Operating a Corporation/LLC Archives - Page 9 of 10

I want to convert my LLC into a corporation. Can I? How? Vice versa?

Depending on what state your company is located in, this could be as simple as filing a single form with that state’s governing agency. In some states, this may be more complicated, but there’s always a way. Keep in mind, by converting the entity, you will likely have to get it a new Tax ID Number, since it’s now a different entity. If there’s a partnership agreement, or certain rights with respect to voting or capital return, be careful about property transferring all of that over. Consult with tax and legal counsel.

July 19th, 2015|0 Comments

What is a Statement of Information (an SOI)?

California, and many other states, require an annual or biannual report filing detailing the names and addresses of the directors and officers (or managers in the case of an LLC). It’s part of the social contract entities have with the public – liability protection in return for transparency. Not filing can lead eventually to suspension of the corporate or LLC charter, thereby exposing the entity’s owners to personal liability. In California, the first one is due within 90 days of filing the Articles of Incorporation or Articles of Organization.

July 19th, 2015|0 Comments

Can I be the CEO, CFO and Secretary of my corporation?

Yes. It’s not always ideal, especially if you’re looking at growing or bringing in investors, but the law allows it. And please stop calling it "my corporation". The more you do that, the more you expose yourself to personal liability. Think of it as separate and apart from you, and the rest of the world will too.

July 19th, 2015|0 Comments

Does my corporation have to have more than one director?

Not necessarily. In California, the default rule is one director per shareholder, and if there are more than 3 shareholders, then 3 minimum. You can always have more than you need.

July 19th, 2015|0 Comments

What’s the bare minimum I need to operate as a corporation?

In terms of capital (i.e., cash money), it depends on your business; one common rule of thumb is 3 months’ worth of cash to run the business. If you mean compliance, you’ll need annual minutes and, in California, an annual filing with the Secretary of State. You’ll also need to memorialize extraordinary transactions, like leases and financings, in your corporate records. Without minutes and/or consents, you could expose the shareholders personally to liability.

August 8th, 2015|0 Comments

What are corporate minutes?

Corporate minutes memorialize actions voted on and authorized by the corporation’s shareholders and directors at duly noticed meetings. Keeping these minutes up to date is critical to maintain the corporation’s liability shield, because without them, a claim could be made that the corporation as an entity separate from its shareholders wasn’t being treated seriously and [...]

February 19th, 2020|0 Comments

What’s the bare minimum I need to operate as an LLC?

The answer to this is similar to the answer for the same question for corporations. However, with LLCs, unless the members require it in their operating agreement, there’s no requirement for meetings and consents, unless the written consents are required by a third party, like a bank. This is the reason some folks try to use LLCs instead of corporations.

August 10th, 2015|0 Comments

Do I need a separate bank account for my corporation or LLC?

Remember, one point of the entity is to keep your business separate from your personal, thereby protecting the personal assets. So, the answer is going to be yes. As such, that will also involve obtaining a tax identification number.

August 10th, 2015|0 Comments

Do I have to pay directors and officers?

No. But depending on the directors' background, level of experience, and the value they bring to your business, you may want to consider some kind of compensation or even equity. Not only are they worth it, but you’ll get a commitment from them that won’t otherwise exist if they’re just donating time and expertise. Specifically with respect to officers, there is an expectation of payment.

August 10th, 2015|0 Comments

What’s the difference between a member in an LLC and a shareholder in a corporation?

I’m proud of you for asking such a clever question. Makes me wish the answer was just as thoughtful. Alas, it’s not: there’s no difference. A shareholder in a corporation, and a member in an LLC, are both nomenclature for defining owner. In fact, LLCs are flexible enough such that they can be structured to look like corporations, so their owners may also end up being “shareholders”. All that said, members in LLCs and shareholders in corporations are governed by different statutes, so their respective rights may differ.

August 10th, 2015|0 Comments

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