Introduction Whether your company is a start-up or an established business, the decision regarding the form of business entity your company operates under is an important one. California recognizes numerous forms of business entities, each with important distinctions. The purpose of this guide is to introduce you to several forms of business entities available in California and briefly discuss their key advantages and disadvantages. The six major forms of business entities are sole proprietorships, general partnerships, limited partnerships, limited liability partnerships, limited liability companies, and corporations. Corporations are by far the most popular form of a business entity and are unique because of the many types of corporations, such as, C-Corporations, S-Corporations, professional corporations, etc. For most business owners, a trade off occurs between adhering to special statutory formalities, limiting…

Introduction Many people start a California corporation without understanding the documents involved and their implications. This guide will review key documents required and/or used in the formation of a California corporation and a brief summary of their typical contents. Articles of Incorporation Articles of Incorporation are the charter document for the corporation. The Articles are filed with the Secretary of State, and upon their filing, the corporation is in legal existence. The Articles of Incorporation contain the name of the corporation, the general purpose of the corporation (this is statutory language that cannot be changed), identification of the original agent for service of process, the type of stock (i.e., common and/or preferred) and any rights or restrictions associated with the stock, and the number of authorized shares. The Articles may…

Introduction Most small to medium-sized businesses are funded through private funding, which is a very complex area. There are many state and federal requirements that must be complied with during each stage of funding. This guide will review key concepts and steps to obtain private funding for a business. STEP #1: Initial Funding. At the initial funding stage, also known as an angel round of funding, a group of investors join together to form the corporation. This is usually a small number of investors (can be as small as 1, 2 or 3), but to qualify for the small business exemptions, generally, cannot exceed 35, as discussed below. These initial investors will contribute the initial amount of capital (money or assets) to start the corporation. In return, these investors receive…

Introduction While a business may fail for many reasons, this document identifies the 10 most common legal mistakes businesses make.  Many of these mistakes expose the business, its owners, and in the case of corporations, its directors and shareholders, to needless liability.  It is our goal that by identifying these common errors you will be armed with knowledge, which if properly utilized, is the key to avoiding these mistakes. MISTAKE #1: Failure to consult with professionals prior to selecting or changing the form of business entity. California recognizes numerous forms of business entities, each with important distinctions.  The six major forms of business entities are sole proprietorships, general partnerships, limited partnerships, limited liability partnerships, limited liability companies, and corporations.  Corporations are by far the most popular form of business entity…

As a general rule, California favors contractual forum selection clauses (the place where the lawsuit will be filed) and enforces them, if they are entered into freely and voluntarily and their enforcement would not be unreasonable. However, a forum selection clause in an Employment Agreement may not be enforced when the claims at issue are based on non-waivable rights created by California statutes unless the Employer can show that the forum designated in the Employment Agreement will not result in a significant diminution of the rights of the California-based Employee. Forum Selection Clauses Favored in California California has long favored contractual forum selection clause that are entered into freely and voluntarily, if enforcement would not be unreasonable because forum selection clauses are important in facilitating national and international commerce. [Verdugo…

Generally, a nonexempt employee must receive premium (or overtime) pay for all hours worked over eight (8) in any day or forty (40) in any week.  (Labor Code §510.)  These requirements apply to every employer in California. Time and a Half Over 8 hours in one day. Employees that work over eight hours in one day must be paid 1.5 times his regular rate of pay for the first four hours worked in excess of eight.  For example, if employee works an 11 hour work day, he will be paid his regular rate for hours 1-8 and then 1.5 times his regular rate for 3 additional hours, representing hours 8-11. Seventh consecutive day of work. If an employee works seven consecutive days, then the employee must be paid 1.5 times his regular…

Employers are experiencing a sharp increase in requests from employees and applicants for workplace accommodations because of a physical or mental disability. There are a myriad of laws and regulations that govern an employer’s duties and obligations when it receives a request for workplace accommodations or knows of an employee in need of workplace accommodations, even if the employee has not requested it. If the employer fails to comply with these laws, it may be found liable for workplace discrimination based on a disability. This is a discussion of an employer’s obligations under California law regarding requests for reasonable accommodation.1 FEHA The California Fair Employment and Housing Act (“FEHA”) applies to any employer who regularly employs five (5) or more persons, including the state, subdivisions of the state and cities. However,…

There is a strong public policy in California to encourage employees to report organizations that they reasonably believe are operating in violation of the law. The California legislature has enacted laws that protect such employees and provide incentives for them to become a whistleblower. Every employer in California should be familiar with their potential legal and financial exposure under these laws. Likewise, every California employee should be aware of the rights, protections and incentives provided to them as a whistleblower. California False Claims Act ("CFCA") The CFCA is modeled on the federal False Claims Act [31 U.S.C. §§ 3729, et seq. "FFCA") and has comparable protection for whistleblowers. The CFCA is codified under California Government Code §§ 12650, et seq. CFCA permits the recovery of civil penalties and treble damages…

The hot topic in the employment world is figuring out if you have independent contractors or employees. Employers often categorize employees are independent contractors in order to avoid having to pay payroll taxes and obtaining necessary benefits, such as workers compensation insurance, and now, health insurance. However, miscategorizing employees as independent contractors can be a very dangerous move. Not only can the employee improperly classified as an independent contractor sue the employer or file a claim with the Labor Commissioner for unpaid minimum wages or overtime pay based on the work performed for the employer (and get waiting time and other penalties too), but the IRS is really cracking down on enforcing improper categorizations against employers, entitling them to sometimes years of back payroll taxes and penalties. There are a…

Whether you are contemplating initiating a lawsuit by suing someone or you have just been served with a summons and complaint in an existing lawsuit, entering into the civil litigation arena in California can be a scary feeling. Despite all of the self-help tools available, the court system is still a complicated process, and competent legal guidance is necessary. Here are the basics of a lawsuit in Superior Court in California. The Pleadings The pleadings are the initial papers filed both the plaintiff and defendant in the lawsuit. The plaintiff files a complaint to start the lawsuit (although in limited circumstances, a petition is used instead). The defendant then has a few choices on how to respond. The defendant can file an answer, which is a formal, legalized response to…