The Court Of Public Opinion

Many people considering starting their own business here about various business entities, but don?t really understand them. Here is an introduction to the corporate entity.

Introduction to the Corporate Entity

Working for yourself is a great thing. It gives you freedom, time and a sense of pride and accomplishment. While it is undisputed that small businesses form the backbone of our economy, many of these small businesses can lead into trouble. While everyone believes they will be an unmitigated successes, the statistics reveal a majority of businesses will fail within two years. This means protecting yourself from the outset an important step.

Incorporating is a way to protect yourself if a business effort fails. Corporations are the oldest form of business entity, which means the laws surrounding them are well-established. In the eyes of the law, a corporation in a legal individual. This results in something known as the corporate shield against liability. If a corporation gets sued for business activities, the parties suing are restricted to recovering against the business. They cannot also name the shareholders. Let?s look at a practical example.

Microsoft if a publicly traded corporation, to wit, you and I can buy shares on the stock exchange. This effectively means that we are owners of the corporation, although our ownership interest is admittedly small. If Microsoft gets sued, we cannot be named in the lawsuit. If the suing parties win, they cannot recover against us personally, to wit, they can?t come for our home or bank account. The only option they have is to go after the bank accounts and assets of Microsoft, the corporation.

There are two exceptions where a corporation does not provide a shield against action to its shareholders. If I start a corporation and then pursue criminal activities, I get no protection. This is what happened to the individuals at Enron. Second, a corporation does not provide protection if I misuse it. This occurs when I intermingle my personal finances with it, conduct no real business and so on. This second situation is very hard to prove for a suing party.

As to the nuts and bolts of a corporation, the process is fairly simple. The corporation is formed by filing Articles of Incorporation with the Secretary of State for your location. The corporation is guided by something called its bylaws, which essentially state how corporate business will be conducted. The owners of shares in a corporation are known as shareholders. When corporate business is undertaken, a board of directors meets to discuss it and pass resolutions. The board members are elected by the shareholders.

When starting a business, it is important that you take steps to protect yourself. A corporation is a solid choice.

Gerard Simington is with www.findanattorneyforme.com – an online attorney directory.

It could be said that Delaware incorporation is a kind ubiquitous process of forming incorporation, for both; people living in US or abroad. For instance, Delaware incorporation is advantageous to companies who intend to offer their shares to the public. Delaware incorporation is definitely much easier and beneficial for businesses when compared to the other states, because of all these contributing factors. Another benefit of Delaware incorporation is Delaware’s extensive and often easily interpretable law. Delaware incorporation is also advantageous because shareholders and directors can make decisions by unanimous written consent in place of formal meetings.

Delaware Incorporation is also a great resource for companies seeking venture funds or an acquirer. Delaware incorporation is favored by sophisticated investors and may broaden corporate opportunities. Another reason for favoring Delaware incorporation is the efficiency of the Delaware Secretary of State and the quality of Delaware judges in handling corporate lawsuits. Delaware Incorporation can really be advantageous as compared to many other states.

Businesses chose Delaware not for one single reason, but because they provide a complete package of incorporations services. The Delaware General Corporation Law is the most advanced and flexible business formation statute in the nation. The Delaware Court of Chancery is a unique 210 year old business court that has written most of the modern U.S. corporation case law. Delaware’s State Government is business-friendly and accessible, and the Division of Corporation is a model state-of-the-art. These factors have all contributed to making Delaware a premier legal home to companies around the world.

You don?t have to be a Delaware resident, but Delaware law requires every corporation to have and maintain a Registered Agent in the State who may be either an individual resident, a domestic corporation, or a foreign corporation authorized to transact business in Delaware whose business office is identical with the corporation’s registered office. You can pay a fee of approximately $99.00 for resident agent services offered by most incorporators.

You don?t need an attorney to perform a Delaware incorporation, but you should contact an attorney concerning legal matters.

Delaware corporate laws allow more flexibility in conducting businesses. Some additional benefits of a Delaware incorporation are:

?Delaware has a separate and highly-respected business court known as the Delaware Court of Chancery. The court protects corporations in Delaware so that they can focus more on their business operations and reasonable litigations/disputes.

?The costs of incorporation filing and franchise tax fees in Delaware are low.

?Delaware has no minimum requirement to open a business bank account. Most states require at least $1000.00 in an account to operate a business.

?Delaware incorporation allows privacy and anonymity of company’s Director, Shareholder, or Officer.

?In a Delaware incorporation the business owner can be all of the officers (director, shareholder, or officer) of a Delaware corporation him/herself.

?Business entities or business corporations that incorporate in Delaware but do not operate in the State of Delaware do not have to pay state income tax.

?Business entities that incorporate as Delaware corporations and LLCs are entitled to the advantages of asset protection. This means company’s assets or company debts are separated from your personal assets.

?Delaware has no sales or personal property tax.

More than 695,000 businesses have their legal home in Delaware, including more than half of all U.S. publicly traded companies, and 60% of the Fortune 500. This may be why Delaware is called the Incorporating Capital of the World.

In summary, many businesses choose Delaware incorporation because:

?The Delaware General Corporation Law is the most advanced and flexible business formation statute in the nation. The Delaware business Court of Chancery has written most of the modern U.S. corporation case law.

?Delaware’s State Government is business friendly and accessible.

?Delaware’s legal system has been ranked No. 1 in the nation for the fifth consecutive year. That alone warrants considering a Delaware incorporation.

?Shareholder, member or beneficial ownership information is not public according to current Delaware business entity statutes. Delaware corporations are required to file a complete annual franchise tax report with names and addresses of all directors and the name and address of the officer signing the report. Effective January 1, 2007 all Delaware business entities will be required to provide to the registered agent the name of a natural person, a business address and a business telephone who will be the communications contact for the entity.

?Delaware companies that do not operate their business within the state do not file Delaware state corporate income tax returns. There are no taxes on Delaware capital shares or stock transfers or state inheritance tax on stock held by non-residents of Delaware.

Gust A. Lenglet is an accountant and financial advisor for many years. He is President and CEO of HBS Financial Group, Ltd. and offers online tax filing as well as income tax articles and information.

Most states make forming a corporation relatively painless by providing forms for practically everything. The bylaws of the corporation, however, are an area you don?t want to rely on a form.

What Are Bylaws?

Bylaws are the technical rules that govern how a corporation will be run. They are a private document for the corporation and are not filed with any government entity. The purpose of the bylaws is to set out how things such as meetings, voting and share transfer will occur with the business.

Provisions

Typically, the bylaws will be the biggest document in your corporate book. If you are a single shareholder entity, they tend to be fairly straightforward since there isn?t really any dispute possibility unless you have a split personality. If there are two or more shareholders, however, the document is going to be a key item because it is going to detail voting rights and so on.

Typically, the bylaws of a corporation will cover the following specific issues:

1. Board of Director Meetings ? When, where and how meetings will be conducted.

2. Notice of Meetings ? The form, time and how notice must be given to board members.

3. Quorums ? Before a board can issue resolutions on corporate business, a certain percentage of board members must be present. This ?Quorom? is set out in the bylaws.

4. Annual Meetings ? The bylaws typically detail when and where the annual meeting of the entity will occur.

5. Special Meetings – The process by which special board meetings may be called when an issue arises that requires the immediate attention of the board.

6. Voting Rights ? Language detailing the voting rights of shareholders and board members in relation to passing or defeating resolutions.

7. Share Transfer Rights ? Language detailing share transfer issues such as right of first refusal and so on.

8. Directors ? Language detailing how many board members there will be, the length of their term, compensation, etc.

9. Amendment ? The process by which the bylaws can be amended to reflect the evolution of the business.

10. Removal ? Language detailing when and how a board member can be involuntarily removed.

There are numerous other provisions that can and probably should go into the bylaws of a corporation. Make sure to discuss them with your attorney.

Richard A. Chapo is a San Diego business lawyer with http://www.sandiegobusinesslawfirm.com – providing legal services and legal advice to businesses in San Diego, California.

After you have decided that incorporating is beneficial for your business, some people consider incorporating in states outside of their home state. Most notably, Nevada has been promoted by many ?incorporating services? as having incredible benefits as opposed to the client?s home state. Other states such as Delaware and more recently Wyoming have also received consideration for incorporating. In some cases, depending on the facts of your business, there are some benefits in forming an out-of-the-home-state corporation in states such as Nevada. However, in the majority of cases the benefits of forming a Nevada corporation is simply a myth and will often be more expensive and troublesome than filing in the company?s home state.

Law of the Land: Foreign Entities

This may be a surprise to many, typically, corporations will be governed under California law despite being incorporated in Nevada. Let?s assume you do file a Nevada, yet you operate all of your business in California. Under this scenario, you are deemed to be a ?pseudo foreign? corporation. If the corporation is a pseudo foreign corporation, California law in many areas will supersede the law of the state where the company was incorporated in. (See California Corporation Code ?2115(b)). Therefore, for companies entirely based in California and doing business in California, practically all of the claimed benefits of incorporating in Nevada are out the window. It should be noted that if a Nevada corporation operating in California fails to qualify as foreign corporation, it may be subject to a number of sanctions. (See California Corporation Code ??2203, 2258, 2259).

Nevada v. California

The benefits typically touted by a Nevada corporation are the following: lower costs; tax savings; and greater privacy. But is any of it true? Below we will discuss some of these issues.

Expense: Contrary to what many people believe, it is more expensive to file in Nevada than in California. Here are some of the additional expenses: the initial filing fee is more; the Statement of Information is much more; you will be required to file a Statement and Designation of Foreign Corporation in California; and you will be required to hire a Nevada Agent for Service of Process each year. For large clients, the additional cost (of approximately $500 more) is not a big consideration, but for smaller businesses every dollar counts.

Taxes: The tax ramifications is usually one of the most important reasons for deciding whether to incorporate and where. Nevada?s secretary of state website says that Nevada has none of the following: (1) corporate income tax; (2) taxes on corporate shares; (3) franchise tax; and (4) no personal income tax. So how does this actually play out? The bottom line is if you are doing business anywhere other than Nevada, you will still be required to pay taxes in the state where you are conducting business. So if you are operating and generating business in Nevada, this can be a huge benefit, otherwise if you are generating money in California, you are required to pay California?s taxes. Furthermore, any income earned by a Nevada business and paid out to a resident of another state will be subjected to the taxation of that state. Therefore, the income passed on to the shareholders of an S-Corporation in Nevada will be taxed at both the federal level and in the state where the shareholder lives (this also applies to other pass-through entities such as LLCs).

Thus, as indicated in the paragraph above, you will not be able to legally gain the Nevada tax benefits if you form a Nevada pass-through entity such as a S-corporation or LLC. However, a Nevada C-corporation can avoid the state taxes (remember that a C-corporation is subjected to double taxation at the federal level). The way a Nevada C-corporation operating in California could be structured to minimize its taxes is as follows: As a C-corporation, your company will be stuck with double taxation at the federal level. Rather than withdrawing the profits from the corporation, keeping the profits within the Nevada C-corporation will allow it to grow free of any state taxes.

Limited Liability Protection: Whether your company has greater limited liability protection in Nevada versus other states is debatable. Many believe that Nevada state precedence makes piercing the corporate veil much more difficult. Whether this is true will depend on the facts of your case and how good your lawyer is, since the test for piercing the corporate veil in both states are substantially similar (both California and Nevada require a showing that a substantial injustice or perpetuation of a fraud occurred). However, in regards to directors and officer liability, Nevada law provides that directors and officers are not liable for any damages resulting from a breach of fiduciary duty unless the breach involved intentional misconduct, fraud, or a knowing violation of the law. (See Nevada Rev. Stat. ?78.138(7)).

Jurisdiction: This can be good or bad for your company. If you are operating in California but are a Nevada corporation, the question is which state law takes precedence? As indicated above, in most circumstances, your corporation will be deemed a pseudo foreign corporation and thus be subjected to California?s laws. So if you are sued, the lawsuit would likely occur in the California. However, if the plaintiff attempts to pierce the corporate veil, the lawsuit may occur in Nevada, thus the plaintiff would have to face additional expenses to travel to Nevada to try the case. Likewise, you as the defendant would be required to go to Nevada as well. However, if you enter into contracts with others, your contract can include ?choice of law jurisdiction? provisions, which require that the contract falls under the laws of Nevada. Similarly, ?choice of forum? provisions in your contracts will require your case to be heard in Nevada.

Privacy: Nevada is generally more restrictive than most states in sharing information about its corporations with other states and the government. As such, many celebrities and high profile individuals seeking anonymity often end up incorporating in Nevada. However, both California and Nevada do not require its stockholders to be listed in public records. Further, Nevada does not share information with the IRS unlike California. But if a Nevada corporation conducts business as a pseudo foreign corporation in California, it would be required to disclose the information to the IRS.

? 2006 Michael N. Cohen, Esq.

This article is not intended as a substitute for legal or tax advice. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. You should consult with an attorney familiar with the issues and the laws.

Michael N. Cohen, Esq. is a business and intellectual property attorney and is the principal of the Law Office of Michael N. Cohen, P.C., located in Beverly Hills, California. For more information, go to http://www.patentlawip.com or contact Mr. Cohen at 310-288-4500.

Regardless of the type of business you conduct, there is a significant risk of being sued in our litigious society. Lawsuits can range from claims of negligence to defective products to disputes with employees. Incorporating is a means of guarding against these potential threats.

Single Incorporation – Protecting Your Personal Assets

Incorporating your business is a method for creating a legal wall between your personal assets and business. Any judgment against your business will not impact your personal assets. While your home, savings, stocks, etc., are protected, what happens to your business? If a judgment is rendered against your business, the business assets are as good as gone. This doesn?t have to be the case.

Double Incorporation Strategy – Protect Your Business Assets

Many businesses can benefit from pursuing a double incorporation strategy. The strategy is designed to address the situation where a business has significant assets that are exposed to litigation risk. If you incorporate your business, it is all well and good that your personal assets are not at risk. But what if your business has a number of high value assets such as manufacturing machinery, office equipment, popular domain name, custom software or other items? Merely incorporating your business will not protect these assets because they are owned by the business entity. Since a successful lawsuit would result in a judgment against the business entity, all assets of the business could be seized as part of the judgment. In short, you lose your machinery, office equipment, intellectual property or any other item of tangible value. The double incorporation strategy prevents this scenario.

As the name suggests, the double incorporation strategy involves the creation of two business entities. The first is your at risk business that interacts with your customers or clients. The second entity, a holding corporation, is then created to own the valuable assets of your business. This holding corporation then leases the relevant business assets to your at risk entity. If the at risk entity is sued, the holding company merely recovers its assets and the plaintiff is forced to settle for pennies on the dollar because the at risk entity has few assets. In essence, the plaintiff wins the battle, but loses the war.

Most people know that a business entity can be used to create a protective shield for their personal assets. If your business has high value assets, now you can use this double incorporation strategy to protect those assets as well.

Richard Chapo is the lead attorney for the law firm http://www.SanDiegoBusinessLawFirm.com – a firm providing legal advice to California businesses. This article is for general education purposes and does not address every facet of the subject matter. Nothing in this article creates an attorney-client relationship

Regardless of the type of business you conduct, there is a significant risk of being sued in our litigious society. Lawsuits can range from claims of negligence to defective products to disputes with employees. Incorporating is a means of guarding against these potential threats.

Single Incorporation – Protecting Your Personal Assets

Incorporating your business is a method for creating a legal wall between your personal assets and business. Any judgment against your business will not impact your personal assets. While your home, savings, stocks, etc., are protected, what happens to your business? If a judgment is rendered against your business, the business assets are as good as gone. This doesnt have to be the case.

Double Incorporation Strategy – Protect Your Business Assets

Many businesses can benefit from pursuing a double incorporation strategy. The strategy is designed to address the situation where a business has significant assets that are exposed to litigation risk. If you incorporate your business, it is all well and good that your personal assets are not at risk. But what if your business has a number of high value assets such as manufacturing machinery, office equipment, popular domain name, custom software or other items? Merely incorporating your business will not protect these assets because they are owned by the business entity. Since a successful lawsuit would result in a judgment against the business entity, all assets of the business could be seized as part of the judgment. In short, you lose your machinery, office equipment, intellectual property or any other item of tangible value. The double incorporation strategy prevents this scenario.

As the name suggests, the double incorporation strategy involves the creation of two business entities. The first is your at risk business that interacts with your customers or clients. The second entity, a holding corporation, is then created to own the valuable assets of your business. This holding corporation then leases the relevant business assets to your at risk entity. If the at risk entity is sued, the holding company merely recovers its assets and the plaintiff is forced to settle for pennies on the dollar because the at risk entity has few assets. In essence, the plaintiff wins the battle, but loses the war.

Most people know that a business entity can be used to create a protective shield for their personal assets. If your business has high value assets, now you can use this double incorporation strategy to protect those assets as well.

More articles at article database

Many people considering starting their own business here about various business entities, but dont really understand them. Here is an introduction to the corporate entity.

Introduction to the Corporate Entity

Working for yourself is a great thing. It gives you freedom, time and a sense of pride and accomplishment. While it is undisputed that small businesses form the backbone of our economy, many of these small businesses can lead into trouble. While everyone believes they will be an unmitigated successes, the statistics reveal a majority of businesses will fail within two years. This means protecting yourself from the outset an important step.

Incorporating is a way to protect yourself if a business effort fails. Corporations are the oldest form of business entity, which means the laws surrounding them are well-established. In the eyes of the law, a corporation in a legal individual. This results in something known as the corporate shield against liability. If a corporation gets sued for business activities, the parties suing are restricted to recovering against the business. They cannot also name the shareholders. Lets look at a practical example.

Microsoft if a publicly traded corporation, to wit, you and I can buy shares on the stock exchange. This effectively means that we are owners of the corporation, although our ownership interest is admittedly small. If Microsoft gets sued, we cannot be named in the lawsuit. If the suing parties win, they cannot recover against us personally, to wit, they cant come for our home or bank account. The only option they have is to go after the bank accounts and assets of Microsoft, the corporation.

There are two exceptions where a corporation does not provide a shield against action to its shareholders. If I start a corporation and then pursue criminal activities, I get no protection. This is what happened to the individuals at Enron. Second, a corporation does not provide protection if I misuse it. This occurs when I intermingle my personal finances with it, conduct no real business and so on. This second situation is very hard to prove for a suing party.

As to the nuts and bolts of a corporation, the process is fairly simple. The corporation is formed by filing Articles of Incorporation with the Secretary of State for your location. The corporation is guided by something called its bylaws, which essentially state how corporate business will be conducted. The owners of shares in a corporation are known as shareholders. When corporate business is undertaken, a board of directors meets to discuss it and pass resolutions. The board members are elected by the shareholders.

When starting a business, it is important that you take steps to protect yourself. A corporation is a solid choice.

More articles at article database

It could be said that Delaware incorporation is a kind ubiquitous process of forming incorporation, for both; people living in US or abroad. For instance, Delaware incorporation is advantageous to companies who intend to offer their shares to the public. Delaware incorporation is definitely much easier and beneficial for businesses when compared to the other states, because of all these contributing factors. Another benefit of Delaware incorporation is Delaware’s extensive and often easily interpretable law. Delaware incorporation is also advantageous because shareholders and directors can make decisions by unanimous written consent in place of formal meetings.

Delaware Incorporation is also a great resource for companies seeking venture funds or an acquirer. Delaware incorporation is favored by sophisticated investors and may broaden corporate opportunities. Another reason for favoring Delaware incorporation is the efficiency of the Delaware Secretary of State and the quality of Delaware judges in handling corporate lawsuits. Delaware Incorporation can really be advantageous as compared to many other states.

Businesses chose Delaware not for one single reason, but because they provide a complete package of incorporations services. The Delaware General Corporation Law is the most advanced and flexible business formation statute in the nation. The Delaware Court of Chancery is a unique 210 year old business court that has written most of the modern U.S. corporation case law. Delaware’s State Government is business-friendly and accessible, and the Division of Corporation is a model state-of-the-art. These factors have all contributed to making Delaware a premier legal home to companies around the world.

You dont have to be a Delaware resident, but Delaware law requires every corporation to have and maintain a Registered Agent in the State who may be either an individual resident, a domestic corporation, or a foreign corporation authorized to transact business in Delaware whose business office is identical with the corporation’s registered office. You can pay a fee of approximately $99.00 for resident agent services offered by most incorporators.

You dont need an attorney to perform a Delaware incorporation, but you should contact an attorney concerning legal matters.

Delaware corporate laws allow more flexibility in conducting businesses. Some additional benefits of a Delaware incorporation are:

Delaware has a separate and highly-respected business court known as the Delaware Court of Chancery. The court protects corporations in Delaware so that they can focus more on their business operations and reasonable litigations/disputes.

The costs of incorporation filing and franchise tax fees in Delaware are low.

Delaware has no minimum requirement to open a business bank account. Most states require at least $1000.00 in an account to operate a business.

Delaware incorporation allows privacy and anonymity of company’s Director, Shareholder, or Officer.

In a Delaware incorporation the business owner can be all of the officers (director, shareholder, or officer) of a Delaware corporation him/herself.

Business entities or business corporations that incorporate in Delaware but do not operate in the State of Delaware do not have to pay state income tax.

Business entities that incorporate as Delaware corporations and LLCs are entitled to the advantages of asset protection. This means company’s assets or company debts are separated from your personal assets.

Delaware has no sales or personal property tax.

More than 695,000 businesses have their legal home in Delaware, including more than half of all U.S. publicly traded companies, and 60% of the Fortune 500. This may be why Delaware is called the Incorporating Capital of the World.

In summary, many businesses choose Delaware incorporation because:

The Delaware General Corporation Law is the most advanced and flexible business formation statute in the nation. The Delaware business Court of Chancery has written most of the modern U.S. corporation case law.

Delaware’s State Government is business friendly and accessible.

Delaware’s legal system has been ranked No. 1 in the nation for the fifth consecutive year. That alone warrants considering a Delaware incorporation.

Shareholder, member or beneficial ownership information is not public according to current Delaware business entity statutes. Delaware corporations are required to file a complete annual franchise tax report with names and addresses of all directors and the name and address of the officer signing the report. Effective January 1, 2007 all Delaware business entities will be required to provide to the registered agent the name of a natural person, a business address and a business telephone who will be the communications contact for the entity.

Delaware companies that do not operate their business within the state do not file Delaware state corporate income tax returns. There are no taxes on Delaware capital shares or stock transfers or state inheritance tax on stock held by non-residents of Delaware.

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