Business Formation Attorney Orange County 

TYPES OF BUSINESS LEGAL STRUCTURES

Due to the apparent ease of setting up an LLC, many business owners simply set and forget. The big issue, however, is the inherent problems at the crossroads of the business. Situations like the death of an owner, divorce, accidents, “immediately” bring your corporate documents into the fray, for example, your articles of incorporations and bylaws.

Are your corporate documents designed to stand the rigor of an attack from the opposing party? Are your documents built around a strategy or merely a tactical approach leaving you with gaping holes for litigation?

Key takeaway: Attain wise counsel. Interview 2-3 trust and estate planners with in-depth business law and real estate background.  

Basic Overview of each legal structure: 

Limited liability company (LLC)

1. Owned: Members
2. Combines limited liability of a corporation with tax efficiency (no double taxation)
3. Offers operational flexibility
4. More tax and accounting complexity
5. Unattractive for outside investors

Limited liability Partnership (LLP)

A variation of the general partnership

S-Corporation

Owned: Shareholders

1. Special tax status with the IRS
2. Pass-through taxation (no tax at the corp level).
3. Tax when profits are distributed to shareholders.
4. Limitations on the number of shareholders and stock classes

C-Corp

1. The corporation is taxed on its net income
2. Taxed when shareholders’ profits are distributed.
3. Owned: Shareholders
4. Legal entity separating owners (the shareholders) from the corporation.
5. Shareholders are not personally liable for any corporate debts or liabilities.
6. C-corps are subject to “double taxation,”
7. Best used when raising outside investment capital or taking the company public.

Sole Proprietorship

1. Owned: One owner (a husband and wife)

General Partnership

1. Owned: Agreement between 2 or more parties

Limited liability Partnership (LLP)

1. Owned: Used be specific professional practices
   1. Engineers
   2. Architects
   3. Lawyers
   4. Accountants
   5. Land Surveyors
   6. Physicians

Family limited partnerships (FLP)

Public Limited Partnership (PLC)

Limited Partnership (LP)

1. Owned: General and Limited Partners

Quick link to California Business Portal

When choosing a business legal structure, it is “crucial” to understand that keeping your minutes and other operating documents up-to-date will keep you out of legal hot-water should a divorce, an accident, or any unforeseen situation occur. The Hess-Verdon strategy highly recommends business owners to come in bi-annually or yearly to do a company state of affairs (meeting minutes).

Now, you may say, “it’s only meeting minutes; I can make them up when I need to.” Well, that philosophy is untrue and fraught with disaster. Up-to-date meeting minutes protects your business entity! The company corporate veil can be pierced should unforeseen situations arise.

The primary reason to choose a legal structure is to protect you personally!

TOPICS TO CONSIDER IN CORPORATE FORMATION

1. Taxation
   1. Passed through to the group of shareholders: i.e., profits are subject to only one level of taxation at the shareholder level.
   2. Business profits taxed at the business level and again at the shareholder level.
2. Business profits

• Personal liability and financing

1. Keeping books bylaws up-to-date mitigates exposure. Lack of Bi-annual, Annual meetings can cause the piercing of the corporate veil.

TOPICS TO COVER FOR BUSINESS FORMATION

1. Choosing a name for your California business
   1. Check names for availability.
   1. https://www.sos.ca.gov/administration/regulations/current-regulations/business/business-entity-names/
2. Reserve up to 60 days: https://bpd.cdn.sos.ca.gov/corp/pdf/name-reservation-request-form.pdf
   1. Hand-delivered or post mailed to California Secretary of State’s office. https://businesssearch.sos.ca.gov/

• Articles of Incorporation (Corporate charter, Articles of association, Certificate of Incorporation)
  1. Contains pertinent information
  1. Firm’s names, address, agent for service of process, amount of stock issued.
  2. The governance of a corporation and corporate statutes in the state the articles of incorporation are filed.
     1. Legal document for the creation of a corporation (Filed with the Office of the Secretary of State)

• Bylaws
  1. Governing rules by which the corporation operates. Once Articles of Incorporation are established, shareholders decide on bylaws to help direct operations.
  2. Bylaws are considered to be the most important legal document of any organization.
  3. Bylaws outline in writing day-to-day rules for the organization and guidelines.
  4. Bylaws describe the exact duties of the Board of Directors. Periodically amended and formally adopted.
  5. Bylaws outlines: Committees, officers, meetings, conflict of interest, amending bylaws

• Employment policies and agreements
• Shareholder agreements
• Operating agreements
  1. Owners
  2. Members
     1. Roles
     2. Purpose

ABOUT HESS-VERDON & ASSOCIATES PLC

We efficiently and economically work to secure a results-driven outcome!

Hess-Verdon & Associates is one of the most reliable and most sophisticated law firms — experienced in the state of California at both the trial and appellate levels. Our law firm has spent years acquiring extensive experience in trial preparation, strategy, and trial presentation to help you with your specific case.

Did you need immediate attention? Set up a Learn more about our 2nd opinion case evaluation.

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