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Orange County Corporate Attorney Andrew Gale “created a great deal of value” by discussing strategy as well as providing legal advice

Andrew Gale, Orange County Business Attorney Client Testimonial - Trusted Adviser

 

 

 

 

Posted by Chris, a Partnership client.

I recommend Andrew Gale.

I met with Mr. Gale to discuss legal questions for my startup. Mr. Gale not only thoroughly answered my questions but also created a great deal of value by discussing strategic decisions for key areas of my business. If you have legal questions regarding term sheets, incorporation, monetization, and more, I would highly recommend Mr. Gale and his firm. I had a worthwhile and friendly experience and I will definitely be in touch with his firm in the future.

Original review posted on Avvo.


Business Structures CA

Common Types of Business Entities in California

If you are planning to start a business in Orange County, California, you need to decide on what type of business entity will it be. There are various kinds of business entities in California. The most common types include limited liability companies (LLC), corporations, sole proprietorships, and partnerships. In this article, learn about the basics of forming a general partnership business structure in California.

What is a Partnership?

In California, there are two types of partnerships. There is a general partnership, which we will discuss in this article. There is also the option of a limited partnership, which we will discuss in another article. There are subsets of limited partnerships that apply in specific situations. These are limited liability partnerships.

A general partnership is a business structure wherein there are two or more people who agree to do business together for profit. The decision between the parties to form a general partnership does not necessarily need a written agreement. Moreover, there is no need to file any form, documents, or registration requirements to the California Secretary of State to create a general partnership. It is only important that general partnerships comply with registration, filing, and tax requirements that are applicable to all types of businesses.

When starting a general partnership in Orange County, California, there are steps that you need to follow and they are as follows:

Step One: Choose a General Partnership Business Name

Choosing a name for your business is one essential aspect of starting it. Many general partnerships in Orange County, CA use the surnames of the individual partners in the company as their business name or create a totally new one. If you do create a brand new name for the business, make sure that is not the same or similar to any existing company in your line of business. Businesses that choose a name similar to their competitors generally find themselves in trouble with common law and federal trademark law protections. You can check for the availability of a business name by running a search on either the California Secretary of State database or on the U.S. Patent & Trademark Office database.

Step Two: Draft a General Partnership Agreement and Have it Signed

Although a written agreement is not a requirement in order to form a general partnership in California, it is highly recommended that you draft one and have it signed. A written partnership agreement helps make sure that there are no misunderstandings between you and your business partners. A properly drafted partnership agreement will also be your guide on how to handle certain situations and problems that might arise in your business. A general partnership agreement contains a lot of things; to name a few: the details of each partner’s contributions to the company; the allocations of profits; losses and draws; each partner’s role assignment and managerial responsibilities; voting rules for decision making; rules in accepting new partners; and rules in the withdrawal or death of a partner.

There have been many cases in California where well-intentioned and honest partners still found themselves in a legal battle all because they did not have a proper written agreement for their general partnership. To make sure that your written agreement is drafted well, have your business attorney assist you in preparing it. Written partnership agreements can always be amended later on if there are any changes that need to be made.

Partnerships in Orange County

Forming Partnerships in CA

Step Three: Obtain the Necessary Licenses, Permits, and Clearances

All businesses should comply with all legal requirements when they begin so that they avoid any unnecessary legal problems later on. Your company may need to get business or professional licenses depending on the nature of your business. California provides a comprehensive database of professions that need a license.

Besides licenses, other local regulations need to be complied with, such as building permits and zoning clearances that apply to your business.

Obtain a seller’s permit. You need a seller’s permit if your business sells tangible goods within the state of California. You can get a seller’s permit through the California State Board of Equalization. Visit their website for more information. If you need help, contact a qualified California business lawyer.

Step Four: Obtain an Employer Identification Number

More often than not, general partnerships need to have employees, and if you’re one of those that plan to have employees, you need to obtain an Employer Identification Number (EIN). All general partnerships in California that have employees are required to report wages to the IRS using their EIN. An EIN is a 9-digit number issued by the IRS to keep track of businesses in California. Registering for an IRN can be done online at the IRS website.

Many business lawyers in Orange County, California recommend that general partnerships obtain an EIN even if they don’t have employees because many banks require an EIN for a business to open an account. Having an EIN reduces the risk of identity theft. Moreover, businesses in California are required to report sales and use taxes along with other reports related to employees. An EIN will be of good use when you register your company to report through the California Board of Equalization.

It’s also important to pay your state income taxes. Your state income taxes are collected by the Franchise Tax Board.

Businesses that have employees that are paid $100 USD or more every quarter must report wages and pay employment taxes on a periodic basis. This can be done efficiently by registering through the California Employment Development Department.

Step Five: Open a Bank Account for Your General Partnership Business

All businesses need to have a bank account separate from the owners’ bank accounts. This is to avoid any problems in categorizing financial expenses as personal or business-related. Using the business name that you created and the EIN issued, you can open a bank account with any business bank of your choice.

Step Six: Obtain Worker’s Compensation Insurance

California’s Department of Industrial Relations mandates that employers in California must carry workers’ compensation insurance. That’s true even if you only have one employee.

The penalties for employers who avoid paying for workers’ compensation insurance are severe. In fact, it’s a criminal offense punishable by a fine of up to $10,000 or imprisonment in the county jail for up to one year, or both. The state also issues penalties of up to $100,000 against illegally uninsured employers.

The Uninsured Employers Benefits Trust Fund, a unit within the Division of Workers’ Compensation, pays benefits to workers who are injured or become ill while working for illegally uninsured employers. They actively pursue reimbursement of these expenses from the responsible employer. They use all available means necessary, including filing liens against an employer’s property. Therefore, it’s absolutely crucial that you purchase workers’ compensation insurance.

Step Seven: Apply for a General Liability Insurance

All the partners in a general partnership business structure are personally liable for the debts and obligations that the business may incur. Business attorneys in California strongly recommend a business liability insurance policy for partnerships so that they may have financial protection against unforeseen events. Protect your business and personal assets from lawsuits and other claims that may arise against your business by obtaining adequate business liability insurance.

Step Eight: Report and Pay Taxes Diligently

It is imperative for all general partnerships in Orange County, CA to report and pay their taxes diligently. What to report depends on the specific activities of a business. Some businesses are required to report items such as sales tax and use tax. Make sure to register your business with California’s Board of Equalization Business Registration.

Business Lawyers CA

Business Attorney in Orange County

Have a Business Attorney to Help You

Whether it is a general partnership or whatever business structure you intend to have for your business, you will surely benefit from having a business attorney assist you in forming it. Competent business lawyers in Orange County, California can help you avoid unnecessary legal problems that might arise in the future.


What is a Limited Liability Company

Business Entity in CA: Limited Liability Company

A limited liability company, or LLC, is a type of business entity that has combined characteristics of a partnership and a corporation. An LLC is not a corporation so it does not have to go through the processes of incorporation. The primary characteristics of this business structure are the protection it provides to its owners when it comes to the debts and liabilities that the company may incur and the pass-through income taxation it offers yearly.

In this article, you will learn more about how a limited liability company in California works.

How are Limited Liability Companies Taxed?

Based on its name, limited liability is the most obvious benefit that an LLC business structure can offer. In addition to that, the flexibility of how an LLC is taxed is another benefit.

The members of a limited liability company can elect to have their company taxed as either a C corporation or as an S corporation. By default, a limited liability company is taxed as a sole proprietorship if there is only one owner or as a partnership if it has more than two or more owners. To decide on how the company should be taxed, all options should be examined and discussed thoroughly with your business lawyer. A competent business attorney can help determine which one offers the greatest tax relief. Regardless of what type of taxation an LLC chooses, its legal liability protection remains the same.

LLC taxation

How are LLCs Taxed in California?

When an LLC chooses how it wants to be taxed, the IRS provides a form called “the check box” form or form 8832. This form was created to simplify the process of selecting how an LLC would like to be treated for taxation purposes. All LLCs, whether single or multiple members should use this form.

Limited Liability Companies that are Taxed as Partnerships or S Corps

Generally, limited liability companies that have more than one member usually choose to be taxed like a partnership. There are times, though, wherein multiple-member LLCs choose to be treated as either a C corporation or an S corporation. If they choose to be taxed like a C Corp, they lose the pass-through tax benefits that are offered in a partnership tax treatment. If they choose to have an S Corp taxation treatment, they are limited with respect to how many members they can have and are prohibited to have non-citizen or resident alien ownership.

Limited liability companies that choose to be treated like a partnership for taxation purposes are subject to subchapter K of the Internal Revenue Code that governs the taxation of partners and partnerships. This means that the business is subject to only a single Federal Income Tax at the members’ level with each member reporting his or her share of each item in the company’s gain, loss, income, deduction, or credit on this personal tax return.

If a limited liability company chooses to be taxed like an S Corp, the restrictions on the equity and capital structure can greatly limit the flexibility in strategic planning for the company. There will be limits in growth, changes in types of stock, inter-generation business transfers, etc.

Basis of Member Interest in a Limited Liability Company

The members of an LLC that has chosen to be taxed as a partnership are taxed based on their LLC interest. Each LLC member’s interest is obtained from the contributions or payments for their membership. The basis in these membership interests is separate from the company’s basis in its assets. In other words, the company’s interest is treated as an interest in a separate entity just like a stock in a corporation. Each member of an LLC must know the basis of his or her interest for many tax purposes including the following:

  • computing gains and losses when they sell or relinquish the interest
  • computing gains and losses on a distribution from the company
  • determining the basis in a property that is distributed by the company
  • determining the amount of partnership losses that he or she is allowed to deduct.

Limited Liability Company Distributions to its Members

llc MEMBERSHIP

Members of an LLC

The distributions of an LLC to its members are treated as a non-taxable withdrawal of the members’ investments up to the level of his membership interest. Each LLC member will receive distributions of partnership property without recognizing a gain or incurring a loss. The only time a gain is recognized is when the distribution exceeds the member’s level of investment or membership interest. Losses may not be recognized on a distribution either unless the distribution consists solely of liquid assets, cash, or unrealized receivables. The losses, if recognized, are limited to the difference between the member’s basis for interest and the sum of the distribution. These gains or losses are considered capital gains or losses for taxation purposes.

The Tax Consequences of Capital Contributions in an LLC

Cash contributions in a limited liability company are comparable to the cash contributions in a corporation or a partnership. No gains or losses are recognized with these contributions. The contributors’ bases for the interest they receive are considered equal to the amount of money he or she contributes.

Property contributions, on the other hand, have a different impact. Gains or losses in a property that has been contributed are deferred in an LLC until the partnership sells that asset or the contributing member decides to sell his or her share in the business. The member that contributed the property does not recognize gains or losses at the time of the contribution, irrespective of his or her ownership allowed in the LLC’s operating agreement. It is only if the LLC sells the contributed property that those gains or losses can be recognized and allocated to the contributing member.

On the contrary, in a C corporation and an S corporation, the transfer of appreciated property in exchange for stock interest is taxable unless the contributor controls the business. The contributor may have control over the LLC if his or her ownership is at least 80% of the stock.

In a C Corp, the company is taxable on gains or losses when it disposes of contributed properties. This, though, has no tax consequence to the stockholders. On the other hand, in an S Corp, the gains or losses are recognized when it disposes of properties. These gains or losses are passed through to the shareholders and are in direct proportion to their stock ownership. The gains or losses are not allocated to the contributing stockholder.


Orange County business lawyer Andrew Gale “cut through the noise and identified a clear road that is right for my needs, for my business“

Andrew Gale, Orange County Business Attorney Client Testimonial - Trusted Adviser

 

 

 

 

Posted by Alissa

Andy was referred to me through the Chapman University entrepreneurship incubator program. Though I graduated from Chapman two years ago, I re-joined the incubator program and am involved as an alumnus based out of NYC, where I live and where I am starting my business. I decided to get involved again because I knew that through Chapman, I’d get introductions to great resources, and in particular was seeking legal advice for early-stage startup structure.

Andy offered much more than just legal advice. He listened to my needs, identified areas of my business model that needed to most attention/focus, and helped me create a list of immediate next steps/action items from a lean startup approach. I thought that I’d only get about 15-30 min of Andy’s time, but we spent an hour on the phone together, during which I had Andy’s undivided attention. I expected that the conversation would be pretty baseline, just covering my needs from a legal perspective (filing as a business, contracts, etc) but instead, Andy took the time to dive deep: to understand my business model, resources, and any pain points where he could help. He provided insightful advice coming not only from a legal standpoint but with extremely acute business awareness and with my available resources and necessity for a lean approach in mind. His experience with early-stage startups is evident, and his advice is on-point and helpful. I’ve had so much advice thrown my way from other entrepreneurs, angel investors, friends with accounting or finance backgrounds, etc… talking with Andy cut through the noise and identified a clear road that is right for my needs, for my business.

I left the call feeling like I had not only a lawyer whose services I could use to draft contracts at various stages of my business but a mentor/partner who really cared about watching my business grow and had the legal/business insight to advise me as I took the next steps in making it a reality.

I will 100% be using Andy’s services as I move forward in establishing and growing my business, and I would 100% recommend Andy, whether you are in Orange Country or across the country.

Original review posted on Avvo.


Small business attorney Andrew Gale is “very helpful and a pleasure to work with!”

Andrew Gale, Orange County Business Attorney Client Testimonial - Trusted Adviser

 

 

 

 

Posted by Christina, a Corporate client.

My startup had Andy advise us on our company. He helped us more than we expected. We had many questions about the liability issues with our product and he answered them all! He put us in contact with someone who works in liability! He was very helpful and a pleasure to work with! Definitely, someone you want in your circle.

Original review posted on Avvo.