Articles Posted in Corporations

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AdobeStock_1070496539-300x200Benefit Corporation and Social Purpose Corporation—alternatives to forming a purely “for profit” Business

What do you do when you want your business to incorporate positive social or environmental impact goals into its core objectives along with maximizing profits? In California, entrepreneurs who do not want to form a nonprofit but, nevertheless, want to structure their business to take into account a social purpose or a public benefit (and not focus only on maximizing profits for its shareholders) have the options of forming a public benefit corporation or a social purpose corporation. In a traditional corporation, directors and officers must prioritize shareholders’ interests above all else or risk being in breach of their fiduciary duties to them. In these alternative forms, the business must consider the interests of other stakeholders and not just its shareholders in making corporate decisions. Note, however, that, unlike nonprofits, neither benefit corporations nor social purpose corporations get special tax treatment. In many respects they are identical to a traditional corporation. Some of the main feature of these alternatives to a traditional corporation are briefly discussed below.

Benefit Corporation: One alternative to a traditional purely for-profit corporation in California is a benefit corporation. Under this structure, the corporation may pursue public benefit goals along with the traditional goal of maximizing profits for its owners. Benefit corporations are creatures of statute in California and are organized under the General Corporation Law of California. The articles of a benefit corporation must state “this corporation is a benefit corporation”. The articles may also identify one or more specific public benefit purpose(s) which may include:

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AdobeStock_164449269-300x2001. Some corporations undertake extreme Corporate Social Responsibility (“CSR”) initiatives, such as pledging to donate a significant portion of their profits to social causes or implementing radical environmental sustainability measures. While these practices can enhance a business’s  reputation, they are not always without legal and financial risks.

Legal Implications:

  • Fiduciary Duty: Companies must balance their CSR goals with their fiduciary duties to shareholders. Excessive spending on CSR initiatives could lead to legal challenges if shareholders believe it adversely affects their returns.
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AdobeStock_883988613-300x200In the construction and property improvement industry, payment disputes frequently arise, creating significant financial stress for contractors, subcontractors, and suppliers. Understanding your rights and the available remedies is essential for navigating these disputes effectively. This blog will explore one of the most powerful tools available to those in the construction industry: mechanic’s liens, along with other remedies to resolve payment disputes.

What is a Mechanic’s Lien?

A mechanic’s lien is a legal claim against a property that has been improved or repaired. It gives contractors, subcontractors, and suppliers the right to seek payment for the work they have performed or materials they have provided. By filing a mechanic’s lien, the lienholder can secure their interest in the property, which can ultimately lead to payment through the sale of the property if necessary.

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AdobeStock_857536293-300x168Corporations, those big players in today’s global economy, have come a long way since their early days in ancient Rome. Let’s take a look at how these entities evolved over time and what that means for the future of business.

Ancient Beginnings

It all started in ancient Rome, where early forms of business entities began to take shape. The Roman legal system laid the groundwork for what would eventually become modern corporations. Back then, these entities were more like collaborative partnerships, with limited liability for the partners—a far cry from the multinational giants we see today.

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AdobeStock_777848814-300x168The world of corporate law might seem dry to some, but television shows and movies have a way of bringing it to life with drama, intrigue, and high stakes. While these portrayals are meant to entertain, they also offer valuable insights into the complexities of corporate governance, mergers and acquisitions, intellectual property, and employment law. Let’s take a look at some of the lessons we can learn from how corporate law is depicted in pop culture.

Mergers and Acquisitions: More Than Just Business

If you’ve ever watched Succession, you’ve seen how the show dramatizes the intricacies of mergers and acquisitions (M&A). Hostile takeovers, shareholder activism, and the challenges of merging different corporate cultures are all part of the storyline. While these elements are heightened for dramatic effect, they mirror the real-world challenges of M&A. Businesses involved in these deals must navigate complex legal frameworks, manage stakeholder interests, and integrate operations—all while striving to remain profitable. The show highlights the critical importance of strategic planning and legal due diligence, reminding us that any misstep can lead to catastrophic consequences.

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AdobeStock_503316415-300x200If you have established, or are thinking about forming, a corporation in California, then you’ll need to create a set of corporate bylaws. This may sound like an unnecessary formality – especially if you are a start-up with just a handful of shareholders and employees. However, no matter the size of your corporation, bylaws are a necessity that can help protect you and your business. The experienced Los Angeles corporations lawyers at Structure Law Group can assist you in preparing corporate bylaws that will help keep your business on the right legal path.

The Purpose of Bylaws

Corporate bylaws serve as the governing rules for managing a corporation. A corporation’s board of directors is responsible for adopting, revising, and repealing bylaws. While the bylaws don’t need to cover every minute detail of the corporation’s day-to-day operations, they should provide a fundamental “roadmap” for how the business will be conducted.

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AdobeStock_505784791_Editorial_Use_Only-300x200Although platforms like Slack and Teams have become indispensable tools for modern collaboration, their widespread adoption raises crucial legal and compliance challenges for organizations. These platforms store a vast amount of user data, including messages, files and even employee metadata. They are subject to stringent data privacy regulations like the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). The GDPR has stricter regulations for EU citizen data privacy, demands explicit opt-in consent and grants extensive data subject rights like access and erasure. On the other hand, the CCPA, which is focused more on California residents, prioritizes data transparency and consumer control through access, deletion and opt-out mechanisms for data sales. Yet/overall, both regulations emphasize the importance of user empowerment regarding their data, requiring organizations to implement robust data protection measures and obtain informed consent for data storage and usage.

While conversation platforms offer significant collaboration benefits, their use necessitates navigating data privacy and compliance complexities. As such, organizations must prioritize user rights by:

  • Informed User Consent: Organizations must obtain explicit user agreement for data storage and usage. This involves clearly outlining the types of personal data collected, the purpose of collection, and how the data will be used in accordance with data privacy regulations.
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AdobeStock_558703638-300x169When it comes to forming a new startup, a California limited liability company (LLC) offers a number of advantages. As the name suggests, an LLC protects the personal assets of individual members from business creditors. And since the LLC is a “pass through” entity, any profits are taxed on the returns of individual members.

But while this arrangement may be ideal for founder-run startups with just a few equity holders, once the business seeks financing from venture capital or other investors, it is often necessary to convert to a corporation. More precisely, a California LLC may need to convert to a Delaware Corporation. The California corporations attorneys at Structure Law Group can advise you on the benefits and drawbacks of making this move. Contact us today to schedule an initial consultation.

When Is a Conversion Necessary?

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AdobeStock_750357071-300x200The rapid evolution of artificial intelligence (AI) is reshaping the world through new trends, regulations, and shifts in user behavior. While AI offers numerous benefits, it also introduces significant risks, particularly concerning accuracy, accountability, data privacy, and security. By proactively implementing mitigation strategies, businesses can harness AI’s potential while protecting their operations and reputation. Below, we explore key considerations for deploying AI across business processes while minimizing legal and regulatory risks.

AI Accuracy and Accountability

A major obstacle to fully realizing AI’s capabilities is concerns about its accuracy and accountability. The core of this issue lies in the quality and quantity of the data used to train AI models. The accuracy of AI models directly reflects the data sets they are trained on. If these data sets are biased or inaccurate, the resulting algorithms can perpetuate hidden discrimination against certain groups. This lack of transparency raises questions about the reliability of the output data, which can be misleading, biased, or incorrect.

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AdobeStock_533470666-300x200Chapter 134A of the Texas Civil Practices and Remedies Code is known as the Texas Uniform Trade Secrets Act, and Texas Civil Practices and Remedies Code § 134A.002(6) establishes that a trade secret is defined as “all forms and types of information, including business, technical, scientific, economic, or engineering information as well as any design, formula, pattern, prototype, compilation, plan, program, code, program device, device, technique, method, process, procedure, financial data, or list of actual or potential customers or suppliers, whether it is tangible or intangible and whether or how compiled, stored, or memorialized physically, electronically, graphically, photographically, or in writing when an owner of a trade secret takes reasonable measures under the circumstances to keep the information secret, and the information derives actual or potential independent economic value from not being generally known to and not being readily ascertainable through proper means by another person who can obtain economic value from the disclosure or use of such information.” Trade secrets are valuable because there are considerable efforts to protect the information, and people will need to work with a Texas business attorney for help protecting their trade secrets.

A legal cause of action for exposed trade secret information is known as misappropriation of trade secrets. This occurs if a trade secret is improperly acquired or is otherwise disclosed or used without consent.

Reasonable Measures to Maintain Trade Secrets

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