Legal Question in Business Law in California

Re: How to incorporate?

there are many factors to consider in deciding Corp vs. LLC, too many to list here. Attorney fees for either run about $500. i have some material on the subject i could email you if you like.

Re: How to incorporate?

I can understand your concerns about cheap and easy "one-stop incorporation shops." Although I don't want to disparage anyone's product, especially when I've not seen it, my personal belief is that business owners who want to incorporate are best served by consultation with an attorney who will 1) understand what the business is all about, 2) identify the specific needs of business owners, 3) if not a tax practitioner as well, consult with their CPA on necessary decisions and then help them reach a decision on the best format for their venture.

Incorporating a small business in California is fairly straightforward. Assuming that no stock will be publicly offered, the incorporators file Articles of Incorporation with the Secretary of State, conduct organizational meetings at which they approve by-laws, appoint a board of directors, make certain elections on Tax treatment, approve the form and sources of capitalization, approve the forms of stock certificates, seals, open bank accounts, etc. Notices re issuance of stock are prepared and sent to the CA Corporations Commissioner, and a Statement by Domestic Stock Corporation (identifies Officers and Directors) is sent to the Secretary of State. The corporation will apply for a Federal Employer ID Number.

If the corporation is to a statutory close corporation (management duties normally reserved to the Board of Directors delegated by agreement to some or all of the shareholders) a Shareholder Agreement should be formed.

This is a broad brush overview of incorporation, and does not list every little thing that needs done. Counsel who specialize in this field will have checklists that cover all requirements.

An LLC is a different kind of beast - a hybrid between a corporation and a partnership. The primary reason people form LLCs is to have a limited liability entity that is taxed as a partnership. Your tax advisor can give the pros and cons of that.

Please let me know if there's more information you'd like from me.

Best Regards,

Tom Newton

Now the inevitable caveat:

The foregoing information is provided as an accommodation only, and does not constitute specific legal advice or a biding legal opinion based on a comprehensive review of all relevant facts, nor can provision of such information be construed as creating an attorney-client relationship.

Re: How to incorporate?

The previous attorney did a good job explaining, incorporating a business as a "C" corporation. Thus, I will not waste your time on that matter.

LLC

The procedure in preparing an LLC is primarily identical to that of a "C" corporation. The going trend with small business today is to file an LLC. The distinction of this entity, which is its advantage over a "C" corporation, is that it is taxed differently than a "C" corporation. A "C" corporation is taxed twice: 1) At the time when the corporation makes money and then 2)when dividends are paid out to the shareholders, the shareholder will have to pay taxes in their returns.

On the other hand, an LLC is not subject to double taxation. The LLC itself is not taxed for its income, only the shareholders who receive dividends will be taxed for income. This is a tremendous advantage, and can save the shareholders significant income. Along with this tax savings, the LLC shareholders personally protected and their liability is substantially limited.

EMPLOYMENT CONTRACTS & AGREEMENTS

Employment agreements, handbooks and manuals are must these days with companies that have the potential of taking off. Along with such success, companies need to be cautious about the way they conduct themselves and establish relationships with potential and current employees.

Our firm handles Corporate, Business and Employment related matters, and we represent employers in California. We have worked with many candidates like yourself in solving their employement issues.

Employment agreementes are not too complex, we would need to draft an agreement to protect your interests without making the agreement unconscionable. Obviously, it is not something that can be produced in a couple of hours because we will have to be clear regarding your concerns, as well as, the concerns that are standard in the industry and incorporate the both principles into a employment agreement tailored to your company.

We would be very interested in setting up a consultation with you. I believe that if you are planning to complete both of these assignments, it would be best to have a single firm handle all of your business concerns because some issues overlap into other areas of law. In addition, if one firm is involved then they know all of your business and legal concerns and, so, you will be better represented.

We have a corporate and employment division, and would be capable of handling both projects. Please feel free to call on me in the event that you have any further questions or concerns. I can be reached at (213) 384-2220, and please ask for "Katch" or "Mike."

Thank you

Re: How to incorporate?

Whether you incorporate, do an LLC, a partnership or stay as a sole proprietor depends on a lot of factors, which need to be discussed.

As far as employment contracts and "keeping an eye on your business", it would be a wise decision to find an attorney to help you. I have seen too many people set things up the "thrifty" way, who ended up losing thousands of dollars, and in some cases, their entire business.

If you are in the Bay Area, email me or give me a call for a free initial consultation. 925-924-0100