Starting a Business or Company

Limited liability companies—commonly known as LLCs—are a very popular type of legal entity for small business owners. An LLC is known as a hybrid entity as owners can enjoy certain benefits of both partnerships and corporations. For example, as the name suggests, LLC owners will have limited personal liability for actions of the business, poor business decisions, many business debts, and more. This protection from liability is similar to that of corporate owners. LLC owners may also elect to use pass-through taxation and report business profits on their personal tax returns to avoid double taxes. However, if you want to avoid the substantial self-employment tax that may result from pass-through taxation, LLC owners can elect to be taxed as a corporation. This choice is important and you should always weigh the different tax options with an experienced business lawyer before deciding. The above are only some of the benefits of forming an LLC in California.

Corporations have many advantages in California. First, incorporating your business often immediately adds credibility in the eyes of not only potential clients and customers, but also to lenders or others who are considering funding your business. It also allows the owners of the business to have some degree of anonymity if they so wish. Except for in very limited circumstances, the corporate owners will enjoy personal asset protection from any business debts, lawsuits, property, business decisions, or other corporate liabilities, and it can also be much simpler to raise capital by issuing stock shares. Corporations, however, also can have disadvantages since there are a much greater amount of regulations and formalities that apply to running an incorporated business. An attorney who understands corporate formation can help you decide whether this type of business is right for you.

Even if you decide to incorporate your business, you may have further decisions to make, one of which is whether to form an S corporation or a C corporation If you make no decision, you will automatically have a C-Corp. However, you may decide at any point during operations to apply for S-Corp status. However, many people do not know the difference and a lawyer can explain it in understandable terms. The main difference between a C or S-Corp is how they are taxed—specifically if they are double taxed as a C or taxed only once at the level of the shareholders as an S. Only certain corporations are eligible for S-Corp status, however, as the law has many requirements if you want to avoid being taxed twice.

Another complication in forming a corporation is choosing where to incorporate your business. For example, since the first half of the 20^th century, many U.S. business owners have chosen to incorporate in the state of Delaware. Delaware corporations are so popular because the state laws regarding business formation are flexible and the state provides many tax benefits for corporations. Additionally, the Delaware Secretary of State office is known for being extremely responsive so that business can be done quickly. Finally, corporate litigation in Delaware often has more certainty because of past court decisions regarding many different corporate issues. We can evaluate your options and tell you whether or not incorporating in Delaware, California, or another location is possible or right for your business.

Anytime you start any type of business with at least one other person, you automatically have a partnership without having to take any additional legal steps. For example, if two college friends collaborate to start doing lawn service for neighbors, they have created a partnership whether they realize it or not. Partnerships are very similar to a sole proprietorship in that partners are not a separate legal entity from the business, so they report their income on their personal taxes and have personal liability for business debts. Many people choose partnerships because of the few legal requirements that exist for formation and maintenance. Partnerships can, however, become much more complicated as a business grows. For this reason, it is always important for partners to draft and sign a partnership agreement that details how the business will be run and how disputes will be settled.

Forming a non-profit can be similar to legal formation of any other corporation with a few extra steps involved. You must choose an available corporate name, file articles of incorporation with the state, draft corporate bylaws, and more. The main difference is that the revenue of a non-profit does not go to any owners, but instead is used to further the mission of the business. Though many people associate non-profits closely with charities, you do not have to be a charitable organization to form a non-profit. Non-profits are also eligible to apply for certain beneficial tax exemptions under 501(c)(3) of the Internal Revenue Code.

Almost every type of business structure requires documents to be drafted to ensure smooth operations. Such documents are not only important at the start of your business but also throughout the course of operations if changes need to be made or additional issues need to be addressed. These documents can be legally technical and can have a huge impact on your business if they are not drafted correctly and in your best interest. We know how to draft important documents to protect the interests of your business and help address any issues you may be facing.

Bylaws are extremely important for any type of business, from partnerships to LLCs to corporations. Bylaws outline the rules and guidelines for the daily operations of your business. If questions ever arise regarding the structure of your company, the rights and duties of owners, the procedures for meeting and elections, and more, turning to the information contained in bylaws will help settle any disputes. Bylaws are different from the Articles of Incorporation and must be formally accepted by owners and formally amended for any future changes. Because of the formality surrounding bylaws, you want to make sure that yours are carefully and thoroughly drafted.

Any time the board of directors of your corporation wishes to vote on a matter, the matter should be set forth in the form of a resolution. Corporate resolutions are commonly used to establish which individuals have the authority to act on behalf of the corporation in important matters. These resolutions should be carefully drafted so that the right decisions are made for the company.

Operating agreements are used for the members of a limited liability companies (LLCs) to set out the role of each individual in the business. These can include financial rights, managerial duties, and other entitlements and powers. This is a critical document to have for every LLC to make sure that operations run smoothly and to settle disputes. Additionally, members can decide to change operating agreements at any time, so this document may need renegotiating and redrafting one or more times during the life of your LLC.

Almost every type of business owner will engage in a contract at some point and many businesses use contracts on almost a daily basis. As a new business owner, you may believe that you understand the basics of contract principles, however, you may not realize that you are missing important provisions and may even be putting your company at risk by entering into contracts that are not carefully drafted, reviewed, and negotiated. Contracts can be involved in almost every aspect of your business, from employment to lease agreements to buying and selling to agreements with other owners, and much more. You should always have an attorney who understands business contracts carefully go over any contract before you sign to ensure the agreement is in your best interest and that your business will be protected from unnecessary liability.

Whenever you start a business with one or more other people, it is always important to enter into an agreement regarding the basic aspects of the business and your relationship. Though the specific formula for a successful founders’ agreement will be different in each case, many issues that should be addressed include decision-making powers, responsibilities, ownership interests, procedures for operations, and more. We can discuss your goals with you and ensure that everything necessary is covered in your founders’ agreement so that you can start you business off on the right foot.

The shareholders of your corporation may wish to create an agreement in addition to any other corporate documents that exist. A shareholder agreement can set out additional protections for shareholders, including a say in preferred dispute resolution techniques and more. A shareholder agreement is private and is more flexible and easier to amend than a corporate constitution. Any shareholders and owners considering this type of agreement should consult with a business lawyer prior to entering into the contract to make sure all parties are protected.

When you start your business, chances are there is certain information that you will want to keep secret. Product information, formulas, client information, and much more should be protected from public knowledge. However, if your business involves employees, independent contractors, or third party collaborators, you will likely have to trust them with this sensitive information in order for them to perform their job duties. By drafting and entering into a confidentiality or nondisclosure agreement, other individuals will sign a binding contract that sets out serious penalties if they ever reveal the confidential information of your business. Because keep sensitive information private is extremely important, you should always have our office draft and review any agreements you want others to sign regarding confidentiality.