- What is a Corporation?
- What are Articles of Incorporation?
- What are Bylaws?
- What is Corporate Structure?
- What is a Limited Liability Company?
- What is a Partnership?
- What is a Trademark?
- What is a Trade Name?
- Do I Have to Register/Qualify My Out of State or Country Corporation in California?
- What is a Fictitious Business Name?
- What is the Legal Name of a Business?
- Basic Incorporation Checklist
- What is a Non-Profit Incorporation?
- Helpful Links
In a general sense, a corporation is a business entity that is given many of the same legal rights as an actual person. Corporations may be made up of a single person or a group of people, known as sole corporations or aggregate corporations, respectively. Corporations exist as virtual or fictitious persons, granting a limited protection to the actual people involved in the business of the corporation. This limitation of liability is one of the many advantages to incorporation, and is a major draw for smaller businesses to incorporate; particularly those involved in highly litigated trade. A company is incorporated in a specific nation, often within the bounds of a smaller subset of that nation, such as a state or province.
The corporation is then governed by the laws of incorporation in that state. A corporation may issue stock, either private or public, or may be classified as a non-stock corporation. If stock is issued, the corporation will usually be governed by its shareholders, either directly or indirectly. The most common model is a board of directors which makes all major decisions for the corporation, in theory serving the best interests of the individual shareholders. One benefit is that a corporation's liability for damages or debts is limited to its assets, so the shareholders and officers are protected from personal claims, unless they commit fraud. In the United States there are three major types of corporations: Close, C, and S.
It is the basic charter of a corporation which spells out the name, basic purpose, incorporators, amount and types of stock which may be issued, and any special characteristics such as being non-profit.
Bylaws are the written rules for conduct of a corporation, association, partnership or any organization. They should not be confused with the articles of incorporation, which only state the basic outline of the company, including stock structure. Bylaws generally provide for meetings, elections of a board of directors and officers, filling vacancies, notices, types and duties of officers, committees, assessments and other routine conduct. Bylaws are in effect a contract among members and must be formally adopted and/or amended. Corporate bylaws are not filed with the Secretary of State. Bylaws are kept at the corporation's principal executive office (if located in this state) or the corporation's principal business office in this state. The bylaws shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside this state and the corporation has no principal business office in this state, it shall, upon the written request of any shareholder, furnish to such shareholder a copy of the bylaws as amended to date.
Read more on http://www.sos.ca.gov/business/corp/corp_faq.htm
A corporation is owned by its stockholders. A stockholder may serve on the Board of Directors and also be an officer of the corporation. In larger corporations, while stockholders may not directly manage the affairs of the corporation, they are able to influence corporate decisions through indirect actions like electing and removing directors, approving or disapproving amendments to the articles of incorporation and voting on important corporate decisions. The members of the Board of Directors are responsible for managing the affairs of the corporation. The directors make only major business decisions but they supervise and appoint officers who make the corporation’s daily business decisions. Officers are responsible for the everyday management of the corporation. Typically, officers are appointed directly by the Board.
A limited liability company, commonly called an "LLC," is a business structure that combines the “pass-through taxation” of a partnership or sole proprietorship with the limited liability of a corporation. Similar to owners of partnerships or sole proprietorships, owners of a LLC report business profits or losses on their personal income tax returns. However, the LLC itself is not a separate taxable entity. Similar to owners of a corporation, all LLC owners are protected from personal liability for business debts and claims. So, if the business owes money or faces a lawsuit, only the assets of the business itself are at risk. Creditors usually can't reach the personal assets of the LLC owners, such as a house or car. Both LLC owners and corporate shareholders can lose this protection by acting illegally, unethically, or irresponsibly.
A partnership is a business with more than one owner that has not filed papers with the secretary of state to become a corporation or limited liability company. There are two basic types of partnerships: (1) general partnerships and (2) limited partnerships. A general partnership is the simplest and least expensive co-owned business structure to create and maintain. A limited partnership is a special type of partnership which is very common when people need funding for a business, or when they are putting together an investment in a real estate development. A limited partnership requires a written agreement between the business management who is /are the general partner or partners, and all of the limited partners. The limited partners may not participate in the management decisions of the partnership or they will lose their limited partnership status.
Abbreviated “TM”, a trademark is a name, symbol, or other device identifying a product, officially registered and legally restricted to the use of the owner or manufacturer. Words that merely name the maker (but without particular lettering) or a generic name for the product are not trademarks. Trademarks may be registered with the U.S. Patent Office to prove use and ownership. Use of another's trademark or one that is confusingly similar is infringement and the basis for a lawsuit for damages for unfair competition and/or a petition for an injunction against the use of the infringing trademark.
A trade name is a name of a business or one of its products which, by use of the name and public reputation, identifies the product as that of the business. A trade name belongs to the first business to use it, and the identification and reputation give it value and the right to protect the trade name against its use by others.
A foreign (out of state or country) corporation transacting intrastate business in the State of California must qualify to do so with the Secretary of State's office. "Transacting intrastate business" is defined as entering into repeated and successive transactions of a corporation's business in this state, other than interstate or foreign commerce. See California Corporations Code Section 191. If you are unable to make a determination based upon the contents of Corporations Code Section 191, you will need to consult private legal counsel.
Suppose that the business's legal name is different than the trade name, that is, the name under which it operates and is known by customers. In that case, a fictitious business name is being used. For example, if John Johnson called his sole proprietorship Canadian Transportations, then Canadian Transportations would be considered a fictitious business name. Because John Johnson runs a sole proprietorship, the business's legal name is his full name, John Johnson. A fictitious business name like Canadian Transportations is sometimes referred to as a doing business as (d/b/a) name. Most states require registration of fictitious business names.
A legal name is the name of the entity that owns a business as it will appear on documents registered with the state in which it operates. For example, a sole proprietorship's legal name is the owner's full name. The legal name of a general partnership may appear in the written partnership agreement, but if not named in the partnership agreement, then the partnership’s legal name is a combination of the last names of the owners. Limited partnerships, limited liability companies and corporations register their legal names with the secretary of state or other state agency.
Incorporating your business can be complicated and time-consuming. The following checklist can prevent getting overwhelmed or miss crucial steps:
- Write a business plan
- Choose the management team
- Decide on a business structure
- Select a corporate name
- Select the state of incorporation
- Create a capitalization plan
- Retain corporate status
- Obtain permits and licenses in order to:
- Identify your business to ensure accountability
- Protect public health and safety
- Keep track of finances for tax purposes
Before you can apply to the IRS for tax-exempt status, your organization must first become a corporation. Nonprofit incorporation is very similar to creating a regular corporation except that a nonprofit must take the extra steps of applying for tax-exempt status with the state in which it incorporates and with the IRS.
State of California: http://www.ca.gov
Governor's Office of Economic Development: http://www.business.ca.gov
State of California Secretary of State: http://www.sos.ca.gov
City of Los Angeles, California: lacity.org
Los Angeles Area Chamber of Commerce: http://www.lachamber.com
Southern California Better Business Bureau: http://www.la.bbb.org
Internal Revenue Service: http://www.irs.gov