Legal Question in Business Law in California

Business

Is it legal for a Corporation to ask for donations to finance a start up?


Asked on 5/10/07, 9:29 pm

3 Answers from Attorneys

Scott Linden Scott H. Linden, Esq.

Re: Business

Legal? Yes. Generally, this is what a corporation's stock is used for. If you are not issuing stock for the "donations" then perhaps creating business loans might be the best bet.

Remember, a corporation must have assets when it is created or it can lose the corporation protection because it is undercapitalized. This is also known as "piercing the corporate veil"...not a good thing.

I would think that the most common type of business to receive actual "donations" would be a non-profit org. Otherwise, most "donations" would be classified as investments or loans.

Our office assists businesses at opening with the proper paperwork and employee guidelines. We also offer complete business reviews; reviewing documents, contracts, employee agreements, employee handbooks, non-comp agreements, as well as workplace safety concerns.

You can learn a little more at our website RulesofEmployment.com.

Please feel free to contact me if you need additional assistance.

Regards,

Scott

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Answered on 5/11/07, 1:55 pm
Johm Smith tom's

Re: Business

Sure but the donations are not tax deductible.

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Answered on 5/10/07, 10:24 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Business

Maybe. Any requests for gifts should make it absolutely clear that there are no strings attached and the donor isn't expecting anything in return, and won't be able to deduct the gift as a charitable donation, investment loss, or otherwise. Anyone including a corporation can accept a gift, but there can be no fraud, deception, mischaracterization or evasion of the true nature of the transaction, or the parties will go down in flames.

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Answered on 5/11/07, 1:16 am


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