Corporations

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

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

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

What/who is an incorporator?

This is the person who signs and causes the filing of the Articles of Incorporation (or, in the case of an LLC the Articles of Organization) with the designated state authority. In a small business, this is usually the owner/shareholder/member. Some folks have their attorney sign the documents to help expedite the process, and that’s ok (but not necessary).

By | June 15th, 2015|0 Comments

What are Officers?

Officers, in a corporate (and even LLC) setting are the individuals who perform the tasks of managing and operating the entity. In California, every corporation is required to have at least three officers: CEO, CFO, and Secretary. There can be more, but no less. LLCs don’t typically have officers, but they may at the discretion of its members.

By | July 7th, 2015|0 Comments

What’s a director, and what’s the difference between a director and an officer?

Directors . . . direct! They set policy and guide the company with its business and direction. Directors are like the captains of ships; they know where the ship should go, and they tell the officers to make it happen.

By | July 7th, 2015|0 Comments

Can one person be all of the officers?

In a word, yes. Is that always advisable? No. Is it typical in a very small single-shareholder corporation? Yes.

By | July 7th, 2015|0 Comments

Can anyone own an S Corporation?

You probably didn’t think to ask this until you saw it was a question. Answer: No. S Corporations are restricted with respect to their ownership, one of the key factors why they can’t always be used. For example, no more than 100 shareholders can own shares in an S Corp, no shareholder can be a non-resident alien, and unless certain filings and compliance rules are met, they generally can’t be owned by other entities, only individuals.

By | July 7th, 2015|0 Comments