The High-touch Legal Services® Blog…for Startups!

© 2009-2014 Dana H. Shultz, Attorney at Law

LLCs: Why an Operating Agreement is Important

Logo for Quora, where Dana Shultz discussed why an operating agreement is importantThis post discusses why an operating agreement is important for every limited liability company (LLC). It expands upon an answer I provided on Quora several months ago. (See In simple terms, why are operating agreements important?)

An operating agreement is an agreement among the members of an LLC. It addresses relations among the members and how the LLC will conduct its affairs. (more…)

A DBA is not a Legal Entity

Logo for Avvo, where Dana Shultz answered a question, noting that a DBA is not a legal entityThis post is based on a question that I answered on Avvo. The question illustrates a common misunderstanding concerning DBAs. (DBA is an abbreviation for “doing business as” – i.e., a fictitious business name.) The questioner did not realize that a DBA is not a legal entity!

Q. Can someone sue a DBA for breach of contract by the parent corporation? (more…)

Can I Walk Away from My Suspended LLC?

Photo of people walking, symbolizing walking away from a suspended LLCThis post addresses a question that arises frequently from founders of California limited liability companies that have been suspended: Can I walk away from my suspended LLC?

A suspended LLC is the result of a founder who has neglected to file Statements of Information with the Secretary of State, or file returns with or pay amounts due to the Franchise Tax Board, or both of the foregoing. Please see Why was My Corporation / LLC Suspended or Forfeited? (more…)

Entity Conversion Can Be Easy – If You Know What You Are Doing

Logo for Quora, where Dana Shultz answered a question about entity conversionThis post about entity conversion is an expanded version of an answer that I provided on Quora yesterday. (How do I convert a Delaware LLC to a California LLC?)

In my experience, entity conversion typically occurs for either, or both, of the following reasons.

  1. The need to convert a limited liability company (LLC) to a corporation to accept an investment from an institutional investor, such as a venture capitalist.
  2. The need to move an entity from one state to another. This typically occurs because the founder relocates, or because an investor prefers to invest in a Delaware corporation.

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How Do We Issue Corporate Shares?

Share certificate, symbolizing how to issue corporate sharesSeveral weeks ago, I wrote about how to issue LLC membership interests. in this post, I am addressing how a small corporation should issue corporate shares.

To start, one must examine the Certificate of Incorporation (Delaware) or Articles of Incorporation (California) to determine the maximum number of shares that may be issued. (To simplify this discussion, I will assume that only one class of common shares has been authorized.) A corporation may not issue more shares than are authorized. (more…)

What Is a Unanimous Written Consent?

FreeBSD Foundation Unanimous Written Consent

The FreeBSD Foundation – Unanimous Written Consent of Directors

This post explains what a Unanimous Written Consent is. (Sometimes it is called an Action by Unanimous Written Consent.)

The term Unanimous Written Consent typically is used in the context of a corporation, which is the focus of this post. However, it can pertain to limited liability companies and other types of legal entities, as well. (more…)

How Do We Issue LLC Membership Interests?

Logo for Quora where Dana Shultz answered a question about LLC membership interestsWhen one forms a limited liability company (LLC) without a lawyer, there is a high likelihood that LLC membership interests will not be issued properly. This post describes how to issue LLC membership interests. It is adapted from a Quora question about LLC membership vesting that I answered.

Properly-Issued LLC Membership Interests

If LLC membership interests are issued properly, one would expect to see several things. (more…)

How Can I Move My Corporation to Another State?

Logo for Quora, where Dana Shultz answered a question about moving a corporation to another stateThis post addresses how one may move an existing corporation to another state. It is based on a question that I answered on Quora (What state is best to incorporate an S-corp if you plan on moving away?).

I find that for most entrepreneurs, it makes sense to incorporate in the state where the entrepreneur resides. As I wrote in In which State should My Startup Incorporate?

Incorporate in the state in which you are doing business, unless there is a good reason to do otherwise [in which case the other state chosen probably will be Delaware]. (more…)

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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