There’s this misinterpretation that forming a corporation or an LLC is a long and tedious process that is difficult and nerve-wracking. With the right and experienced team by your side, forming your entity will be easy. Our firm has formed over hundreds of entities since the 70’s. Our boutique business law firm does not only handle the formation of the entity, but we also advise clients on when, how, and what type of entity to form, and prepare the necessary legal documents be it a C corporation, S corporation, a Limited Liability Company, a Limited Partnership, or a General Partnership. Should you be planning on forming a new corporation in Los Angeles, consult with the attorneys at Citron and Deutsch today.

1. If you plan to have a number of outside shareholders, form a California C corporation (S Corporations are limited as to who can own stock).
2. In the Articles of Incorporation authorize 30,000,000 shares of common stock, and issue the founders 10,000,000. This will allow you to issue shares to employees in bigger numbers. It also allows for the price per share to be lower.
3. If you plan to raise funding from outside sources, also authorize 20,000,000 shares of preferred stock. This will allow you to have a class of stock on the books for issuance to outside sources of capital. The preferred class of stock will be defined in the negotiations with your capital source(s).
4. File for a City Business License in the city in which you operate.
5. File for a Wholesale Resale Number with the State Board of Equalization if you plan to sell products at retail. This allows you to collect and pay sales tax.
6. File for an Employer ID Number. This is required for you to open your checking account, and to pay employment taxes.
7. Open a checking account at a bank with which you have a good relationship.
8. Set up a Merchant Account (to take credit cards) if you plan to sell at retail or over the Internet.
9. File for a Trademark if you have a product name that you believe will be branded.
10. Check with a patent attorney to see if you have anything that may be protectable.
11. Enter into trade secret and invention assignment agreements with your employees.
12. Carefully think through each of your strategic relationships, what you anticipate from them, and cost and timing.
13. Obtain all of the URLs for your name or any similar name.
14. Obtain business liability insurance, at least $1,000,000 coverage.
15. Develop a Capitalization Table (Cap Table) that shows who owns stock, how many shares they own, what they paid for them, and what percentage of the company they own.

In your dealing with potential partners/shareholders, be sure to take into consideration all of the people you are going to be issuing stock. If you are not careful you wind up giving away so much that there is little left for you.

Once the corporation and/or LLC is formed, our firm works on assisting in keeping the entity up to date. We are often asked, what do we need to do each year to keep our corporation up to date.

1. File a Statement by Domestic Stock Corporation with the Secretary of State. There is a $250.00 annual filing fee. This lists your officers and directors with the State of California. The form is sent to you by the Secretary of State each year. If it is not filed on time, there is a $250.00 fine, plus interest until paid.
2. Hold an annual meeting of your shareholders and an annual meeting of your directors. At the shareholder meeting, you elect the directors. At the director meeting, you elect the officers. If this meeting is not held each year, there is a chance that you could have the “corporate veil” pierced in a lawsuit, which could make the shareholders liable for corporate obligations.
3. Another reason for having your minutes up to date is the Internal Revenue Service. Your commitments to retirement plan financing, including a 401(k) plan or profit-sharing or defined benefit plan have to be approved by the board of directors before the end of each fiscal year. If they are not approved, they could be disallowed by the IRS.
4. There are often significant events in the life of your company which should be documented both to show that the corporation approved the action, and to prevent vendors from claiming that it is a personal activity/obligation rather than a corporate activity/obligation. Reminder, all corporate contracts should be signed in the name of the corporation, not in your personal name. To do this you put the full name of the corporation above the signature line, and put your name and office in the corporation below the signature line. And, approve the transaction in corporate minutes.
5. There are some critical issues that corporate minutes need to cover, including changes to the by-laws, approving the issuance of stock, approving borrowing of money or buying significant assets, signing on new leases, major employment agreements, buy-sell agreements, and promises made between the shareholders, officers, and directors of the corporation.
6. If you are uncertain if a specific action should be drawn into the corporate minutes, ask us. If you have past events that have not been documented in corporate minutes, they can be approved now, so long as all of the directors will sign off on the actions. One reason to make sure you have minutes for important matters, is sometimes you have a recalcitrant shareholder or director who does not like what you have done and will not sign-off. If you do it in a timely fashion, there is less likelihood of this occurring.
7. Another item which needs to be completed on an annual basis is the filing of your corporate tax returns, both Federal and State. There is an annual $800 minimum fee with the Franchise Tax Board of the State of California, even if you do no business or lose money. If the company has ceased to do business, there is a formal way to close the doors or dissolve the corporation that needs to be followed. There are actions that your accountant needs to take along with an attorney’s office to make sure liability does not continue to follow you from a closed corporation.
8. We send our corporate clients annual questionnaires on corporate activity. From the returned questionnaire we draft minutes of a board meeting and notice waivers so that actual meetings do not have to be held, so long as all the shareholders and directors sign. If these questionnaires are not returned to us, we cannot do the minutes. If you are one of our corporate clients and you are not sure if your corporate minutes are up to date, please call and ask anyone in our offices to check. We will be happy to resend your corporate questionnaires if necessary.