Rose Rose Productions did an amazing job of producing this video on why we love helping small business owners and startups. We are very fortunate to spend our days helping entrepreneurs start and grow their businesses.
Rose Rose Productions did an amazing job of producing this video on why we love helping small business owners and startups.
We are very fortunate to spend our days helping entrepreneurs start and grow their businesses.
Read LessShould your company elect to be taxed as an S corporation? In California, certain professions that require a state license are prohibited from forming a limited liability company or a traditional corporation and instead must incorporate as a professional corporation. By default, California professional corporations are taxed as C corporations. As a C corporation, your… Read More
Should your company elect to be taxed as an S corporation? In California, certain professions that require a state license are prohibited from forming a limited liability company or a traditional corporation and instead must incorporate as a professional corporation. By default, California professional corporations are taxed as C corporations. As a C corporation, your professional corporation would pay federal taxes on its profits, and you would also pay individual taxes if you receive salary, bonuses, or dividends from the corporation.
By electing to be taxed as an S corporation, your professional corporation would instead be a pass-through tax entity, like an LLC or a partnership. Electing to be taxed as an S corporation may also allow you to pass losses from the business to your personal income tax return, where you can use the losses to offset income that you may have from other sources.
Finally, if the corporation pays you a “reasonable salary,” you may not be required to pay self-employment taxes on any shareholder dividends you receive in addition to your reasonable salary.
A drawback of electing to have your professional corporation taxed as an S corporation rather than a C corporation is the cost of the premiums for shareholder benefits. In a C corporation, costs like insurance coverage are deductible as a business expense. Additionally, the shareholders may not be taxed on the value of the benefits.
Another drawback is the restrictions on who can be a shareholder of an S corporation. For example, S corporations may not have shareholders who are non-resident aliens.
Finally, S corporations may only issue one class of stock whereas C corporations can have different classes of stock that have different rights and liquidation priorities.
You should consult with your CPA or tax professional to make sure being taxed as an S corporation is the best fit for your professional corporation. However, for most California professional corporations, an S corporation election is likely to provide the most tax savings.
Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.
Read LessIn California, certain professions are prohibited from forming a limited liability company or a traditional corporation and must instead incorporate as a professional corporation. Professions that are required to be professional corporations include many of those that require a state license, such as dentists, certified public accountants, doctors, veterinarians, lawyers, optometrists, marriage and family therapists,… Read More
In California, certain professions are prohibited from forming a limited liability company or a traditional corporation and must instead incorporate as a professional corporation.
Professions that are required to be professional corporations include many of those that require a state license, such as dentists, certified public accountants, doctors, veterinarians, lawyers, optometrists, marriage and family therapists, psychiatrists, and psychologists.
Professional corporations have more restrictions than traditional corporations.
For example, with a few limited exceptions, officers, directors, and shareholders of a professional corporation must be licensed to conduct the professional activity.
In addition, professional corporations are subject to the regulations of the applicable governmental agency overseeing the profession in which the professional corporation is engaged. For example, some agencies have restrictions on what you can name a professional corporation and require specific language to be included in the professional corporation’s bylaws regarding who can own shares or be officers of the professional corporation.
Professional corporations are also subject to specific rules in the California Business and Professions Code. For example, only licensed persons can be shareholders of a professional corporation.
While professional corporations do not provide liability protection for malpractice, you could have limited liability protection for claims not based on malpractice, such as a slip and fall accidents.
In addition, forming a professional corporation may allow you to deduct payments for benefit plans, such as disability or health plans and group term insurance.
Finally, you should speak with your CPA or other tax professional about whether forming a professional corporation and electing to have it taxed as an S corporation may provide tax savings.
Please contact us at (415) 633-6841 or info@bendlawoffice.com to discuss whether your company is required to be a professional corporation and, if so, the steps necessary to set it up right.
Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.
Read LessWhy should your company have strategic bylaws? California does not require a company to have written bylaws. However, every business should have a set of strategic, written bylaws to optimize company operations and legal protections. Here are 6 reasons why: 1. They are the Company’s Legal Backbone A company’s bylaws provide the legal framework for… Read More
Why should your company have strategic bylaws? California does not require a company to have written bylaws. However, every business should have a set of strategic, written bylaws to optimize company operations and legal protections. Here are 6 reasons why:
A company’s bylaws provide the legal framework for how it operates. This includes the number of people who serve on the board of directors, how to call a board meeting, and the officer positions for the company.
If your company does not have bylaws in place, the laws of California will control how the company is run. It is much better for the owners to determine how the company should operate than to rely on the state’s default.
This is similar to an individual not having a will or trust. If they die, the state’s statutes determine how the individual’s assets are distributed. Instead, each individual should thoughtfully think through how they would like their assets distributed and to set up the legal mechanism to enforce their plan.
Similarly, it is much better for business owners to think strategically about how they would like their company to operate. Relying on state statutes might not always be the best fit for the company. The bylaws then serve as the legal framework that supports the business strategy.
Every company runs into challenges eventually. It is better to consider some of the potential turning points in your company and provide for them in your bylaws. This preemptive approach allows you to determine how you would like the outcomes of these situations to be determined, rather than waiting to make tough decisions when interested parties and passions may create the perfect storm for litigation.
For example, what will happen if there is a legal dispute between the owners? Do you want the company to be tied up in the expense and distraction of litigation or would you prefer arbitration? What happens if one of the owners dies? What if one of the owners wants out of the company?
The bylaws present an opportunity to calmly and objectively reflect on these issues before they occur. It is wiser to answer these types of questions ahead of time and determine what might be the best solutions for your company than to rely on the default rules in the state’s statutes or to try to resolve them when clear heads are less likely to prevail.
One of the primary reasons to form a corporate entity is to possibly have personal limited liability from the potential business debts and judgments against your company.
If a company does not have bylaws and is sued, a plaintiff could try to “pierce the corporate veil” by claiming the company should not be provided with the shield of limited liability protection because its owners did not follow corporate formalities.
In determining whether to pierce the corporate veil, the court would evaluate a number of factors to determine whether your company is legitimate, including whether you have the proper corporate documents and records. By not having bylaws, a business owner is risking not being provided limited liability protection if sued.
Communication and clear expectations are key to any successful relationship including the relationship between business owners. Bylaws clearly lay out how the company will be run which can be crucial in preventing misunderstandings over how the owners expect the company to be managed.
Finally, if you would like to open a business account or apply for loans most banks will require you to provide a copy of your bylaws. In addition, insurance companies may require you to provide a copy of your company’s bylaws before providing certain types of polices.
As a business owner, it is often tempting to cut corners to lower costs. A strategic, thought out set of bylaws should not be one of these corners. Instead, bylaws should be recognized for what they are – one of the wisest investments a business owner can make to ensure the long-term effectiveness of their company.
If you have any questions regarding bylaws or any other business legal issue, please contact us at (415) 633-6841 or info@bendlawoffice.com.
Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.
Read LessBusiness owners often want to incorporate in Delaware, but are unsure if it is possible without having a physical office in the state. You do not need a physical location to incorporate in Delaware, but you do need to have a registered agent for service of process. A registered agent for service of process is where… Read More
Business owners often want to incorporate in Delaware, but are unsure if it is possible without having a physical office in the state.
You do not need a physical location to incorporate in Delaware, but you do need to have a registered agent for service of process. A registered agent for service of process is where service would be delivered if your company is sued.
BizFilings ($220/year) and a number of other companies provide a registered agent for service of process in Delaware.
If you need a registered agent for service of process in California, our firm charges $99/year.
It is important to remember that even if you incorporate in Delaware, you will also need to register your business in each state where you are doing business. Most states have a very low registration threshold because they want to know which businesses are operating in their state and maximize revenue from franchise taxes.
You can read about the pros and cons of incorporating in Delaware. If you have any questions regarding incorporating in Delaware or any other business legal issues, please contact us at (415) 633-6841 or info@bendlawoffice.com.
Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.
Read LessAs a business owner, you face many challenges and expenses. One of the most important decisions is how to meet the legal requirements of your business while balancing the need to preserve time and capital. Below is a list of tips you may want to consider when selecting a qualified, trusted business attorney. 1. … Read More
The best method for selecting a great business attorney is to consult other business owners and your trusted advisors. Does a business owner you trust have an attorney they recommend? Does your CPA, financial planner, or banker have an attorney they know and trust? An attorney who has the money or aptitude to have their website on the first page of a Google search is not necessarily the attorney who is best suited to help your business.
Once you have a list of attorneys, your biggest concern should be whether they are qualified to handle your legal needs. An attorney who is fresh out of law school may be inexpensive, but it may be worthwhile to pay more for an attorney who has experience with your industry or navigating the nuances of your city and state. For example, a family law attorney may be well qualified to handle a child custody dispute, but they may not be the best attorney to set up a new business entity. It is important to keep in mind that attorneys are business owners as well and some are reluctant to turn away new business – even if they are not particularly well qualified to handle your legal needs.
How can you determine if an attorney is well qualified to handle your legal needs? The first step is to review the attorney’s biography. Do they seem like they would be a good fit for your company’s legal matters? If so, contact the attorney and interview them for the position for which they are “applying” – one of the most important roles in your company. Some questions you may want to ask include:
You should also ask the attorney specific questions that are important to your legal needs to determine if they have the necessary background knowledge. For example, if you are setting up a new company, you may want to ask the attorney to describe the difference between an S corporation and an LLC or how much the annual franchise tax is for a corporation in California. These types of questions can be a good method to gauge the knowledge base of the attorney and whether they are best suited to help your business.
Good business attorneys in the Bay Area typically charge between $275 to $595 per hour. Partners in large law firms can charge as much as $1,200 per hour. This can lead to large, unexpected legal bills. What may seem like a simple legal question can result in you receiving a ten page memo and a $3,000 invoice.
However, some attorneys are willing to offer flat project rates, which can better allow you to budget for your legal needs. An attorney may also be willing to put a cap on the amount they charge for a project. For example, an attorney might say that it typically takes them three to five hours to set up a corporation. If an attorney will not provide a flat rate for the project, they might be willing to agree to a cap that the project will not cost anymore than five times their hourly rate. Having a flat project rate or cap on the legal costs for a project can be key in preventing surprise legal bills.
It is easy to forget that an attorney is a small business owner and may encourage you to buy additional legal services that your business may not immediately need. You should ask the attorney how they would prioritize the timing of the legal projects they recommend. For example, can you pay to set up your company now, but wait to file for a trademark until you see if your business is actually viable?
It is important to not only find an attorney who is reasonably priced and well qualified, but someone you feel comfortable working with. Is the attorney someone you want to develop an ongoing relationship with over the years as your business grows? Will you enjoy interacting with them or will you dread having to contact them?
The attorney should be a member of a trusted group of fiduciary advisors who provide your company with quality advice for a fair price. This team of trusted fiduciaries will vary from business to business, but will often include a business attorney, a CPA, a financial planner, a personal banker, and other individuals who will not only provide you with sound advice, but also genuinely care about the success of your business.
You should meet with several business attorneys. Selecting the right business attorney is extremely important and you should take the time to make the right decision. Most business attorneys provide a free initial consultation. Take that opportunity to meet with several attorneys. You are no doubt very busy, but finding a good fit early on can save dozens of hours down the road. Trust your instincts in determining which business attorney is going to best help your business grow and succeed.
If you have any questions regarding hiring a business attorney or any other business legal issue, please contact us at (415) 633-6841 or info@bendlawoffice.com.
Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.