What is a Chairman versus a President?

In small companies, often the same individual serves as the chairman and the president.  The president, commonly also referred to as the chief executive officer, is the top executive in a company responsible for managing a company’s operations and performance.  She is the leader of the firm and is responsible for implementing corporate policy as established by the board of directors. 

The chairman is the highest ranking officer in the board of directors, and is often selected for this leadership role by the board either by election or appointment.  The chairman presides over the board meetings, but may or may not have actual executive authority.

What is a corporate seal and do I need one for my company?

A corporate seal is the official mark or signature of a corporation, and signifies that the document on which it is affixed is a formal, legally binding corporate act.  Corporate seals originated from the days of ancient English law, when a barrister would make an imprint on a document by pressing his ring in hot wax.  Modern corporate seals are stamps that emboss or imprint company information such as the corporate name, state and date of formation.  They may be purchased from a stationary or office supply vendor.  We also offer corporate seals for clients who request them during the formation process..

In California and in most other states, corporate seals no longer have any legal significance.  California Civil Code Section 1629 does not require companies to use seals in corporate contracts:  “All distinctions between sealed and unsealed instruments are abolished”.  Today, the signature of an individual authorized to bind the company in legal obligations is viewed as an official corporate act.  Therefore, if the president or secretary of a company signs a contract, the validity of the contract would be legally enforceable.

How can I dissolve a California Corporation?

To dissolve a California corporation, the company must authorize the decession to dissolve, file with the Secretary of State, and satisfy the Franchise Tax Board. First, all of the Shareholders of the company must vote on the decision to dissolve. If all Shareholders agree to dissolve, the vote can be administered by written consent, pursuant to California Corporations Code Section 603 (a). Next, with regard to the Secretary of State, the corporation must file 1) a certificate of dissolution (Form DISS STK) and 2) an election to wind up and dissolve with the Secretary of State (Form ELEC STK). The election to wind up and dissolve is only necessary if the dissolution has not been agreed to by the unanimous consent of all outstanding shares. Finally, with regard to the Franchise Tax Board, the corporation must file a final return and pay all outstanding taxes.

How can I dissolve my California nonprofit corporation?

The election to dissolve a California non-profit corporation must be authorized by the vote of a majority of all the members of the corporation, or if there are no members, by the board of directors. The corporation must file 1) A certificate of dissolution (Form DISS NP) and 2) an election to wind up and dissolve with the Secretary of State (Form ELEC NP). The election to wind up and dissolve is only necessary if the dissolution is not by unanimous consent of all members or directors. Prior to filing the dissolution document(s) with the Secretary of State, the corporation must obtain consent from the California Attorney General. To receive permission to dissolve, the corporation must provide the Attorney General with the financial statements of the corporation for the previous three years, show that the that all its debts have been paid off, and that it will distribute any assets to other non-profit organizations that are also tax exempt. The Attorney General then issues a waiver letter, which waives any objections to the dissolution. The corporation must file the waiver letter along with the Form DISS NP, and Form ELEC NP, if applicable, with the Secretary of State to complete the dissolution process.

What happens at the first meeting of the board of directors of a corporation and when does it take place?

The first meeting establishes the corporate structure of the company by appointing the initial directors and officers, authorizing the issuance of share to the initial shareholders, authorizing the bank of choice for the corporation, and establishing  the principal place of business, in addition to many other important details. The meeting should take place after the corporation is in existence and has the authority take action. It is prudent to hold the meeting after the corporation has received a filed copy of the article of incorporation from the secretary of state to ensure that the company in authorized to do business and validly existing.

How will I be notified that my corporation has successfully obtained subchapter S Status?

After the Election by a Small Business Corporation (IRS Form 2553) has been filed with the IRS, you will receive a letter from the IRS indicating that your election has been accepted. It is very important to maintain a copy of the acceptance letter in your corporate book  as your accountant will most likely need it to prepare your corporate tax returns. Unfortunately, the letter  is often confused as junk mail and thrown away.  To avoid this, it is the practice of our firm to list  our mailing address on the form 2553 so that the S election acceptance letter is delivered to our office for safekeeping.

What is an incorporator and what is his or her role in the formation process?

An incorporator is the individual who organizes the incorporation and arranges for the Articles of Incorporation to be filed with the Secretary of State. The incorporator signs the Articles, verifying the information submitted is true and correct. Oftentimes, the incorporator  is not a shareholder, director or officer of the corporation. Most frequently, the incorporator is the lawyer who is handling the formation of the corporation.  Following the first meeting of the Board of Directors and officers, the incorporator resigns from its role. Accordingly, the incorporator’s signature appears on the corporation’s organizational documents.

What does “doing business” mean, and when do I have to “qualify” to do business?

Every state in the country requires a foreign LLC or corporation to “qualify” to do business in a state where it is “doing business”.  So what constitutes doing business?  It’s defined differently from state to state, but states tend to define it broadly and ambiguously.  In California, for example, doing business is defined as “entering into repeated and successive transactions”.  What does that mean?!

Most states, including California and New York, provide lists of “safe harbors” that do not constitute doing business (e.g., holding a board meeting, soliciting orders).  In other words, we know much more about what is NOT doing business than what IS doing business.

Although both California and New York include simply maintaining a bank account on their list of safe harbors, as a practical matter, opening a bank account still tends to require a qualification.  Thanks to the Patriot Act, most banks will require a qualification before they will open a bank account for a foreign corporation.  See, http://www.eminutesonline.com/it%e2%80%99s-un-patriot-act-ic-california-banks-impose-burden-on-corporations-seeking-to-open-accounts-that-conflicts-with-language-and-spirit-of-patriot-act-and-its-implementing-regulations/

Do I need to file a fictitious business name statement (DBA)?

Companies and individuals create fictitious business names (DBAs) so that they can operate under a name other than their legal name or use more than one name for business purposes. Using alternate names for business is acceptable as long as a fictitious business name statement is filed with the county, city, or state depending on local requirements. A DBA allows corporations and individuals to receive and process checks in the fictitious business name, in addition to the corporate name or individual name.  Because DBAs must  be filed in multiple locations (e.g., each County where a company is doing business in California) and renewed regularly (every 5 years in California), the better approach is to avoid the need to file a DBA by incorporating using a corporate name that the company will actually use in conducting its business

Do I have to pay federal taxes on a nonprofit corporation?

Corporations that qualify under 501(c)(3) of the internal revenue code are tax-exempt, meaning they are not taxed by the federal government. In addition, those who donate to a qualified nonprofit corporation can take a tax deduction for any donations they make to the nonprofit corporation.

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