Articles Posted in Tax Planning

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One of the legal services that corporate attorneys provide is advising startups with strategies to protect their long term interests. Each business entity has specific tax requirements and a San Jose business attorney can help you determine which is best for your venture. In this article, we’ll discuss specific business entities and how they’re taxed.

  • Sole proprietorship

A sole proprietorship is not a business entity. It’s the default state of an individual who owns a business. Those who run sole proprietorships are taxed as individuals with assets and profits. The biggest pitfall of the sole proprietorship is that you end up paying both the employee and the employer side of social security. These are typically split between employer and employee.

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AdobeStock_168060971-300x200Prop 19 is now effective in California. The new law makes changes to existing property tax laws, so it is important for homeowners to understand how their tax obligations can change under the new rules. Business owners must also be prepared for changes to property tax assessments on corporate real estate holdings. Learn more about the changes to state property tax laws, what business owners need to do to prepare for these changes, and how a California corporate attorney can help you determine the best way to manage real estate assets held by your business. With advanced planning, your business will be prepared to meet its tax obligations without compromising its financial goals.

What Is Prop 19?

According to the Office of the San Francisco Assessor-Recorder, Prop 19 makes changes to certain state property tax benefits. The law is an amendment to the state constitution that limits certain property tax benefits to make them available to others who need them. For example, this amendment requires an owner who inherits family property to use the home as a primary residence in order to retain the lower property value assessment for tax purposes. On the other hand, a homeowner who is over 55 years of age, disabled, or the victim of a wildfire or natural disaster may transfer a low property tax base on a replacement residence up to three times. These amendments have large impacts on families, especially in the bay area where the value of homes have increased significantly for many individuals who are now looking to pass the property on to their children.

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AdobeStock_119264482-300x204Naming a business is a critical component of branding strategy for a person or entity involved in a California business. When the name of the business does not include the owner’s last name, a person or entity has to file a fictitious business name (FBN) statement with the office of the Registrar-Recorder or County Clerk in the specific county location for the business. This process is also known as registering a “Doing Business As” (DBA) or “Trade Name,” and a business without a location in California will have to register with the Clerk of Sacramento County.

The DBA requirement can be confusing for many people, but you do not have to handle everything on your own. Contact an LA business formation attorney with Structure Law Group, LLP for help with all your DBA needs.

When DBAs Apply

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Untitled-design-22-300x200A limited liability company (LLC) is an option for people wishing to start a business in California that combines the tax advantages and flexibility of partnerships with the liability protection that comes with a corporation.

Starting an LLC in California still requires rigorous oversight. Make sure you are working with a Silicon Valley start-up company attorney at the best start-up law firm in Silicon Valley, Structure Law Group, LLP.

Limited Liability

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AdobeStock_229466821-300x200For over two years, landlords throughout California have shouldered the financial burdens of eviction moratoria. Federal, state and local laws have limited the circumstances, manner, and time in which a landlord could remove a tenant delinquent on rent or other obligations under the lease. While some would argue these measures were a necessary health precaution during the worst of the pandemic, they shifted the financial burden of missed rental payments onto landlords in most respects. Now, landlords are finally experiencing some relief as eviction moratorium laws expire. Learn more about commercial landlord rights in California under current eviction regulations.

How California Has Handled Commercial Tenant Evictions

Governor Newsom’s latest executive order extended eviction moratoriums on commercial landlords through September 30, 2021. Since that date has lapsed, commercial tenants are no longer protected under the expired law and must rely on state and local regulations still in effect. In sum, commercial landlords may start eviction proceedings against tenants in the counties where no extension has been provided. In some counties, local ordinances have extended eviction moratoriums and protections. Los Angeles County, for example, has created a two-phase tenant protection resolution. Different eviction rules will apply as the procedures are phased in throughout 2022. In Santa Clara County, commercial tenants must now be caught up on at least fifty percent of their arrears, or they could be subject to eviction. Tenants have until August 19, 2022, to be fully paid up on their arrears. Each county has its own rules, so be sure to consult with an attorney about your specific situation.

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AdobeStock_67958307-300x187Delaware has long been known as a popular state for incorporation of a new business. Some entrepreneurs think this is solely because of tax benefits, but there are many legal and practical benefits to incorporating a new business in Delaware. Here are some of the most common:

Management Friendly

The Delaware General Corporation Law is considered to be friendly toward the management of corporations. There are many specific provisions that help corporations run more efficiently: for example, Delaware corporations have the option of using cumulative voting, while other states make it compulsory for corporations that are not publicly traded. The DGCL also allows for shareholder approval of mergers without separate votes in each class of outstanding stock. Special meetings can be limited to a call by the Board of Directors, which prevents the complications associated with shareholders calling special meetings. Finally, the DGCL embraces new technologies and now allows corporations to use distributed ledgers or blockchains to create and maintain the corporate records required by law. These and other provisions help corporations run more efficiently under Delaware state law.

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AdobeStock_299947443-300x162It is important to structure a business entity that will best meet your needs before starting a new business. Even once you have selected a corporation over a partnership or LLC, there are still choices to be made. S corporations and C corporations have some similarities. There are also critical differences, and it is important to understand how each type of corporation functions before selecting the one that will best meet your business needs. 

Only One Class Of Stock

There are several key differences in how ownership may be held in S corporations and C corporations. S corporations may issue only one class of stock, while C corporations can have multiple classes. S corps are limited to a maximum of one hundred shareholders – all of whom must be United States citizens or lawful residents. C corporations have no such restrictions on ownership. S corporations also cannot be owned by other S corporations, C corporations, LLCs, partnerships, or trusts. These stock and ownership restrictions make an S corporation unsuitable for many corporations. Be sure to consult with your business lawyer about your specific plans for issuing stock and apportioning ownership in your new business.

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So, you’ve decided to incorporate your business in California and form a corporation. This corporate structure provides multiple benefits in California, including certain California tax benefits and legal protections. Every state has different requirements for forming a corporation, and California is no different. Whether you’re incorporating a new business, a small business converting to a corporation, or a multi-national corporation coming to the states, the experienced corporate attorneys at Structure Law Group, LLP can help. Contact our experienced business attorneys at 408-441-7500 or online to schedule your free corporate consultation.

Types of Corporate Entities in California 

There are multiple types of business entities in California. From a sole proprietorship to a general stock corporation, you must choose the entity that’s right for you. Once you elect to form a California corporation, you must choose which type of corporation best suits your business. California recognizes the following types of corporations:

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Starting a business partnership can be very exciting. You are ready to hit the ground running with your new venture. However, you will want to pause and make sure you have your legal interests well documented and in order before you jump into starting the business. The corporate attorneys at Structure Law Group understand the intricacies of forming a partnership and putting safeguards in place should a problem later arise.

California Partnership Legal Classifications

General Partnership

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Fotolia_194134312_Subscription_Monthly_M-300x200It may seem simple to try and put together a shareholder agreement on your own. However, a carefully drafted shareholder agreement is imperative to how your business functions in the present, but more importantly how you might need to handle things in the future. You will want your shareholder agreement to be carefully drafted to match your business’ specific needs. Even though every shareholder agreement will be different, there are some common components that most shareholder agreements include.

Governance Procedures

The shareholder agreement can outline how often meetings should be held. It can also describe the process for general or special meetings, quorum needed for specific types of matters, and how notices for the meetings should be sent. The addition of theses details not only spells out the procedural process, but also notifies members of their duties and rights as a shareholder.

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