What is an agent for service of process?
October 13, 2008
All corporations must have an agent for service of process. This is the designated party upon whom a lawsuit may be served if the corporation is involved in litigation. The agent for service of process must be either a natural person residing in California, or a corporation having an office within the State of California. If a corporation serves as an agent for service of process, the corporation must file a certificate with the Secretary of State, identifying the office and person who may be served with process.
Sybil LLC, Inc.
October 13, 2008
Anyone who watched TV in the 1970s most likely associates the name “Sybil” with the idea of multiple personalities. There are “Sybils” in the business world as well. Generally, limited liability companies with two or more members are treated under Federal tax law as partnerships; LLCs with one member are “disregarded” for Federal income tax purposes, and the income is reported on the sole member’s tax return. Read more
Advantages of a Board of Advisors vs. a Board of Directors
October 13, 2008
In today’s competitive business environment, organizations frequently seek outside expertise to help the company grow and prosper. Traditionally, companies seeking external advice invite advisors to join their Board of Directors. However, the formality, liability and expense of a Board of Directors fuels the popularity of an informal, budget-friendly alternative: a Board of Advisors. Read more
How many shares should be authorized?
October 13, 2008
The number of authorized shares is largely irrelevant from the standpoint of ownership of the corporation. It is the percentage of shares owned by a shareholder that determines the shareholder’s ownership interest in the company. For example, if a corporation is authorized to issue 1,000 shares and Joe owns 500 shares, Joe’s ownership interest would be the same as if the corporation was authorized to issue 1,000,000 shares and he owned 500,000 of them. In California, there are no additional fees for authorizing large number of shares. However, in other jurisdictions (e.g.., Delaware) the annual fee owed to the state (i.e., franchise tax) is calculated based on the number of authorized shares. As a result, great care should be taken when initially determining a corporation’s capital structure. For example, in Delaware, it is typically advisable to authorize no more than 3,000 shares of capital stock.
Understanding the Differences between Corporate Names and Trademarks (Guest Author, Don Thornburgh)
October 13, 2008
Formation of a business entity, such as a corporation or limited liability company, entitles the owner to conduct business under that name in the jurisdiction in which the entity was formed. It is important to recognize, however, that the act of creating the company itself does not confer upon the owner any intellectual property rights in the name. Read more
Why are there usually more authorized shares than shares that are actually issued?
October 13, 2008
By authorizing more shares in the Articles than the corporation plans to initially issue (e.g., authorize 1,000,000 shares and issue 10,000 shares), it is possible to later issue more shares without amending the Articles to change the capital structure.
What are the record-keeping requirements for a corporation?
October 13, 2008
Corporations act by meetings of shareholders and directors, and these meetings are documented in Minutes or Written Consents. Each corporation must have an annual meeting of the shareholders and the Board of Directors.
What optional provisions may be included in the Articles of Incorporation?
October 8, 2008
When establishing a corporation, unique concepts are either added to the Articles, Bylaws, or an agreement among the shareholders and the corporation (e.g., an investor’s rights agreement or a shareholder’s agreement). Certain concepts are only enforceable if they are included in the Articles. However, in general, Articles should be kept simple and straightforward, because they are public record and can only be changed by amending the Articles. The most common optional provisions that are included in the Articles of Incorporation relate to limitations on the liability of the officers and directors and authorizing indemnification of the officers and directors. These concepts must be included in the Articles to be enforceable.
What is a federal employer identification number?
October 8, 2008
An “EIN” (Employer Identification Number) is a number assigned to the corporation by the IRS for identification purposes. Each separate entity or business must have a separate EIN. The EIN is obtained by submitting IRS Form SS-4 (Application for EIN) to the IRS.
The Knee-Jerk LLC
October 2, 2008
LLCs have too often become the knee-jerk choice for most new businesses over the past few years. However, as the California gross receipts tax has risen (and as clients have expressed dissatisfaction with the cost), it is time to compare the advantages of LLCs with other options. This article examines some of the factors that can be used to determine whether the LLC is the right structure for a particular business. Read more
