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760.438.8460
info@stanprowse.com
5876 Owens Avenue, Suite 150, Carlsbad, California 92008
Educating clients about the pros and cons of incorporating or forming a limited liability company continues to be a part of my legal practice.  For many sole proprietors the trade off between the cost of buying more insurance and creating a company with limited liability favors the former rather than the latter.  If incorporating appears to be truly beneficial, it’s important for a client to understand how to properly care for a fictitious entity, which involves both maintaining proper documentation of its continued existence and a financial bright line between the entity and the owner/shareholder.  One of the motivations for incorporating is often the desire of a sole proprietor to give a trusted employee a “piece of the business.”  This is potentially dangerous, and I often advise against it.  Most clients believe that they can continue to control the incorporated business if they hold 51% of the stock.  This is a misconception.  A shareholder owning more than 35% of the stock may force the dissolution of the corporation without any reason.  Furthermore, the California Corporations Code provides for cumulative voting.  A two shareholder corporation must have two directors.  In the event of serious disagreement, one of the two shareholders cannot oust the other from the board by electing both directors unless he owns more than 64% of the stock.  Increasing the trusted employee’s compensation to maintain his loyalty is usually preferable to making him a co-owner.
  • The Historical Background of Corporations

    People who own and operate small businesses like to incorporate. The common perception is that by incorporating they will protect their homes and other assets from creditors if their businesses fail. Is their perception correct? Let’s start from the beginning. Where did corporations come from and what do they do?

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    Corporations - Historical Background


    Forming A Corporation

    A corporation is a more traditional way to protect your investments from creditors, but it requires more paperwork, both initial and ongoing. If you have formed a corporation yourself, allow our corporate law attorney to review your minute book. It may need additions or corrections.

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    Corporations - Creation
    Incorporation Disaster

  • Limited Liability

    Limited liability is the goal. How well does it work for small businesses?

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    Limited Liability

    Partnerships

    A general partnership is the most challenging way for two or more people to do business. Consult with us before you decide to partner with your best friend, a relative or a favorite employee. Gaining the reliable legal advise of an experienced business law attorney is the first step in protecting your future.

    Buy Sell Agreements

    Plan ahead for the retirement, disability, or death of the company's principles. Insurance to fund the company's purchase of a deceased principle's interest should be obtained. Put/call provisions in the event of fundamental disagreement should also be included.

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    Buy Sell Agreements

  • Sales and Purchases of Businesses

    Please allow business law attorney Stanley D. Prowse to review your proposed transaction early in the process. We can help you separate the important issues from the boilerplate and reach an agreement that will hold up over time.

    Employment Issues

    We review severance agreements for employees and counsel employers on workplace dos and don'ts, including ways to minimize the risk and pain of terminating personnel. We do not accept wrongful termination cases.

    Debt Collection

    A judgment several years old may be collectible. We have had particularly good results pursuing stale judgments against businesses.