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.

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.

What does it mean for shares to be “publicly held”?

When shares of a company are “publicly held” this means the shares are traded on the public securities markets subject to federal regulation.

What if I attempted to incorporate and failed to do so properly? Am I now personally liable for all of my company’s debts?

The situation that you have been placed in is a dangerous one, but not all hope is gone yet.  It really will depend on the types of liabilities that you may have incurred and what your state’s laws are.  Some states will recognize an attempt to incorporate, if you had carried on as if there was a corporation and the failure to incorporate was not in bad faith.  If you are in this situation, seeking the help of an attorney immediately is imperative since there can be a lot of gray area which only a professional can help you sort out.

Once a corporation is formed, what can the corporation do?

Once a business is incorporated, all business is conducted in the corporation’s name.  The corporation itself borrows money, contracts with other entities and individuals, sues, and can be sued.  It acts like a person.  The same applies for Limited Liability Companies (LLCs).

Can a Foreigner be a Shareholder of a S-Corporation?

 

The tax code provides that a S-Corporation must not have a nonresident alien as a shareholder (see, IRC Section 1361(b)(1)(C)).  Treasury Regulation Section 1.1361-1 states that “a corporation having a shareholder who is a ‘nonresident alien’ as defined in Section 7701(b)(1)(B) does not qualify as a small business corporation.”  Section 7701(b)(1)(B) provides — in typical IRC legalese — that a person is a nonresident alien if he isn’t a resident alien.  Having a particular visa has no impact on whether a non-resident alien can be a S-corporation shareholder.  Only a green card or meeting the IRS’ “substantial presence test” enables an alien to be eligible to be an S Corporation shareholder. 

 Section 7701(b) and the implementing Treasury Regulations (i.e., Section 301.7701(b)-1) provides that to be a resident alien (and thus an eligible S corporation shareholder) one either has to have a green card or meet the substantial presence test by being in the US for at least 183 days during a three year period that includes the current year.  This is the only area where having a certain visa may be relevant.  Section 7701(b)(3)(D)(i) provides that an individual shall not be treated as being present in the US on any day if such individual is an exempt individual.  Section 7701(b)(5) defines exempt individuals as those who are a foreign government-related individuals (including those temporarily present in the US on a visa which the IRS determines represents full-time diplomatic or consular status), teachers, trainees, students or professional athletes temporarily in the US to compete in a charitable sports event.  Thus, the visa classification of these types of individuals could, actually, hinder them meeting the substantial presence test.   

 

What is an incorporator?

The Articles of Incorporation are signed by the “incorporator”. Any natural person may serve as incorporator. As a matter of convenience, our firm generally serves as the initial incorporator.

What is a Statement of Information?

A new corporation is required by California law to file a Statement of Information with the Secretary of State within 90 days after incorporation. A renewal form Statement of Information must be filed biennially thereafter.

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