This is an edited version of a LinkedIn question and my answer. (They no longer are available there because LinkedIn removed its Q&A feature.) Q. In California, does suspension of a corporation automatically “pierce the corporate veil” resulting in personal liability (suspension for non-payment of taxes would seem to be the ultimate in “disregard of corporate formalities”)?
A. In my opinion, mere failure to pay taxes does not constitute disregard of corporate formalities or the basis for an alter ego finding. (more…)
I am pleased to make the article “The Top Ten Legal Mistakes of Startup and Early-stage Companies” available as a Free Download on the Downloads page.
Here are the ten mistakes that are discussed:
- Failing to comply with corporate formalities
- Pretending that employees are independent contractors
- Neglecting to provide and update an employee handbook
- Failing to establish or adhere to discipline or termination procedures
- Failing to ensure that the company owns its intellectual property
- Believing that “open source” means “no restrictions”
- Thinking that all NDAs have the same terms
- Using another company’s standard-form agreement
- Giving “family jewels” to an overseas supplier
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.
More than 20 years ago, I was General Counsel of a small software company. The CEO – a successful serial entrepreneur – was always looking for opportunities to acquire, or establish strategic relationships with, other companies. The CEO was creative in identifying opportunities, yet highly attuned to potential problems. He told me, “If you think it smells bad now, wait until you dig into it.“ I was recently reminded of his warning.
A client (“Client”) had signed a letter of intent to acquire a much smaller company (“Target”) and asked that I represent Client in the transaction. I sent a Due Diligence Request List to Target, and with its reply I had my first clues that Target might have some problems. Target’s initial responses were superficial and incomplete. I did not know whether the company was being evasive or was merely naive. Either way, it appeared that Target lacked a lawyer’s guidance.