Archive for the ‘Business Entities’ Category
Setting up a corporation is just the first step in creating a separate legal entity that can, among other things, shield shareholders from personal liability for actions of the corporation and limit their exposure to the amount of capital invested in the business.
But courts, including those in California, may ignore the corporate structure and hold shareholders personally liable for corporate debts and obligations if the “alter ego” doctrine comes into play. The alter ego doctrine permits piercing of the corporate veil if factors exist that make it difficult to maintain the fiction that a corporation and its shareholder are separate entities, and it would be inequitable not to do so. Courts look at various facts in making this determination. These include (a) commingling of personal and corporate funds, (b) failure to maintain minutes of meetings and
adequate corporate records, and (c) failure to capitalize the corporation with sufficient assets, among others.
While the formalities for maintaining the separate identity of an LLC may be fewer than those required for a corporation, formalities still exist.
With respect to California corporations, “[C]ourts have followed a liberal policy of applying the Alter ego doctrine where the equities and justice of the situation appear to call for it . . .”. First Western Bank and Trust Co. v. Bookasta (1968) 267 Cal.App.2d 910.
An experienced attorney can not only help you create a corporation or other legal entity for your business, but assist you in operating your entity in accordance with the formalities necessary to protect shareholders from personal liability for corporate debts and obligations.
Schein & Cai can help you determine whether to incorporate, form an LLC or other entity for your business and help ensure that corporate formalities are followed on an ongoing basis. Call us for a free consultation.
Find us at www.sacattorneys.com
Offshore corporations have long been a choice of companies interested in an economic option for their business. There are four top reasons to establish an offshore company:
1. Tax Savings – Offshore companies can provide a portion of an overall taxation reduction strategy for individuals or entities. When combined with an offshore bank account, for example, an offshore company can reduce individual taxes. If the offshore corporation is created in a low or no tax jurisdiction, it allows a business to obtain profits easier. Read the rest of this entry »
When starting a business, the first issue (other than the name of the business) facing the owner is what type of business entity he or she should choose. The most common forms of business entities in California are Corporation (C, S, and Non-profit Corporation), Limited Liability Company (LLC), Partnership and Sole proprietorship. Read the rest of this entry »