Business & Entrepreneurship, Corporate & Securities Updates, Legal Updates
Several of our clients have recently received official-looking letters from an entity called California State Corporations and a few others companies asserting that the California entities are not in compliance with California law. These companies essentially passe themselves off as a branch of the state government where there is actually no affiliation or connection. These solicitations are not being made by the California Secretary of State’s office and are not being made by or on behalf of any governmental entity. The mailings imply that the entities are either not in compliance or are required to complete enclosed paperwork and return it along with a fee ranging anywhere from$49.50 to $150 for obtaining a Certificate of Status. Please note that business entities are not ordinarily required to obtain a Certificate of Status with the California Secretary of State, unless for a specific transaction-related purpose, such as in commercial real estate financing. Should you require a Certificate of Status, we an assist you in obtaining this document. Although a business entity can use an intermediary to submit filings, request a certificate of status, and pay fees to our office, no business is required to go through another private entity in order to obtain documents or certificates from the Secretary of State’s office and no private entity can issue these documents. The California Secretary of State only charges $15 for the first certificate and $5 for each additional certificate – NOT the $49.50 this particular scam asserts. Furthermore, the scam claims that obtaining the document will take seven to 10 business days, when turnaround times are currently only 24 to 48 hours....
Business & Entrepreneurship, Corporate & Securities Updates, Legal Updates
Becoming an S-Corporations Some startup companies benefit from starting out as an S-corporation, while others remain C- Corporations. Corporations can elect to remain C-Corporations for a number of reasons, including tax deductions only available for C-Corporations, the corporation does not qualify as an S-Corporation, or the shareholders’ desire to have the opportunity to exclude from gross income 100% (until December 31, 2013, thereafter 50%) of the gain from the sale of “qualified small business stock” . Generally a corporation fails to qualify for S-Corporation status if one or more of the following situations apply: ANY owner of the corporation is another business entity or a non-resident alien (as described further below) The corporation will be owned by more than 75 persons The corporation plans to issue more than one class of stock (i.e., special allocations of profits and losses will be made that are not proportionate to the equity percentage of each owner). Non-resident Aliens and S-Corporations Although the tax code permits certain foreigners to be shareholders of S-Corporations, it is generally not advised, as foreigners who do not stay in the country long enough during a particular year can inadvertently cause the corporation to lose its S-Corporation status. This can cause adverse and unintended tax consequences to the other S-Corporation shareholders. Whether a foreigner is a non-resident alien does not depend on the visa class held by the immigrant. Rather, under the IRS code, only a green card holder or one who meets the “Substantial Presence Test” determines whether an alien is eligible to be an S Corporation shareholder. However, individuals under certain visas such as the F-1...
Business & Entrepreneurship, Corporate & Securities Updates, Legal Updates
In the search for start-up capital funding, there can be quite a few advantages to going to friends and family for your source of financing. They know your strengths and capabilities and may take a chance on you when banks or investor funding may not be readily available. Also, this source of money may be available when other money is not. For Founders having trouble with cash flow or don’t have the collateral or revenue to attract a bank or professional equity financing, this could be your only source of start-up capital. This initial investment source can help in launch a new venture or serve as bridge funding until venture capital investment comes through. ADVANTAGES FOR THE START-UP FOUNDER Raising money from family and friends has a number of advantages, especially as compared to other financing alternatives. For instance, private loans may have more Founder-friendly terms than other traditional sources. Founders may also be able to structure convertible notes and preferred share investments with more favorable terms than commonly found with early investor seed money. Founders might be able to make more flexible arrangements regarding payback, including paying lower interest, grace periods, or graduated payments, than through traditional lending sources. Importantly, raising money from friends and family shows validation from key supporters. The start-up phase of a new business can be a very stressful and doubt-filled time, and having friends’ and families’ financial support shows belief in a Founder’s ideas, which can make all the difference in those early days. FREQUENTLY ASKED QUESTIONS Below are some of the most common question IBV Advisory Group Inc. encounters when representing Founders...
Business & Entrepreneurship, Legal Updates
We are proud to announce Evelyn Ginossi is now a mentor with the Spain-based start-up accelerator Zarpamos. Zarpamos is an incubator/accelerator of digital projects specialized in mobile and web applications in Spain. The core of Zarpamos (which means “Setting Sail” in Spanish) is 3 associates: Manuel García as manager and responsible for the Accelerator. Ronsel Foundation as Expert in Business Training for entrepreneurs. And a Venture Capital Fund. Zarpamos gets actively involved in each project’s development putting together a follow up plan and making the most out of the different projects synergies. Zarpamos will negotiate with every professional involved a minimum share in the company and will continue actively participating in it even when they leave the accelerator. Click here to see the original story: http://zarpamos.com/en/evelyn-ginossi-nuevo-mentor/ __________ We welcome as new mentor Evelyn Ginossi,Attorney Transactional Business expert, live USA: For the past ten years, Evelyn Ginossi has accumulated a wide variety of experience in finance, consulting, and law. She has significant experience in structuring international and domestic transactions, equity and debt relationships, and negotiating contracts. Evelyn manages and directs all of the primary practice areas of IBV Advisory Group Inc. Evelyn also represents clients in the real estate aspects of mergers and acquisitions transactions and corporate real estate services matters. Evelyn has significant experience in handling foreign direct investment transactions by new entrants into the US and California markets and serves as outside general counsel for such companies. Evelyn received her undergraduate degree in Political Science with an emphasis in International Relations from the University of California, Santa Barbara, her Juris Doctor from Loyola Law School of Los Angeles, and her postgraduate certificate in Law from the University...
Business & Entrepreneurship, Corporate & Securities Updates, Legal Updates
There are many considerations a business owner must think through before deciding which business entity to select. While a business owner may elect to do business as a sole proprietorship or as a partnership, he may inadvertently put his personal assets at risk by not implementing a structure that separates the individuals involved from the business itself. A corporation is one business entity option that limits the business owners’ risk of loss to the amount of money invested in the business, provided that the corporation adheres to basic “corporate formalities”. If corporate formalities are not followed, the corporation will not be recognized as a corporation and both business owners and shareholders may open themselves p to personal liability. When a corporation is found to have not followed corporate formalities, this is known as “piercing the corporate veil”, which opens up a shareholder’s personal assets. WHAT DOES IT MEAN TO ADHERE TO CORPORATE FORMALITIES Adherence to corporate formalities is often cited as a significant disadvantage for those who consider a Corporation as a business form and this is often why many instead opt for a Limited Liability Company (LLC). In addition to entity maintenance and formalities, selecting the appropriate entity should also reflect tax, partnership structuring, and decision-making considerations, which is why individuals starting a new business should always seek qualified legal counsel and tax advice. The following are basics of corporate formalities which must be followed. Keep in mind that each state has its own corporation laws, and in addition to corporate formalities may require different forms or documents to be filed on a regular basis. Bylaws. Bylaws are...
Business & Entrepreneurship, Legal Updates
This article takes a look at the fundamentals of an LLC, the difference between an LLC and other popular forms of ownership, and the importance of having a solid Operating Agreement in place. What is an LLC? A limited liability company (“LLC”), is a popular form of business entity in California as it provides asset protection to its members while being easier to maintain than a corporation. An LLC may have one or more owners (known as “members”), and may have different classes of owners. In addition, an LLC may be owned by any combination of individuals or business entities. In general, all the members are shielded from individual liability for debts and obligations of the LLC. An LLC is formed by filing “Articles of Organization” with the California Secretary of State prior to conducting business. A company can be formed on a routine basis usually in about 2-3 weeks, or on an expedited 24-hour basis for an additional filing fee. Either before or after filing its Articles of Organization, the LLC members must enter into a written Operating Agreement signed by all the parties involved, both managers and members. An LLC is typically managed by its members, unless the members agree to have a manager handle the LLC’s business affairs. The level of the involvement of the members in the day-to-day affairs is generally established in the Operating Agreement and varies depending on the structure of the business. An LLC’s life is perpetual in nature. However, the members may agree to a date or event of termination. What Are Some Differences Between an LLC and a Partnership or...
