FAQ

Business Law FAQ’s

Q: What type of business entity is best for my business?

California has a wide range of business entities, including corporations, general partnerships, limited liability companies (LLC), limited partnerships (LP), and professional corporations (PC). The most popular entities are corporations and LLCs, in which the owners are shielded from personal liability — LLCs have become increasingly popular because they tend to have less complicated structures and tax responsibilities. Every business venture has unique interests to consider, and deciding which type of entity to form requires assistance from an experienced business attorney.

Q: What are the possible consequences of personal liability for business debts and obligations?

A: Limited liability offered by incorporation shelters business owners from personal liability. Certain types of insurance can also help cover business owners, directors, and officers. However, if an owner or director performs certain personal acts, behaves illegally, or fails to uphold statutory requirements for corporate status, he or she may face personal liability despite the corporate shelter.

Q: What is “piercing the corporate veil?”

A: Sometimes, courts will allow plaintiffs to receive compensation from corporate officers, directors, or shareholders for damages rather than limiting recovery to corporate resources. This procedure avoids the usual corporate immunity for organizational wrongdoing, and may be imposed in a variety of situations. If a business is indistinguishable from its owners in practical terms, courts will not allow owners to benefit from limited liability.

If a corporation is formed for fraudulent purposes, courts will allow recourse to the owners.

If a business fails to follow corporate formalities in areas such as record-keeping and decision-making procedures, a court may impose liability on the individuals controlling the business.

The potential for personal liability encourages businesses to observe legal requirements and to avoid damage to third parties.

Q: What services do you offer to corporations?

A: For initial set-up of a corporation, we consult with the client about best practices, corporate form and maintenance, any contracts or other binding documents used or necessary for the performance of the purpose of the business, and then we prepare by-laws, operating agreements, partnership agreements, stock certificates, and all necessary documents for application and approval by the Secretary of State, plus order and assemble your corporate book.

Ratings and Reviews