California LOEN Penalties for California Corporations Understanding the penalties associated with late and unfiled California Limited Offering Exemption Notices (LOENs) for California Corporations is essential to avoid unnecessary startup costs and more severe penalties from the California Department of Financial Protection and Innovation and its Commissioner (the securities regulators for the [...]
Initial Capitalization of California Corporations When forming a California Corporation, one of the critical steps involves deciding on the initial capitalization. Adequate capitalization is essential to ensure that the corporation operates with sufficient resources while meeting the legal, financial, and operational requirements, and is discussed in a recent article titled "Adequate [...]
Adequate Capitalization of California Corporations California Corporations are business entities structured to allow business owners to operate corporate business in corporate form as a separate legal entity. Understanding adequate capitalization helps business owners plan both how they initially fund their California Corporations and how they continue to maintain corporate reserves to [...]
What is a 25102(f) Filing for a California Corporation? Some frequently asked questions the experienced attorneys at San Diego Corporate Law are asked revolve around 25102(f) filings for California Corporations.A Limited Offering Exemption Notice, often referred to as a 25102(f) filing after California Corporations Code Section 25102(f) which provides for the [...]
How Long Does It Take to Form a California Corporation? One of the questions the experienced corporate attorneys at San Diego Corporate Law are often asked is how long takes to form a California Corporation. The answer is a bit complicated because the timeline for forming a California Corporation can vary [...]
What Tax Benefits Does a California Corporation Provide? In California, establishing a California Corporation is a popular business structure for business owners (referred to as “shareholders” of a California Corporation). A separate article titled “What Liability Protection Does a California Corporation Provide?” examines the liability protection and separation of [...]
Four Reasons Not to Convert a California LLC to a California Corporation Sometimes it becomes necessary or advisable for a business owner to cease operating as a California LLC (California Limited Liability Company) and commence operating as a California Corporation. The decision to transfer operations from a California LLC [...]
Is it Better to be a Corporation or S-Corp in California? Choosing the correct business entity is important for the success of a business and the decision can have significant tax implications. In California, two popular options that entrepreneurs often consider are forming a California Corporation or a California [...]
Who Owns a California Corporation? A California Corporation is a popular business structure among entrepreneurs and small business owners in California due to its tax benefits and liability protections. But exactly who owns a California Corporation? This article seeks to shed light on this question by exploring the roles [...]
Who Owns a California S-Corp? A California S-Corp is a popular business structure among entrepreneurs and small business owners in California due to its unique tax benefits and liability protections. But exactly who owns a California S-Corp? This article seeks to shed light on this question by exploring the [...]
Who Owns a Limited Partnership in California? Understanding the business structure of California Limited Partnership ownership can be complex. Navigating through the laws and regulations of a business entity is essential to ensure that the business operates within the bounds of the law. In this article, we will explore [...]
Is it Better to be a Corporation or LLC in California? In the realm of business formation, aspiring entrepreneurs often grapple with the choice between forming a California Limited Liability Company (California LLC) or a California Corporation. This decision is particularly crucial in the State of California, where the [...]
How to Choose a California Incorporation Attorney Choosing a California Incorporation attorney for the formation of a California Corporation is a critical decision that can significantly impact the success of your new business entity. This guide will help you navigate the process of selecting an experienced, competent California Incorporation [...]
What Should be Included in the Annual Meeting of the Shareholders of a California Corporation or California S-Corp? Both California Corporations and California S-Corps are required to hold an annual meeting for shareholders. These meetings are pivotal for fostering transparency, discussing business strategy, and making essential corporate decisions. But [...]
What Should be Included in the Annual Meeting of the Board of Directors of a California Corporation or California S-Corp? The Annual Meeting of the Board of Directors serves as a pivotal event in the corporate calendar of any California Corporation or California S-Corp. These meetings are not merely [...]
What Should be Included in the Initial Meeting of the Board of Directors of a California Corporation or California S-Corp? The inaugural meeting of the Board of Directors signifies a pivotal moment in the lifespan of a California Corporation or California S-Corp. It sets the tone for future corporate [...]
What is Missing from Your California Articles of Incorporation? California Articles of Incorporation are the founding document of a California Corporation, California S-Corp, or California Professional Corporation. Whether forming a new California Corporation, California S-Corp, or California Professional Corporation or ensuring the California Articles of Incorporation of an existing [...]
California Corporation Bylaws Whether it is a California Corporation, a California S-Corp, or a California Professional Corporation, California Corporation Bylaws are the backbone of your California Corporation, setting the groundwork and guiding the daily operations and management processes. Every California Corporation must adopt bylaws, and this article identifies the [...]
What Specific Information Does a Company Need to Report for FinCEN Beneficial Ownership Information Reporting? As part of anti-money laundering and counterterrorism financing measures, commencing on January 1, 2024, the Financial Crimes Enforcement Network (FinCEN) requires most businesses to provide certain beneficial ownership information. But what specific data does [...]
What is Beneficial Ownership Information Reporting? Unless otherwise exempted, most companies in the United States, including California Corporations, California S-Corps, California Professional Corporations, California LLCs, California LLPs, California Limited Partnerships, and even some California General Partnerships and California Joint Ventures will be required to commence reporting about their Beneficial [...]
What are the Disadvantages of Being a Joint Venture in California Operating as a Joint Venture in California can seem appealing due to its simplicity, low cost to get started, and minimal regulatory requirements. However, the advantages of a California Joint Venture business structure are not without certain drawbacks. [...]
Can an Architect Practice Architecture Using a California LLC? A common question the attorneys at San Diego Corporate Law are asked is whether or not an architect may practice architecture as a California Limited Liability Company (LLC). Whether you are an architect, or someone advising architects and other licensed [...]
S-Corp vs C-Corp in California A California Corporation is a business structure formed in the State of California. This designation provides businesses with a distinct legal status, offering liability protection for shareholders separate from their personal assets. A California Corporation can be classified as either an S Corporation or [...]
Taxation of C-Corp vs S-Corp in California When establishing a corporation in California, one of the key decisions you will have to make is whether to structure your business as a California C Corporation (C-Corp) or a California S Corporation (S-Corp) for corporate income tax purposes. Though both offer [...]
Real Estate Development Company in California Whether you are a new real estate developer or a seasoned property developer with years of experience in the real estate market, it is important to choose the correct business entity for your real estate projects. When embarking on a real estate development [...]
Forming a Corporation in California Whether you are a small business owner or an entrepreneur starting a business in California with a big idea, understanding the legalities of forming a corporation is an important milestone on your road to success. In this article, we will guide you through forming [...]
Evaluating California Entity Choices When it comes to launching a new business in California, choosing the right legal entity is a critical decision. Each entity - be it a Sole Proprietorship, General Partnership, Corporation, S-Corp, Limited Liability Company (LLC), or Limited Partnership - carries its own set of advantages [...]
Corporate Governance: What is the Corporate Opportunity Doctrine? In general, the officers and directors of a San Diego corporation owe various duties to the corporation (and to the corporation's shareholders -- its owners). Among the duties are to always act in the best interest of the corporation and take [...]
Key Differences Between General Partnerships, Corporations, and Limited Liability Companies When you start your own San Diego small business, you have several types of corporate entities through which to operate. In this article, we discuss the key differences between three commonly used entities: general partnerships, standard corporations, and limited [...]
There are several important consequences of having your corporation's existence suspended. First, legally speaking, your corporation loses its legal "rights and privileges." Among these are the ability to file and defend lawsuits, and the ability to enforce business contracts. This means that your corporation will not be able to sue a customer, for example, for non-payment of an invoice.
Many startup entrepreneurs begin their businesses as a sole proprietorship. That is the easiest and quickest way to begin working as "your own boss." Without question, being a sole proprietor is effective -- for at least a short while. After a time and after your business is succeeding and making money, however, this is often time to incorporate your business.
So, you are finally ready to launch your new San Diego startup business. Congratulations! Starting your own business is exciting and nerve-racking at the same time. Here are a few of the most important legal considerations for any business when they are first starting out:
The main reason for using a corporate entity -- like a corporation or a limited liability company or a California professional corporation -- is to obtain the shield provided by the corporation that protects your personal and family financial assets. If the corporate entity undertakes a business obligation, then the business creditors can only seize business assets if there is a judgment; your personal and family assets are protected.
If there is a failure in the notice and if there is a dispute that leads to litigation, there is a potential that a California judge might invalidate the actions taken at the meeting.
The corporate shield that protects your personal and family assets is the most important advantage of forming a corporate entity through which to operate your San Diego business. When formed, a corporation or a limited liability company ("LLC") legally becomes a separate entity with its own rights and ability to enter into contracts.
Dissolution of a California corporation is the process of closing a legal entity. It is one of the steps taken when a business winds up and ceases to exist. Once dissolution is accomplished, the corporation (or limited liability company) will no longer exist as a legal entity. If you are thinking of closing up your San Diego corporation in the near future, an experienced San Diego corporate attorney can provide advice and counsel.
When corporate partnerships are formed, the main disadvantage of partnership dissipates since the partners are legal entities that are already protecting the personal and family financial assets of the natural persons involved. For these reasons, a limited partnership might be the best business form for your next San Diego venture.
The short answer is "yes." Even if you have only one shareholder in your California corporation, you must hold annual shareholder and board of directors meetings. That is what California law requires. There are also a host of practical reasons -- good business reasons -- to have shareholder and board "meetings."
Forming a California limited liability company ("LLC") is similar to forming a California corporation. There are some important differences, however, and an experienced San Diego corporate attorney can provide advice and counsel if you are in the process of setting up a corporate entity for your business.
Thoughts on Being Your Own Agent for Service of Process Here in San Diego and elsewhere in California, corporations, limited liability companies, and limited partnerships are required by law to designate an "agent for service of process." This is part of the process of setting up your corporate entity [...]
No Breach of Duty of Loyalty to LLC Where LLC Conducted No Business Under California law, a limited liability company ("LLC") is one of the options available for forming a corporate entity through which to operate a business. Other options include a corporation, various professional organizations, and limited partnerships. [...]
Corporate Governance: Options for Breaking/Avoiding a Shareholder Deadlock When running your San Diego business through a corporation, one of the practical issues that must be addressed is possible corporate deadlock. In general, corporations run on the ideas of voting and majority rules. The shareholders own the company and they [...]
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. [...]
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 [...]
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, [...]
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 [...]
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.
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 [...]
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 [...]
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 [...]
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 [...]
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 [...]
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 [...]
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 Corporations Law: Board is the Boss, CEO is the Employee Many people get confused about how corporations are run. We are used to seeing the Chief Executive Officers of a company in the news and the media. It is tempting to see that person as the "boss" and, [...]
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 [...]
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 [...]
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 [...]
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'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 [...]
