Archive for Business Entities

Must a Corporation Issue All Authorized Shares?

Sample stock transfer ledger, symbolizing that a US corporation need not issue all authorized shares

Sample Stock Transfer Ledger

This post is based on a conversation I had with a foreign client recently. Q. Must a corporation issue all authorized shares?

A. No, a corporate may, but it does not need to, issue all authorized shares.

Foreign Parent Audit

This question arose because my foreign client was being audited. The auditors thought that they had uncovered a problem.

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Harvard Business Services Joins Hall of Shame

Logo of Harvard Business Services, which joined this blog's Hall of ShameHarvard Business Services, Inc. has joined this blog’s Hall of Shame.

Prior to retaining me, one of my international clients used Harvard Business Services to form a Delaware corporation. During that process, HBS made two significant mistakes that I had to fix.

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Who Appoints the Members of a Board Committee?

Logo for Quora, where Dana Shultz answered a question about appointing members of a corporate board committeeThis post addresses a generalized version of a question that I answered on Quora concerning committees of corporate boards of directors. Q. Who appoints the members of a board committee?

A. Appointment of board committee members is governed by the corporation’s bylaws, or by applicable statutes if there are no bylaws. In my experience, bylaws (or statutes) state that a board committee is appointed by a majority of the board members. Committees are not appointed by the CEO or the Chair of the Board.

For example:

How Can I Find a Lost EIN?

Internal Revenue Service logo, symbolizing a lost EINAn Employer Identification Number, issued by the Internal Revenue Service, is the most important identifying number for US businesses, especially for tax purposes. This post addresses how you can find a lost EIN.

Find the Lost EIN Yourself

The IRS Lost or Misplaced Your EIN? page starts by recommending searches for existing records that should include the lost EIN:

  • The IRS confirmation notice that was provided when the EIN was issued.
  • Bank accounts that were opened, or governmental licenses that were issued, based on the EIN.
  • Tax return that were filed.
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Can I Form a Corporation with a Future Filing Date?

Logo for Avvo, where Dana answered a question about future filing dateThis post expands upon an Avvo answer that I provided. Q. Can I form a corporation with a future filing date?

A. Yes. The answer will vary slightly depending on the state of incorporation.

Future Filing Date in Delaware

If you want a future filing date in Delaware, Section 103(c)(4) of the General Corporation Law says, in relevant part:

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What if I Don’t File a Limited Offering Exemption Notice?

Banner for California Department of Business Oversight, where Limited Offering Exemption Notice is filedThis post is based on a question that I answered on Quora: What happens if you do not file a Limited Offering Exemption Notice in California?

Limited Offering Exemption Notice Requirement

I first addressed the Limited Offering Exemption Notice in Section 25102 (f) – Securities Law Compliance if You Incorporate in California. As that post explains, LOEN filing is required for corporate share issuances that are exempt from securities registration requirements in California.

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RULLCA Brings New LLC Laws to California in 2014

Logo of the California Secretary of State, symbolizing RULLCA (the California Revised Uniform Limited Company Act)RULLCA is an abbreviation for the California Revised Uniform Limited Liability Company Act. That Act will bring new LLC laws to the state starting January 1, 2014.

RULLCA – Up to Date and in the Mainstream

RULLCA is intended to reflect changes in LLC law during the past 20 years. Also, RULLCA will make California’s LLC law more similar to LLC law in other states.

Perhaps most interesting, the new law applies automatically to all California LLCs in existence as of the effective date. It will apply to all out-of-state LLCs that are registered in California, as of that date, as well. No new documents need be filed with the Secretary of State. The new law has neither opt-in nor opt-out procedures.

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Stock Transfer Ledger Available for Download

Stock transfer ledger templateToday I added a stock transfer ledger template to the documents available for free user downloads.

If you have not yet accessed the downloads page.

  • Enter your name and email address in the spaces on the right side of the screen.
  • Select Free Downloads from the drop-down list.
  • Click on Sign Up.
  • You will receive an email with instructions for accessing the downloads page.

At the downloads page, click on Stock Transfer Ledger. You browser then will make the stock transfer ledger file (an Excel spreadsheet) available for download.

I was prompted to make this file available by a question on Quora (What’s the best way to establish an electronic version of a corporate share register?).

Dana H. Shultz, Attorney at Law? +1 510 547-0545? dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

When Is It OK to Incorporate Online?

Ads for "incorporate online"Many entrepreneurs need to control expenses – including legal fees. One way to do that is to incorporate online rather than work with a lawyer. Occasionally I am asked, “When is it OK to incorporate online?

My greatest concern when entrepreneurs incorporate online is that they have no way to know whether the process has been completed properly. This is particularly true with respect to issuing shares – a critical task.

In answering this question, I look for activities that increase the likelihood of a dispute or a lawsuit. I ask:

Future Services Can’t Buy Shares in CA but *Can* Buy LLC Membership

Label saying "100% free", symbolizing buying an equity interest by future services rather than cashFuture services seem like a great no-cost way to buy equity in a startup. In California, however, whether you legally can buy equity with future services depends on whether the startup is a corporation or a limited liability company (LLC).

Corporations Code Section 409(a)(1) specifies the types of “consideration” that can be paid for corporate shares. These include, for example, “money paid; labor done; [and] services actually rendered to the corporation or for its benefit or in its formation or reorganization”.

However, “neither promissory notes of the purchaser [subject to certain exceptions] nor future services shall constitute payment or part payment for shares of the corporation“. So a California corporation cannot grant shares in exchange for future services.

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