Legal Question in Business Law in California

For a new incorporation -- what special measures are needed if one of the shareh

For a very small start-up company (market cap 70K), three of our investors have decided to complicate matters by pooling their money and investing as a separate corporation. First, any guesses as to why they would want to create such a micro-size holding company?

Our start up company will be incorporated in California law. The corporation that will be one of our shareholders is incorporated in New Jersey.

What potential complications should I be aware of. Our CPA told us that it would be no problem -- that we merely had to put the other corporation's name and EIN in the list of shareholders / share distribution in place of individual names in the proper documents.

But I suspect it's more complicated than that. Do we need to get some sort of warranty / assurances that this corporation was properly formed? How do we get assurances about who has legal authority to act in behald of this corporation that is investing in ours? Does it matter if they are incorporated in a different state?

Thank you for any advice.


Asked on 3/09/00, 12:54 am

1 Answer from Attorneys
Alvin Lundgren Alvin R. Lundgren, L.C.

Re: For a new incorporation -- what special measures are needed if one of the sh

Your accountant is correct, it is not a big deal. You can ask for a certificate of good standing to verify that the corp. was properly registered in NJ. The corp. will appoint a person to act in its behalf. You can get a resolution from the corp to show who that is.

It does not matter what state they are incorporated in.

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Answered on 3/21/00, 8:29 pm


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