Operating a Corporation/LLC

What is a fictitious business name?

Also known as a DBA (doing business as), if your entity is using a name for its business that’s different from its entity name, then you are using a fictitious business name, and state law requires that you file a fictitious business name statement in the county you are operating out of that records the name of your business and the name of the entity using that name. It’s also a good idea to do file that even if you don’t want to, because it’s helpful evidence to prove the use of your name from a certain point in time, which helps you to defend or bring trademark infringement claims.

By | July 12th, 2015|0 Comments

Can I use my old bank account for my new corporation or LLC?

That would be nice, but this is the beginning of you needing to think about why you formed the corporation to begin with: to make it separate from the sins of the past. So, no, new bank account, with a new tax ID number. Sorry.

By | June 15th, 2015|0 Comments

What are authorized shares?

Authorized shares are the number of shares your corporation is authorized to issue. You do not have to issue all of your authorized shares, and frequently it can be a mistake to do so. Authorized shares do not vote, and do not participate in dividends.

By | July 12th, 2015|0 Comments

What is a board of directors?

Directors are the individuals who direct or guide the corporation with respect its overall business model and, well, direction. The board sets policy and votes on major or extraordinary decisions. Shareholders elect directors, and directors elect officers. The “board” is the entirety of all of the directors.

By | July 12th, 2015|0 Comments

What are bylaws?

Whether for a corporation or in any business or political setting, bylaws are the rules that govern the procedures of the particular entity. In a corporation, the bylaws is the set of rules which address, for example, when meetings will be held, and what the duties of the officers are. Though it’s a standard document for a corporation, some LLCs will also choose to have bylaws separate from their operating agreement. Some bylaws are considered “off the shelf”, but your business, like any other, is unique, and therefore it’s a document that should be reviewed and drafted carefully to suit your particular needs.

By | July 12th, 2015|0 Comments

What is an Operating Agreement?

Novices to LLCs tend to think that this is the document governing the actual operations of the company. Not so. The operating agreement, also sometimes known as the LLC Agreement (or some variation), is the governing document for the LLC itself. It may be very short, defining merely who the members are and what their respective ownership percentages are. Added to that, there may be restrictions on the transfer of the ownership interest, as well as guidelines for meetings, consent rights, call rights, and so on. These are contracts that can become quite complex.

By | August 10th, 2015|0 Comments

Do I need an operating agreement for my LLC?

Need? No. And if I were a litigation attorney who made money off of people’s mistakes, I’d say don’t have one and let the chips fall where they may -- better yet, let state law govern your rights and duties. But I’m in the business of preventative law. So, yes, you should have an operating agreement. Just by way of example, without one, and your partner dies, you’ll become partner’s with your dead partner’s surviving spouse -- think about that one for a minute. No way out of that without a written operating agreement providing for a buy-out.

By | August 10th, 2015|0 Comments

What does “capitalization” mean?

Capitalization can mean a couple of things. At first it usually refers to the contributions of money or property that the owners (shareholders or members) have contributed to the business, their “capital contributions”. Later on, or as a result, or in anticipation of such contributions, it may refer to a capitalization chart or table, which will set out each owner and their percentage interest in the entity.

By | July 12th, 2015|0 Comments

What are stockholders and shareholders?

Simply put, those are the owners, and they can be in many shapes and sizes. A shareholder can be an individual who owns shares in GM or Microsoft; it can be you, owning 100% of the issued shares in your own corporation. It can be another corporation or venture capital firm owning shares in your start-up. "Stockholder" and "shareholder" typically means the same thing.

By | July 12th, 2015|0 Comments

What are “issued shares”?

Good question. This concept often gets confused with “authorized shares”. Issued shares are those shares that the corporation has actually “issued”, i.e., transferred to a shareholder. This can be in the form of a certificate, and that can be typical in a small business. In larger businesses, the ownership of issued shares is usually a journal entry in the corporation’s books and records, or with the broker. The number of issues shares cannot exceed the number of authorized shares.

By | July 12th, 2015|0 Comments