The first step in starting a business is to gain a business formation. In general, there are four types of business formation in Californian. They include:
A corporation is an organization through which a business is conducted. It is a legal entity incorporated in certain jurisdictions by its founders. Like a physical person, a corporation has its rights and obligations. However, the latter shall not be attributed to the owner(s) of a corporation, since they are distinct from each other.
Corporations as a rule have several of distinctive characteristics that altogether separate them from the other types of legal entities and help to obtain certain rights and obligations. Many specialists in the field of corporate/business law distinguish characteristics of corporations that overlap one with the other. Many lawyers believe that the central attributes of the corporations are:
In most states, it has become a conventional practice when the companies are incorporated without having a temporary existence limitation and only in exceptional cases do the founders/shareholders of the companies decide to have an ending date. If the shareholders decide, at the moment of registration, that the company should have a specified ending date, then the defined date shall be considered as an automated end of the corporation if prescribed in the charter of the company. However, in the prevailing number of cases, the founders of the corporations do not specify an ending date, which means that the corporation can have an ending date only if:
The characteristic of perpetual existence of the corporation gives the shareholders a sense of comfort meaning that the corporation is easily manageable, safer and a stable place to make investments, expect returns without having to worry about the sudden changes. Likewise, this characteristic eliminates any extra expenses the corporation may have taken for the regular updates/addendums in the state registration body. Alternatively, corporations can carry the information as initially prescribed in the charter without spending additional efforts to file any other documents.
A legal personality in the case of companies is decided by the specific types of business organizations, which own separate property and assets (tangible, intangible) and the liability of the latter extends to the assets and investments it committed. The legal persons can acquire and exercise property and non-property rights, carry on responsibilities, act as plaintiffs and/or defendants in courts.
Limited liability is a fundamental doctrine of corporate law. There are many benefits of a limited liability company. The rule of limited liability implies that the investors who make contributions to the equity capital of the company/corporation bear the risks only to the extent of the initial investments and the assets the company possesses. For example, if A and B persons, each owning 50% of the shares in the company, jointly organized, invested 200$ in total to the charter capital of the company, then each of them risks only 100$ and not more than the investment if no other assets are transferred under the property entitlement of the company.
If you need help in forming a corporation in California we invite you to contact our Los Angeles Business lawyer at (310) 943-1171.
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.
In the previous article, we went over what a limited liability company, or LLC, is and why you may want one. It offers various lucrative advantages to its member-owners and it comes with relatively few strings attached. Such an idyllic scenario is very rare to stumble upon in the corporate realm, which is why many businesses aim to achieve LLC status. However, to establish an LLC there are some key requirements you must complete in order for the state of California to grant recognition of your company as an LLC. Firstly, you’ll need to select a business name, then you’ll have to file the necessary documentation to the state of California, and you will have to come to an agreement with the other members of the LLC as to how everything will be run. Let’s start with that first part.
To start, you’ll want to decide upon a name for your LLC. But the trick is that you’re not the one that’s going to do the final deciding. That’s reserved for the state to decide and grant. As a general rule, you’ll want to ensure that the name you’ve settled on is:
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
Lastly, it’s also definitely worth making sure that your chosen LLC name doesn’t infringe upon any potential copyright issues. If your name is too similar to another LLC’s name, then you may be held in contempt of copyright violation.
This second step is arguably the most important one on the list. You will have to create and file Articles of Organization. These are important documents which outline and affirm the initial statements required of you to form an LLC. The Articles of Organization will be filed to the state secretary’s office and, once approved, they establish the LLC as a registered business entity within the state.
The information that is required typically includes the name of the LLC, its registered address, the names of the owners and their roles, as well as a few more key points of information about the LLC. These documents are used by the state government to keep track of which LLCs are claimed and who their registered agents are. Registered agents must be designated in order for your LLC to get formed because that person will have legal authority to respond to any legal documents that your LLC may receive.
Lastly, you’ll want to draft up an Operating Agreement. This is an extremely important part of the LLC creation process because it plainly establishes the business’ financial and operational decisions, the processes for arriving at those decisions, the protocols and chain of command, as well as many other rules, regulations, or provisions. The main reason you’d want to spend quite a bit of time working on the specifics of an Operating Agreement is that it outlines and governs the internal operations of your business in such a way that is most suitable to the specific needs of the business owners. Therefore, by investing time in writing it out now, you will save a lot of frustration, confusion, and time later down the line.
Do note that once signed by the member-owners of the LLC, the Operating Agreement acts as an official contract which binds them to its terms and conditions. The legal significance of this document is yet another reason to spend time on it–should any legal disputes or issues arise between the owners of the LLC, the operating agreement is one of the first things the courts will point to. As such, you’ll generally want your operating agreement to mention:
Also, bear in mind that the Operating Agreement must be completely transparent and agreed upon by all members of the LLC. You will all have to sign the document affirming your assent to its terms and rules.
There are many points to make sure you get down in just right way while filing the documents for forming your LLC. In particular, the Articles of Organization and the Operating Agreement are so crucial to get right that the future of your business depends on it. That’s a very tall order to ask of anyone to complete on their own. That’s where we come in; you do not have to go through that process alone. We can help you with the filing of these documents so that you can focus more on your business and worry less about the details. Give our office a call today at (310) 943-1171 to speak to our experienced California business lawyers. We will make the process as smooth as can be.
KAASS LAW is authorized to practice law in California. Our lawyers in Glendale, Los Angeles County, California specialize in offering services for multiple practice areas. 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