Corporation and Limited Partnership Law
Certain forms of businesses require careful planning and formation. Once formed, there are specific steps that should be taken to retain the protections provided by these structures. Corporation and limited partnership law is complicated. Formation and maintenance of these entities requires careful attention to detail. You should consult an experienced Pleasanton business lawyer. At the Law Offices of Stephen M. Fuerch, we provide legal counsel and representation to businesses in Alameda and Contra Costa Counties regarding the nuances of corporation and limited partnership law.California Corporations and Limited Partnerships
The application of corporation or limited partnership law can have important ramifications for a company’s liability in case of litigation and the taxes that it must pay. Corporations are entities that are fully independent of their owners. Generally, founders form a corporation because they want the significant protections that it provides in terms of taxes, debts, liabilities, and other obligations. Corporations are formed only when many formalities are followed. Articles of Incorporation will need to be filed with the Secretary of State. The Articles should specify the total number of shares that the corporation can issue and designate each class and series, along with the number of shares that can be authorized in each class and series and the rights that attach to each of them. Incorporators, directors, and a registered agent should be specified. The directors will owe fiduciary duties both to the corporation and to its shareholders.Piercing the Corporate Veil
Following certain formalities carefully can result in a corporate veil that shields the personal assets of owners. However, when corporations are not properly maintained, litigants and creditors may “pierce the corporate veil.” This means that they could go after a business owner’s home, car, bank accounts, or other assets in satisfaction of a judgment or debt. Accordingly, it is critical for owners to retain counsel and take the steps needed to form and maintain a corporation. Protection for personal assets may be lost in connection with commingling corporate and personal assets, failing to adequately capitalize the corporation, failing to issue stock, failing to keep separate corporate financial records, and failing to hold the proper meetings and keep corporate records and minutes.
There are many different ways in which a corporation can incur liability for damages. For instance, if someone visited corporate offices and was injured by negligently maintained equipment onsite, the visitor could not, in most cases, hold the owners personally responsible, but they could commence litigation against the corporation. Likewise, if a corporation incurs debts that it does not pay, creditors may not be able to place liens on the owners’ property in order to satisfy these debts.Limited Partnership Law
Under California Corporations Code section 5501, two or more people can create a limited partnership, in which there is at least one general partner and one limited partner. General partners provide financing and control the daily operations of the company, and they bear significant risks of liability. Limited partners, on the other hand, typically only provide capital to the business. Their liability is restricted to their own participation in the business. They are not bound by the obligations of the partnership. While it is possible to have a general partnership without a formal agreement, you should retain a lawyer to draft an agreement if what you envision for your shared business is a limited partnership.
A limited partnership agreement should specify how the company’s profits will be split. Usually, the percentages of profits and losses are allocated according to partners’ capital contributions to the business. Limited partners primarily risk their financial investments in the business. However, general partners, who can legally bind the business and control operations, can be held personally liable for the business’ debts and obligations. To form a limited partnership, you will need to file documents with the California Secretary of State, put together a written partnership agreement, and hold yearly meetings.Retain a Business Lawyer in the Pleasanton Area
Corporation and limited partnership law requires thorough attention to detail and adherence to rules as they apply to a particular business and industry. For many entrepreneurs and business owners, forming an entity to protect personal assets is an important step when building a solid business. It is critical to retain an experienced Pleasanton attorney who understands the formalities required to create these entities and maintain them over time. We may be able to counsel you as you start a corporation or limited partnership. Call the Law Offices of Stephen M. Fuerch at (925) 463-2575 or complete our online form.