How To Dissolve A California Corporation

By: Doug Bend So you need to dissolve your California corporation?  You should consult with your attorney and CPA as the steps can vary from company to company, but there are typically twelve steps to dissolve a California corporation. 1.  Approval Of The Board Of Directors. A majority of the board of directors needs to… Read More

By: Doug Bend

So you need to dissolve your California corporation?  You should consult with your attorney and CPA as the steps can vary from company to company, but there are typically twelve steps to dissolve a California corporation.

1.  Approval Of The Board Of Directors.

A majority of the board of directors needs to pass a written resolution approving the dissolution of the corporation.  

2.  Approval Of The Shareholders.

If shares have been issued, a majority of the outstanding shares will also need to approve the company’s dissolution in written resolutions.

3.  Notice of Dissolution To Creditors.

If the company has any creditors, it should provide them with notice of when claims must be submitted for payment to be considered.

4.  Certificate Of Dissolution.

A certificate of dissolution will then need to be filed with the California Secretary of State’s Office. 

5.  Discontinued Registered Agent For Service Of Process Services.

If you are using a third party service provider as the corporation’s registered agent for service of process, you should notify them of the dissolution so you do not continue to get charged for the service.

6. File Declaration Of Closed Business With The City.

If the corporation is registered with a city, most cities require that the business registration be inactivated.  For example, if your corporation is registered to do business in San Francisco, a Declaration of Closed Business would need to be filed.

7.  File An Abandonment Form For Your Fictitious Business Name Statement.

In addition, most jurisdictions require you to file a form notifying the county that you will no longer be using any fictitious business names that you registered. For example, in San Francisco you would need to file a Statement Of Abandonment Of Use Of Fictitious Business Name Statement.

8.  Cancel Any Other Licenses And Permits.

You will also need to cancel any additional licenses or permits, such as your California Seller’s Permit and your registration with the Employment Development Department.

9. Corporate Transparency Act. 

You may need to file a final report with the U.S. Treasury Department’s Financial Crimes Enforcement Network to be in compliance with the Corporate Transparency Act.

10.  IRS Form 966.

Within 30 days of the board of directors approving the dissolution, IRS Form 966 must be filed.

11.  IRS Forms 8594 and 4797.

If the dissolution involves the sale or exchange of corporate assets, IRS Forms 8594 and 4797 may also be necessary.

12.  Final State Tax Return.

You will need to work with your CPA or other tax professional to file a final state tax return.  You will also need to file any delinquent tax returns and pay any owed taxes.

In California, the Franchise Tax Board will continue to assess an annual franchise tax until the corporation has filed a final tax return with the FTB.  You should indicate it is the final return by checking the box that it is the final return and writing “final” on the top of the return.

13.  Final Federal Tax Returns.

Lastly, a final federal tax return needs to be filed for the corporation.  Like the state tax return, you should indicate on the form that it is the final return for the company.

For many companies these are the steps to officially close down a California corporation, but please contact us at (415) 633-6841 or info@bendlawoffice.com to make sure no additional steps are required as each situation is unique.

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.

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What Entrepreneurs Need to Know About Legal Entities

By: Doug Bend Doug Bend was recently interviewed by Leo Manzione on what entrepreneurs need to know about LLCs and corporations. Leo is a Partner and Business Coach with Run Right Consulting. You can view the video here. Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current… Read More

By: Doug Bend

Doug Bend was recently interviewed by Leo Manzione on what entrepreneurs need to know about LLCs and corporations. Leo is a Partner and Business Coach with Run Right Consulting. You can view the video here.

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.

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What is a California Statement of Information And When Does It Need To Be Filed?

By: Doug Bend A Statement Of Information provides information about your legal entity to the California Secretary of State’s Office. For example, it includes who are the officers of your corporation or if there is a Manager for your LLC.  Legal entities are required to file their first Statement of Information within 90 days of registering with… Read More

By: Doug Bend

A Statement Of Information provides information about your legal entity to the California Secretary of State’s Office. For example, it includes who are the officers of your corporation or if there is a Manager for your LLC. 


Legal entities are required to file their first Statement of Information within 90 days of registering with the California Secretary of State’s Office. 


Corporations are then required to file a Statement of Information each year thereafter beginning five months before and through the end of their registration anniversary.

LLCs are only required to file a Statement of Information every other year, beginning five months before and through the end of the month of their registration anniversary. 

The Statement of Information is a public document that can be viewed on the Secretary of State’s website. 

It only takes about 10 minutes to prepare the filing and if all of the information is still the same you can merely check the first box that there has been no change.

In addition, the filing fee is relatively minimal ($20 for LLCs and $25 for corporations), but the failure to timely file the Statement of Information can result in hefty late filing fees.  You are supposed to get a postcard reminder in the mail, but we recommend our clients also set a Google calendar alert to help make sure they do not miss the filing deadline.

If you have any questions or would like our help submitting your Statement Of Information, please do not hesitate to contact us at 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.

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Starting a US Company as a Non-Resident

If you are a non-US citizen or company considering opening a business in the US, there are three primary considerations: (1) U.S. Immigration visa requirements, (2) the legal structure of your business, and (3) how it will impact your personal taxes. To help analyze these three factors we’ve brought in an immigration attorney and a… Read More

If you are a non-US citizen or company considering opening a business in the US, there are three primary considerations: (1) U.S. Immigration visa requirements, (2) the legal structure of your business, and (3) how it will impact your personal taxes. To help analyze these three factors we’ve brought in an immigration attorney and a CPA.

1. U.S. Immigration Considerations

by Dan Roten, a partner at Kaiser and Roten

There are three primary immigration options for starting and running a business in the U.S.

  • E-1 Trade Visa/E-2 Investor Visa

The E visa category allows foreign nationals who are citizens of treaty countries to start businesses in the U.S. There are two types of E visas. The E-1 Visa is for foreign nationals who engage in substantial international trade of goods, services, or technology between their home country and the U.S. The E-2 Visa allows foreign investors to direct and develop a U.S. business in which the investor has either already invested or is in the process of investing substantial funds. E visas are valid for 5 years and E visa holders are admitted to the U.S. for two year periods. The foreign national can renew the E visa indefinitely as long as they continue to maintain an E business in the U.S.

  • L-1 Multi-national Transfer Visas

The L-1 Visa enables foreign companies to transfer managerial, executive, and specialized knowledge employees to a U.S. subsidiary, affiliate, or branch who have been employed at the foreign company for at least one year. If the foreign company wishes to open a new U.S. branch, affiliate, or subsidiary, immigration laws allow for the transfer of one managerial or executive employee to open and manage the new U.S. entity through the initial start-up phase.

  • EB5 Job Creation – Permanent Residency Visa

The EB5 program allows for permanent residency in the U.S. (Green Card) for foreign nationals who invest $1 Million in a new U.S. commercial enterprise (new is considered any business formed after 11/29/1990). The $1 Million investment must directly or indirectly create 10 full-time jobs for U.S. citizens or lawful permanent residents. The foreign investor is given a conditional two-year green card based on the investor’s business plan and then must place all funds at risk and create the required jobs within the two-year conditional period. Once Immigration is satisfied the funds have been invested and the jobs created, the conditions on permanent residency will be removed.

2. The Legal Structure

by Alex King of Bend Law Group, PC

Depending on the state you incorporate in and the type of business you plan to operate, there can be a myriad of options for incorporating your business. The two most popular options are the Limited Liability Company (LLC) and the Corporation. Why do some entrepreneurs choose to form an LLC instead of a corporation, and vice versa? Below are some considerations to help you decide what type of entity might be the best fit for your business.

  • Ownership

The owners of a corporation are shareholders, while the owners of an LLC are members. An LLC is much more a product of contract law, while a corporation is a child of statute. Therefore, it is much easier to create separate classes of ownership within an LLC operating agreement because you can draft the agreement to fit the desired ownership structure. However, unlike a corporation, it can be much harder to set up an equity incentive plan that includes stock options within an LLC. For many startups, especially tech startups that rely on equity compensation to attract talent, this can be a major hindrance.

  • Corporate Formalities

Unlike a corporation, an LLC does not have to hold regular meetings and keep corporate minutes, which reduces the paperwork of maintaining your entity. A corporation must hold annual shareholder and board meetings to elect the board of directors and appoint corporate officers. In California, an LLC must file a statement of information with the Secretary of State every other year, while a corporation must file a statement of information every year.

  • Management

An LLC’s members or managers can manage the company. In contrast, a board of directors handles the management responsibilities, while the corporate officers handle the day-to-day operations.

  • Distributions

A corporation must allocate its distributions in proportion to each shareholder’s ownership share. An LLC, on the other hand, does not necessarily have to allocate its profits or losses in proportion to each owner’s membership interest. Instead, the LLC’s operating agreement (which is subject to certain IRS restrictions against negative capital accounts) can determine the distributive share of gains, losses, deductions, or credits (often referred to as “special allocations”), provided these distributions have “substantial economic effect.”

  • Investment

Entrepreneurs hoping to achieve venture seed funding typically choose the Delaware Corporation. Venture capital firms won’t automatically screen out businesses that are not incorporated in Delaware, but they prefer it due to its friendly corporate governance benefits, ease of dealing with the DE secretary of state, and well known and predictable corporate laws. Furthermore, investors prefer the corporate structure because they often are prohibited from investing in an LLC, which is taxed as a partnership. They prefer a structure that allows the company to freely grant equity compensation to talented new hires without the added hassle that comes with an LLC structure. (For additional Delaware considerations you can check out these two blog posts, here and here.)

3. Taxes

by Chun Wong, principal at Safe Harbor LLP

There are many tax considerations for a non-US citizen holding ownership in a US entity. Here are a few of the big ones.

  • Type of Entity

U.S. business entities are generally classified for U.S. tax purposes as corporations, partnerships, or disregarded entities. Corporations are subject to income taxes themselves (the dreaded “double taxation”). The income of partnerships and disregarded entities (“pass-thru entities”) is generally taxed directly to the owners of those entities.

  • Income Taxes (Federal & State)

U.S. businesses are generally subject to U.S. federal and state income taxes. Federal corporate income taxes are imposed at graduated rates up to a maximum rate of 35%. State corporate income taxes range from 0% to 12%. State income taxes are generally only due to states in which the entity is doing business. Individual federal income taxes are imposed at graduated rates up to 39.6%, and state rates for individuals range from 0% to 13.3%. Individual income taxes are generally imposed on individuals who own interests in pass-thru entities (such as a Limited Liability Company).

  • Withholding / Branch Profits Taxes

The U.S. imposes a 30% withholding tax on certain types of payments to non-U.S. persons (such as dividends, interest, rents, and royalties) and on the U.S. branch profits of foreign corporations. These 30% taxes are generally a second level of U.S. tax (in addition to income taxes).

  • Estate & Gift Taxes

The U.S. imposes estate and gift taxes on nonresident aliens that own property situated in the U.S. For U.S. estate tax purposes, shares in a U.S. corporation are treated as situated in the U.S. Importantly, the estate tax exemption for nonresident aliens is only $60,000 and there is no gift tax exemption for nonresident aliens. There are far fewer estate and gift tax treaties. However, to the extent they exist, they can reduce U.S. gift and estate taxes.

  • State Sales Taxes

Many U.S. states impose sales taxes on goods sold in their state. The threshold of activity that requires a seller to withhold on sales into a state can be quite low. Each individual state must be analyzed to determine whether sales taxes must be withheld.

  • Treaties

Income tax treaties with the U.S. can reduce or eliminate U.S. withholding taxes. Treaties may also prevent U.S. income taxation altogether if a foreign business does not have a permanent establishment in the U.S. Income tax treaties do not apply to the individual states.

  • International Tax Compliance and Organizational Structures

Along with the complex domestic tax issues, there are often even more complex U.S. international tax issues for both outbound and inbound transactions. In choosing the optimal entity choice, international investors or business owners must always align legal, tax, and accounting structures to avoid adverse consequences of foreign-owned U.S. entities, and U.S. companies must also be cognizant of foreign-owned corporations (CFCs). Proper structuring or organization can also create benefits such as deferral of tax and optimal utilization of foreign tax credits or even avoiding triple taxation in some cases. Some of the more common terms of description for U.S. international tax include: controlled foreign corporations, foreign partnerships, FBAR, FATCA, Passive Foreign Investment Company’s (PFICs), Interest Striping, FIRPTA, and anti-inversion. The common descriptors contain many traps and pitfalls for the unwary. Obtaining the advice of attorneys and well-versed tax advisors in advance will often, if not always, result in more beneficial outcomes and eliminate or minimize adverse consequences.

As you can see, one size does not fit all. Crafting a strategic entity can mean a world of difference as your business begins to take off. With so many considerations, it can be immensely helpful to schedule a consultation with each expert as you plan your US company.

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.

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Top 5 Reasons to Consider Converting an LLC to a Corporation

By Tucker Cottingham and Doug Bend *This post originally appeared on Forbes We help launch dozens and dozens of startups each year.  In the vast majority of cases, we form a Delaware C-Corp. However, lately we have seen many startups that formed their own LLC and now need to convert to a corporation. Here are… Read More

By Tucker Cottingham and Doug Bend

*This post originally appeared on Forbes

We help launch dozens and dozens of startups each year.  In the vast majority of cases, we form a Delaware C-Corp. However, lately we have seen many startups that formed their own LLC and now need to convert to a corporation.

Here are the top five reasons you may want to change your company from a Limited Liability Company to a corporation:

1. You want to raise money from VCs

Venture capitalists want to invest in Delaware C-Corps. C-Corps allow investors to create “preferred shares” of stock and provide a consistent legal structure across their portfolios. Some VCs also manage public funds, which are often restricted from investing in LLCs.

2. You want to join a startup accelerator

Accelerators or incubators that take equity often require participants be incorporated as a corporation. Corporations are comprised of shares of stock, which makes it easy to calculate and distribute equity. Additionally, many accelerators view a corporation as an investment-ready vehicle and a symbol of business acumen.

3. You want to give equity to your employees

In a corporation, it is easy to place shares of stock in reserve that the company can later distribute to employees. In an LLC, the members own 100 percent of the company. In order to give equity to a new member, the members must sell a portion of their personal ownership stake to the new member. This personal sale of securities could trigger capital gains tax and create other complications.

4. You want to issue equity on a vesting schedule

It is relatively easy to issue shares from a corporation that is earned over time on a vesting schedule. In contrast, because there are no shares of stock in an LLC, members usually elect to distribute profit interests. However, defining and calculating those profit interests is an expensive endeavor that requires constant monitoring of member capital accounts.

5. You want to follow best practices

Startups should position themselves to easily accept funding and retain top employees. While it may make sense in some situations to veer off the typical path, doing so usually requires explanation. Founders who want to present themselves as in-line with industry practices seek out corporations.

The process for converting from an LLC to a corporation depends on the state in which you originally formed your LLC. Some states (like California) have a fast-track conversion statute that specifically allows for a domestic LLC to convert to a foreign (out of state) corporation. In other states, a conversion may actually require a merger. In both cases, be sure to consult with a tax expert. You want to consider all tax issues prior to drafting your conversion or merger plan.

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.

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Should Your California Professional Corporation Elect To Be Taxed As An S Corporation?

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… 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.

  1.  Tax Advantages of the S 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.

  1.  Disadvantages To Being Taxed as an S Corporation

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.

  1.  Conclusion

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.

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How Many Shares Should You Authorize For Your Delaware Corporation?

When forming a corporation in Delaware you will need to indicate on the certificate of incorporation the total amount of stock the corporation is authorized to issue.  How do you decide how many shares you should authorize? There are two schools of thought on this decision: Only Authorize 5,000 Shares. By March 1st of each… Read More

When forming a corporation in Delaware you will need to indicate on the certificate of incorporation the total amount of stock the corporation is authorized to issue.  How do you decide how many shares you should authorize? There are two schools of thought on this decision:

Only Authorize 5,000 Shares.

By March 1st of each year you will have to file an annual report and pay a franchise tax in Delaware.  The tax is calculated based on the authorized shares for the company by using either the Authorized Shares Method or the Assumed Par Value Capital Method.

The Authorized Shares Method is based on the number of authorized shares and is calculated as follows:

  1.   If the company is authorized to issue 5,000 shares or less the annual franchise tax is $175;
  2.   If the company is authorized to issue 5,001 to 10,000 shares the annual franchise tax is $250; and
  3.  For each additional 10,000 authorized shares the annual franchise tax is increased by an additional $85.  The maximum annual tax under the Authorized Shares Method is $200,000.

You may, therefore, decide to authorize the company to only issue 5,000 shares so you pay the minimum amount of Delaware franchise tax each year ($175).

Authorize Millions of Shares.

The second school of thought is to authorize millions of shares, typically 10,000,000 shares.

The rationale is that individuals who receive 1,000,000 shares feel like they are receiving something of greater value. They may be more motivated than individuals who receive 500 shares, even if the shares represent the same percentage of ownership in the company.

In addition, having more shares provides more flexibility in allocating shares on vesting schedules.

The drawback is that in Delaware having more than 5,000 authorized shares results in a higher annual franchise tax.

If you authorize millions of shares, you will most likely calculate the Delaware annual franchise tax using the Assumed Par Value Capital Method.  The calculations under this method can be complicated, but the Delaware Secretary of State’s Office provides a good explanation and examples of how to determine the tax here.

Please contact us at (415) 633-6841 or info@bendlawoffice.com to discuss how many shares you should authorize for your Delaware corporation.

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.

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