Legal Question in Business Law in California

Re: transfer of money to other bank acc

If I looked at your business from the standpoint of the attorney for an unhappy customer looking to sue and recover big-money damages, I'd sure as heck look for ways to drag your parents into the suit! You didn't say how old you are; if you are under 18 you lack the legal capacity to make contracts and that is a different analysis; your parents would probably be responsible for your business activities.

If you are over 18, I would sue all concerned on the theory that the business was not your sole proprietorship; that it was in fact a partnership, since your parents received the cash flow in the first instance, and, more important perhaps, owned most of the assets used in the business. When assets are "under their name," that leads to a presumption of ownership, and owning the assets of a business, unless you are a bona fide lessor, may lead to a de facto partnership.

Now, there are defenses to such a claim. Partners are people who share in the profits and losses of a business. I would have to show sharing of risk.

Another danger is that if your parents are in the chain of ownership of goods you are selling, they could be sued for product liability if a buyer is injured by a hazardous product.

Do you have any kind of business insurance?

Yes, I think doing business as an LLC would be a good idea. It'll cost $800-plus a year in franchise fees. Might still be worth it. LLCs as well as corporations have to be set up and run properly to provide the expected liability shelter.

Re: transfer of money to other bank acc

An LLC vs. what? - you don't say what you are now. (Why aren't you also considering a corporation, along with the option of an LLC, if you are currently a sole proprietor?)

To handle this properly, you should, regardless of your business structure, have all revnues deposited into a business bank account in the business' name. Then excess revenues/profits should be distributed to you in some fashion, depending on business structure. Once in your personal bank account, you can then give whatever you want to your parents (although at some point the gift tax may apply). If on the other hand your parents are employees or co-owners of the business, then they should be received distributions of some sort depending on the entity type directly from the business. Absent some extradordinary arrangement to the contrary, assets under their name are not yours, they are theirs. It sounds as if you would benefit by paying for an hour or two of a business attorney's and possible also an accountant or CPA's time to get your affairs straightened out.