Legal Question in Business Law in California
Incorporating in CA - Issue stock
I started a corporation in CA with only a $2 initial investment in exchange for the common stock. My accountant told me that was too low both for the IRS and to protect my personal assets. She suggested buying more stock now for a few thousand $$.
Is this necessary if I want to remain a real CA corporation and protect myself from liability? And do I need to file an "issuance of stock" form with the state of CA like I did when initially incorporated? Thanks!
1 Answer from Attorneys
Re: Incorporating in CA - Issue stock
Generally, a corporation must not be under capitalized to be considered a "viable" California corporation. Your accountant appears to know this general rule. The act of adding capital to a California corporation by existing shareholders, as well as the purchasing of business insurance are good defensive mechanism that may assist you in preserving the "corporate veil". Generally, the act of additional capitalization to an existing California corporation by one or more shareholders (whose initial stock was properly issued in the first instance), may not require filing a registration statement. Having stated that, however, you would be well advised to consult with an attorney to make certain your corporation has been formed appropriately . . . and is operating according to California law.
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