FAQs

Should I form my LLC or corporation in a state other than where I live?

If you’re not thinking about Delaware, then maybe. Sometimes you’re going to have to. If, for example, you’re forming an LLC for investment real estate, with a few exceptions, that state will require you to form your LLC in the state where the property is. There may be other reasons to be in another state, but those come up rarely.

By | June 15th, 2015|0 Comments

When does a corporation become a corporation? An LLC?

I wish the answer to this were more existential, and thus more interesting. Alas, it’s as simple as this: when you duly file Articles of Incorporation, also know as charter documents, with the state official authorized to recognize and process such filings. In California, it’s the Secretary of State. In Delaware, it’s the Division of Corporations. Same for LLCs, except it tends to be called Articles of Organization.

By | June 15th, 2015|0 Comments

Why should I form a corporation/LLC for my business?

Corporations provide liability protection for its owners, as well as its officers and directors, with some exceptions. So, there’s that. Insurance covers some things, not all things. And sometimes a corporation won’t help you . . . for example, if you’re a lawyer and you commit malpractice. That’s on you, individually – corporation or not. Tax may also drive a reason to incorporate or organize an LLC.

By | June 15th, 2015|0 Comments

What are Articles of Incorporation?

This is about as arcane as it gets . . . “Articles”. Be that as it may, we’re stuck with it as a word in corporate lingo. This is the document which provides the state, and therefore the public, with the initial information needed to bring the corporation into existence. It must follow certain state requirements minimally, and may also contain certain other provisions that may either be recommended generally, or may be required by certain investors. Sometimes this is referred to as the “corporate charter”.

By | June 15th, 2015|0 Comments

What are Articles of Organization?

Like Articles of Incorporation, this is the document used for bringing your LLC into existence. It’s filed with the state’s authority for, well, filing such documents. In California, this is the Secretary of State. In Delaware, it’s the Division of Corporations.

By | June 15th, 2015|0 Comments

Will a corporation or LLC protect me from liability?

That’s supposed to be the point of them, so I’m going to say . . . yes! However, you can become personally liable for your own negligence (or intentional bad acts). You may also become personally liable of the person suing you can prove that you didn’t follow corporate formalities, like holding meetings, maintaining minutes, or keeping enough working capital in the business’s accounts.

By | June 15th, 2015|0 Comments

Is the liability protection for LLCs and corporations the same?

Yes. There are some very case-specific nuances, especially when you get down to single-member LLCs, but unlikely anything that is going to effect you generally. Don’t obsess over this one unless you have plans to not pay taxes, for example.

By | June 15th, 2015|0 Comments

What is a “Certificate of Incorporation”?

Some states use “Certificate of Incorporation” as an alternative to Articles of Incorporation; for example, New York and Delaware.

By | June 15th, 2015|0 Comments

I’m a professional. What’s right for me?

First things first: the question really is whether an entity is going to do you any good at all. From a liability perspective, keep in mind that anything you do is your personal problem; putting your medical practice into a corporation won’t shield you from your own malpractice. But it could, for example, shield you from your employee’s malpractice, or your file clerk’s sexual harassment claim against a fellow doctor. And it may also shield you from your partner’s malpractice. So there are upsides. Some states, like California (where I practice), restrict the use of certain entities by professionals. The term “professional” itself has some grey area. Typically, professionals required to have a certain education, training, and experience aren’t permitted to use an LLC for their business (in California). So lawyers, doctors, etc. will generally use a corporation, though certain professions, like lawyers, have other specific partnership entities available to them. Others, like real estate appraisers, are still permitted to use an LLC. There may also be tax reasons, as a professional, to put your business into an entity. There’s much to consider.

By | June 15th, 2015|0 Comments

Should I form as a Professional Corporation?

Should you? Probably not. Are you required to? Maybe. It depends on the type of profession you’re in. Lawyers, for example, are required to be in professional corporations (“PC”). Forming as a PC may require additional restrictions in your bylaws, for example concerning ownership. So if you don’t need to, generally you shouldn’t. But you may not have a choice.

By | July 12th, 2015|0 Comments