According to the Corporation Code of California, the types of corporate structure within Californian jurisdiction are divided into two broad categories:
The persons who have formed partnerships are known as partners, while shareholders are persons who own one of the shares of a corporation. Therefore, the differences arising among the partners/shareholders within partnership/corporation are referred to as partnership and shareholder disputes.
When the business involves two or more people, sooner or later the disagreements between them become inevitable. Partners/shareholders usually succeed in ironing out the differences based on mutual understanding given the common business interest. Unlike it, sometimes disagreements have deep roots full of possible grave consequences for the business. Such disagreements may refer to many different circumstances in connection with the collision of business interests, opposite ideas, breaches, etc.
The practice shows that more frequently the factors described below do cause or at least contribute to such disputes:
In some cases, there are laws aimed at resolving shareholder disputes within the legal procedure. For instance, in the process of voluntary dissolution of a corporation, the minority shareholder’s rights may be violated while distributing corporation assets to the shareholders entitled thereto, so they may fight it by the legal tools vested by the Corporation Code of California. In particular, according to the latter, upon the petition of shareholders who hold shares representing 5 percent the court may take jurisdiction over the voluntary winding-up proceeding if that appears necessary for the protection of any parties. The court, if it assumes jurisdiction, may make such orders as to any matters concerning the winding up of the affairs of the corporation and for the protection of its shareholders. In short, the shareholder dispute described above could be resolved by the interference of a court for the protection of the shareholder rights.
There is a range of methods to resolve such disputes. Among others, they may include:
We believe that the most effective and practical way would be entrusting an attorney to reach a settlement in conditions best for your interests.
If you need legal assistance when you find settling such disputes is beyond your powers, we invite you to contact an attorney at KAASS LAW at (310) 943-1171 and speak to our Glendale business attorney to assist with the process.
A corporation registered with the State of California can cease its corporate existence in two ways:
Each way of dissolution has its grounds and specific legal procedure. While a corporation may be involuntarily dissolved under a court decree, the voluntary dissolution is carried out by a corporation’s shareholders, as well as in special cases by the Board of Directors. This article will address voluntary dissolution, leaving involuntary dissolution for a separate discussion.
The Corporations Code of California, chapter 19, sections 1900-1907, covers the legal regulations pertaining to the procedure of voluntary dissolution. These rules help an interested person to comply with the requirements of the law in the process of voluntary dissolution.
In general, someone may initiate voluntary dissolution by:
When establishing a company, one of the first and most important decisions you will have to make is whether to form the company as a corporation, an LLC, or any of the other common forms of business organization. Each of them offer various advantages and drawbacks to their ownership and, as such, it is up to you to look into which one will most effectively fit the needs of your business. To help with that crucial decision, we have several articles which go over the different pros and cons of each method of business organization.
Should you choose to go with making a corporation, you will then be faced with having to more rigorously document certain proceedings as a result of how California law interacts with corporations. Some view these more specific details as a nuisance that corporations simply must contend with. We, however, believe that many aspects of the extra bookkeeping that you must track and report are actually very strong indicators of the strength of corporations. By viewing these requirements from that perspective, we can greatly simplify and empower the role that the bookkeeping tasks serve.
Shareholders may dissolve their corporation for a variety of reasons. In this regard, they are not accountable to anyone else. Shareholders holding shares representing 50% or more of the voting power should vote to wind up and dissolve the corporation, unless the articles of incorporation prescribe a higher threshold. Whereas, the board of directors may approve to wind up and dissolve a corporation which comes within one of the following descriptions:
Once the resolution on a voluntary dissolution is in place, the corporation steps into the stage known as “winding up”. This aims to finalize the debt-clearance process. It assumes paying outstanding debts and discharging pending liabilities. Afterwards, the corporation resolves the issue of distributing the remaining assets to the shareholders entitled thereto.
The corporation must notify its creditors about the commencement of dissolution, allowing them to submit their claims. Such notification shall include all the relevant information necessary for sending claims, for instance the mailing address, the deadlines for submission etc.
Further, you need to file a certificate of dissolution with the Secretary of State (SOS). The certificate of dissolution shall include the following information:
The official website of SOS provides the form of the certificate. You must submit the certificate via email or in person. Thereupon the corporate powers, rights, and privileges of the corporation ceases. The Secretary of State notifies the Franchise Tax Board of the dissolution.
However, in addition to the above actions, the corporation must consider a number of additional legal obligations. For example, the corporation must file a final tax return with the California Franchise Tax Board. Also, all applicable taxes must be paid before or at the time the Certificate of Dissolution is filed. In addition, if the corporation had employees, all requirements under the California Labor Code must be met. These include:
Failure to meet these obligations can result in civil liability and penalties. In addition, if the company holds any licenses or permits, they must be formally revoked or transferred. This is especially important for businesses in regulated industries. Such as:
Corporations are advised to retain accounting and corporate records for at least three years after liquidation. This may be necessary in the event of an IRS audit or creditor lawsuit. Contact KAASS LAW for legal assistance in all stages of liquidation.
If you need to initiate and finalize the process of a voluntary dissolution of your corporation, we invite you to contact an attorney at KAASS LAW at (310) 943-1171 and speak to our Glendale business attorney to assist with the process.
The whole reason that corporations have to deal with a detailed and pesky bookkeeping record is because California law requires it. According to California Corporation Code 1500, every corporation must maintain a detailed and accurate record of accounts and outlines of the time that the executives and owners spend on meetings. In fact, even shareholder, board, and committee meetings and decisions must be documented and housed in the executive headquarters. Further, all shareholder names, addresses, and amounts of shares owned must also be accounted for in the report. For smaller corporations, this is already a nightmare to contend with, but the larger your corporation grows, the more annoying and tedious this law becomes.
The other part of this dilemma to consider is how exactly all of that information is going to be stored. Clearly, the records must account for information that is not only sensitive but also deeply personal and intimate with respect to the company and its shareholders. All of those people are going to be relying on the corporation to ensure the safety of their credentials and information. To that end, there are a few methods of bookkeeping that are worth discussing. The law only goes so far as to specify that the records must be kept either in written form or in some other form that is capable of being converted into a clear, legible, tangible form, or any combination of the aforementioned. Therefore, you actually have some wiggle room here in terms of deciding how to store the necessary information. You can, of course, choose to go the traditional route of simply keeping all the information on hand in paper form. The upside is that you will always have the original paper copy of the records, but the obvious downside is that those records are susceptible to being permanently lost or damaged. The alternative would be to store those records digitally, by uploading them onto your corporation’s secure server from the beginning by means of software. The pro in these situations is that you are unlikely to ever completely lose all of your important bookkeeping records, but the drawback is that now all of that sensitive information is potentially vulnerable to online attack. In these situations, cybersecurity becomes a major concern.
As we have seen there is no one method that manages to avoid all risk, and that’s a large part of the reason why California Corporate Code 1500 can be such a hassle for corporations to deal with. However, we can help. Our firm has extensive experience with helping businesses through the issues that may arise from record keeping as per California Corporate Code 1500. We invite you to us a call at (310) 943-1171 to speak with our California corporate lawyers today. Our lawyers in Glendale, Los Angeles, California, are dedicating to providing our clients with the highest quality services possible. KAASS LAW, 815 E Colorado St #220, Glendale, CA 91205, (310) 943-1171
KAASS LAW is authorized to practice law in California. The above content is intended for California residents only. This content provides only general information which may or may not reflect current legal developments. KAASS LAW expressly disclaims all liability in respect to actions taken or not taken based on any of the contents of this website. The above content DOES NOT create an attorney-client relationship. KAASS LAW does not represent you unless you have expressly retained KAASS LAW in person at the KAASS LAW office. KAASS LAW helps clients in: Los Angeles, Burbank, Hollywood, Glendale, Van Nuys, North Hollywood, Studio City, Highland Park, Eagle Rock, Sunland, Tujunga, Sylmar, San Bernardino, La Crescenta, La Canada, Beverly Hills, Westwood, Santa Monica, Brentwood. Pacoima, Montebello, Commerce, Alhambra, Downey, Bell, Maywood, Walnut Park, Vernon, Lynwood, Echo Park, Silverlake, Mission Hills, Northridge, Woodland Hills, Encino, Canoga Park, North Hills, Porter Ranch, Chatsworth, Reseda. Get Directions on Google Maps