BUSINESS FORMATION

The Law Offices of Steven E. Springer recognizes that there are multitudes of questions every entrepreneur has about a new business. There are also those who wish to expand an existing business from another state into California. What legal form should the company take? Are there tax complications or restrictions on certain forms? Why should someone form a business in the first place? The experienced attorneys at the firm are here to work with you to overcome these challenges and realize your goals.

FORMS OF CALIFORNIA COMPANIES

California, like other states, offers several forms of doing business and requires different levels of formality in each of their operations.

The simplest are sole proprietorships and partnerships, which offer no protection from liability to their operators and owners. A sole proprietor is a single person running a business. A general partnership is two or more people or entities running a business. Both offer no protection for personal or partner assets — so they are disfavored unless your business (usually a professional practice) has no other forms or does not wish to use a limited liability form. Again, with a general partnership, each partner is liable to the fullest extent for the acts of the other partners and the partnership itself.

The next most basic kinds of entities are the limited partnership (LP) and limited liability partnership (LLP). They are not the same. Limited partnerships have at least one general partner and one limited partner. The limited partner is only liable to the extent of their investment in the partnership, but they normally have limited knowledge or participation in the activities and affairs of the business. Limited liability partnerships provide limited liability to the partners for the acts of other partners and the LLP as a whole. However, limited liability partnerships in California are restricted to lawyers, accountants and architects.

Limited liability companies (LLCs) have become the most common form of businesses. They provide the limited liability available to corporate shareholders while providing pass-through taxation, like a partnership. They do not have extremely formal requirements for recordkeeping.

S corporations, so named because they are taxed under Subchapter S of the Internal Revenue Code, is a hybrid entity like the LLC. However, S corporations have special restrictions: They may not have more than one class of stock, they are limited in their number of shareholders, all shareholders must be U.S. citizens or permanent residents, and the shareholders must be individuals, estates or trusts. S corporations offer pass-through taxation like LLCs.

Finally, C corporations are the traditional corporation, providing limited liability to shareholders and requiring a great deal of formal maintenance of documents. Unlike LLCs and S corporations, C corporations pay taxes twice on profits, once to the corporation and once to the shareholders. Despite this, their flexibility has kept them dominant as a type of formation and ownership.

SUPPORTING BUSINESSES THROUGH VITAL LEGAL SERVICES

The Law Offices of Steven E. Springer offers a wide variety of services in the initial formation of businesses, including:

• Advising on the form of new entities

• Preparing formation documents

• Reserving business names

• Obtaining employee identification numbers (EINs)

• Reviewing Business Transactions

• Drafting bylaws, partnership agreements and operating agreements

• Preparing buy-sell agreements

• Consulting on the formation of corporate boards and advisory boards

• Conducting shareholder meetings

• Business consulting

• Advising on insurance and accounting issues