctors, nurses, psychologists, veterinarians, etc. See the Moscone-Knox Professional Corporation Act, Cal. Corp. Code, §§ 13400-13410. As a practical matter, medical corporations often function like [...]
FAQs About Stock Dividends If you are starting a new San Diego corporation and issuing shares of corporate stock, at some point when revenue, profits, assets, and retained earnings allow, your company is going to be faced with the decision about whether to approve "dividends." If you are investing [...]
San Diego Startups: Structuring Corporate Stock to Satisfy Investors and Owners (Part III) If you are in the process of starting a new San Diego business, consider issuing different classes of stock -- voting vs. economic -- as a vehicle for enticing investors without losing control of your new [...]
Can My Investors Take Over My Small Business? Many San Diego small businesses seek out investors to help start the business, but there is often some confusion about what role the investor plays and what rights the investor has. One common concern for small business owners is whether an [...]
Time to Incorporate and Start Your San Diego Businesses By all reports, the economy is doing well and small business confidence and optimism is at an all-time high. For the last 45 years, the National Federation of Independent Business has been charting an "optimism index" for small businesses and [...]
Buy-Back Agreements: Removing a San Diego Shareholder for Cause or No-Cause With small, closely-held San Diego corporations and limited liability companies, it is important that the shareholders, members, and owners get along at a basic level. Maybe not best of friends, but the ability to work together for the [...]
Does Your Family-Run LLC Need an Operating Agreement? In brief, "Yes." Even a family-run limited liability company ("LLC") needs a well-drafted and solid operating agreement. One of the most common mistakes made by family-run businesses is assuming that normal business practices are "not necessary because we are family." The [...]
Thoughts on Handling a Dissident Director Under California law, the board of directors of a San Diego corporation is charged with the management of the company. See Cal. Corp. Code, §300 which states that "... the business and affairs of the corporation shall be managed and all corporate powers [...]
Nine Changes in Your Business That Necessitate Hiring a Good San Diego Corporate Lawyer One can conceive of a business as a living, growing organism that migrates through various changes and evolutions. We here at San Diego Corporate Law have discovered that there are natural growth points and retraction [...]
When a Joint Venture Might be a Better Alternative to a Merger or Acquisition Mergers and acquisitions ("M&A") can be effective methods of expanding your San Diego business into new markets and customer bases. However, merging with or buying another business are both risky endeavors. Depending on the circumstances [...]
Corporation Classes of Stock, Control, and Money: Lessons From Facebook On July 26, 2018, Facebook, Inc. lost nearly $120 billion in market capitalization value as stock prices plunged more than 19%. According to news reports, that was the largest total single-day drop in market value ever recorded. See here. [...]
California Business Forms and Structures: An Overview If you are just starting your new San Diego business, California law provides you with many choices as to the form and corporate structure of your business. There are advantages and disadvantages for each form/structure, and a good corporate attorney can help [...]
FAQs Regarding Forming a California Medical Corporation In California, physicians, nurses, and other healing arts practitioners are permitted to form professional corporations pursuant to the Moscone-Knox Professional Corporation Act (“MKPCA”). See Cal. Corp. Code, §§ 13400 et seq. Other professions, such as lawyers and accountants, can also form professional [...]
Can My San Diego Teenager Form a Corporation and Start a Business? Some have probably heard that Kylie Jenner may soon become a billionaire at the young age of 20 years old. See here. In the new economy, young entrepreneurs are increasingly using technology and online marketing/sales platforms to [...]
Signs That a Partnership Fight is Looming Forming a partnership is often an excellent way of starting and running a business. There are tax advantages, mutual help and assistance is created, different skills sets can enhance the chances of success, etc. However, as with any relationship, conflict can result [...]
Serving on a Board of Directors: What You Need to Know A California corporation is governed at the highest level by its board of directors. The day-to-day operations of the company are conducted by the corporate officers, who carry out the policies made by the board. This article discusses [...]
Incorporation Assistance: Reasons to Hire an Experienced Corporate Lawyer to Help We here at San Diego Corporate Law emphasize the need to form a corporate entity such as a corporation or a limited liability company to run your business. There are many reasons why this is important. It is [...]
Amended Corporations Code Section 1601: Right to Inspect Corporate Records Under the California Corporations Code, San Diego corporations are required to allow inspection of "accounting books, records and minutes" by shareholders of the corporation. See Cal. Corp. Code, § 1601(a). This right to inspect is one of several rights [...]
Buy-Sell Agreements for California Professional Corporations While Buy-Sell Agreements are incredibly valuable tools for any small business to have, they are particularly important for professional corporations. The best time to have a Buy-Sell Agreement drafted for your California professional corporation is in the beginning, after the corporation is formed [...]
Checklist for California Corporation Articles of Incorporation Finding a good and experienced corporate attorney to assist you in forming your corporation the right way is important. At San Diego Corporate Law, we believe in doing things right the first time. While each business is unique, there are some items [...]
California Makes 2018 List of Top 10 States for Launching Startups The website wallethub.com just published its list of the top 10 states for launching a startup. California makes the list coming in at number eight, and Texas was number one. See here. California would have ranked higher, but [...]
California's Proposed Gender Quota Law for Corporate Boards San Diego and California corporations are governed by their respective boards of directors. Lawmakers in Sacramento are getting close to passing a new law that would require gender diversification on corporate boards of directors. The proposed law is currently designated as [...]
Avoiding Family-Owned Business Pitfalls: Minority Shareholder Oppression Claims It is often the case that many family-run businesses emphasize the "family" part of the business, providing jobs, money, and resources for members of the family. In fact this is often among the main reasons to start a family-run business - [...]
San Diego Joint Ventures: Limiting Risk and Capital Exposure With many types of business efforts and potential market exploitations, joint ventures offer many advantages such as: Cost sharing, which can be particularly useful if none of the joint venturers can independently fund the enterprise Sharing of divergent talents, skills, [...]
FAQs About Forming a California Corporation Starting your own San Diego business can be exciting, but can also generate a lot of questions. Among the most common questions that we get here at San Diego Corporate Law are questions about forming a corporation, whether to form a corporation, when [...]
Stock Price: Majority Shareholders Owe Fiduciary Duties to Minority Shareholders Under California law, majority shareholders of a corporation owe various fiduciary duties to the other shareholders. This has long been the case. See Jones v. H.F. Ahmanson & Co., 1 Cal.3d 93 (Cal. Supreme Court 1969). In general, majority [...]
Differences Between California Corporations and LLCs: Alter Ego Doctrine California law has a number of alternative corporate forms for businesses to use with respect to running their businesses. Each form -- such as a corporation vs. a limited liability company -- has advantages and disadvantages compared to the alternatives. [...]
Director/Manager Personal Liability for Health and Safety Violations In general, forming a corporation or a limited liability company will shield the officers and directors of the company from personal liability for corporate debt and obligations, including obligations that are violations of laws. However, there are some circumstances in which [...]
Do San Diego Home-Based Businesses Need to Use a Corporate Entity? Many people work from home and own home-based businesses. Back in 2013, Forbes Magazine stated that more than half of Americans work for small business and over 50% of those are home-based. See here. Since 2013, even more [...]
Buy-Sell Agreements Should be Reviewed Annually If you are running a San Diego partnership, limited partnership, closely-held corporation or an LLC, it is important that you have a well-crafted buy-sell agreement. If you do not have one, it is time to have one written. A good San Diego corporate [...]
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 [...]
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 [...]
