Business Law -- Formation Choices

We assist business owners in selecting the appropriate business entity for them and ensure the proper legal formalities are followed as they start, expand or change businesses.

Sole Proprietorship

This is the easiest business organization to form and generally does not need an attorney to get started, simply get the needed business permits, line up your finances and open the doors. The disadvantage here is that the proprietor is personally liable for all the business debts, taxes and other liabilities. The legal life of this form of business last until the business closes or the owner/proprietor dies.

Partnerships

The California Uniform Partnership Act, part of the Corporations Code, is the law governing operation of a partnership in this state. All states have now adopted some version of the Uniform Partnership Act, so most laws regarding partnerships are very similar throughout the country. The types of partnerships most often used in business are: Limited Partnerships; Registered Limited Liability Partnerships and General Partnerships. We can help you decide the most appropriate form for your business.

Limited Liability Company (LLC)

When you form an LLC you create a separate legal person and you are a member. An LLC is a company in which members limit their liability exposure to their percentage of ownership or equity interest in the company. members' personal assets are protected in the event of business-related lawsuits. A domestic limited liability company generally offers liability protection similar to that of a corporation but is taxed differently. Domestic limited liability companies may be managed by one or more managers or one or more members. In addition to filing the applicable documents with the Secretary of State, an operating agreement among the members as to the affairs of the limited liability company and the conduct of its business is required. The limited liability company does not file the operating agreement with the Secretary of State but maintains it at the office where the limited liability company's records are kept. Professional limited liability companies are restricted in California at this time.

In California all LLCs pay a fee to the State, just as a corporation does. A new LLC, however, must also pay that fee in its formation year. Another feature of the LLC is the ability to have more members than are allowed in an “S” corporation. California allows singe member LLCs, but not all states follow that example.

Corporations

A domestic corporation generally is a legal entity which exists separately from its owners. While normally limiting the owners from personal liability, taxes are levied on the corporation as well as on the shareholders. The sale of stocks or bonds can generate additional capital and the longevity of the corporation can continue past the death of the owners. When creating a corporation the Articles of Incorporation must be filed with the Secretary of State and the registration fee paid at that time.

Corporate bylaws are not filed with the Secretary of State. Bylaws are kept at the corporation's principal executive office (if located in this state) or the corporation's principal business office in this state. The bylaws shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside this state and the corporation has no principal business office in this state, it shall, upon the written request of any shareholder, furnish to such shareholder a copy of the bylaws as amended to date.