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Can You Use The Full Legal Name Of Another California Corporation That Has Been Dissolved?

Several times a year a client will ask if we can form a corporation in California that has the same name as a corporation that has already been dissolved. Typically, the California Secretary of State’s Office will not accept a filing to form a new corporation if there is already a corporation with that same… Read More

Several times a year a client will ask if we can form a corporation in California that has the same name as a corporation that has already been dissolved.

Typically, the California Secretary of State’s Office will not accept a filing to form a new corporation if there is already a corporation with that same name registered with its office.

However, if a corporation has been dissolved it opens the availability of that name again with the California Secretary of State’s Office.

And so the good news is the California Secretary of State’s Office will accept a filing to form a new corporation even if it has the exact same name as a corporation that was previously dissolved.

The bad news is instead of submitting a form online and getting the a federal employer identification number (EIN) in only a few minutes, you would need to submit IRS Form SS-4 to obtain the EIN.

That is important for three reasons. First, you need the EIN to open a business checking account for the corporation. Second, the IRS often takes six to eight weeks to process the SS-4. And so instead of being able to open the business checking account right away after the corporation has been formed, you will not be able to do so for up to eight weeks. Lastly, you need the EIN for other government filings such as many city business license applications and to obtain a seller’s permit. Put another way, the EIN is one of the first dominos that will need to fall before you can fully complete the formation of your corporation.

If you do not want to have to wait six to eight weeks to open the business checking account, another option is to switch out one of the words in the full legal name of the corporation or add one more word to the full legal name. You can then file a Fictitious Business Name Statement with your County Clerk’s Office for the company to also do business as the name that you would like to use.

For example, if the legal entity for our law firm (Bend Law Group, PC) was dissolved you could register a new corporation with the California Secretary of State’s Office with that same name but you would then have to wait up to eight weeks to get the EIN and open the business checking account. Instead, you could have the full legal name of the corporation be Bend Business Law, PC. You could then file a Fictitious Business Name Statement for the corporation to also do business as Bend Law Group without holding up the opening of the business checking account.

Of course, you should think twice before using the same name as a corporation that has already been dissolved. The prior corporation could have debts and liabilities that creditors could try to come after your corporation for as it would be easy to confuse your corporation for the dissolved corporation with the same name.

For example, we had a client who was sued because of this type of mistaken name identification. We filed a motion with the court explaining the mix up and the suit was dismissed, but not before it caused our client to incur additional time and money expenses that it would not have had to incur if it had instead chosen a more distinct name.

In addition, you should check to see if there is already a federal trademark on the name of the corporation.

Lastly, if you are forming a corporation in a different state you should consult with an attorney in your jurisdiction as it might different requirements for when you can use the name of a corporation that has been dissolved.

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

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Do I Have to Sign This? Spousal Consent Forms

By: Alyssa Ziegenhorn When forming a new business, it’s important to make sure the ownership interest in the business is clear. Whether you are forming a C-corp, an S-corp, or an LLC, ownership of some kind is going to be distributed between the founders. We’ve discussed the importance of signing a stock purchase agreement; the… Read More

By: Alyssa Ziegenhorn

When forming a new business, it’s important to make sure the ownership interest in the business is clear. Whether you are forming a C-corp, an S-corp, or an LLC, ownership of some kind is going to be distributed between the founders. We’ve discussed the importance of signing a stock purchase agreement; the same goes for an Operating Agreement in an LLC which outlines the membership interest percentage of each member.

If you are receiving shares of a corporation or a membership interest in an LLC, you may see a “spousal consent form” with your spouse’s name and some form of acknowledgement such as:

 “I, [Spouse’s Name], spouse of [Participant’s Name] (“Participant”), have read and hereby approve the foregoing Agreement.  In consideration of the Company’s granting my spouse the right to acquire the Shares as set forth in the Agreement, I hereby agree to be bound irrevocably by the Agreement and further agree that any community property or other such interest that I may have in the Shares shall hereby be similarly bound by the Agreement.  I hereby appoint my spouse as my attorney-in-fact with respect to any amendment or exercise or waiver of any rights under the Agreement.”

This is because California is what’s known as a community property state. That means all the assets that are acquired by either spouse during their marriage belongs to both spouses equally. So, if you receive shares, your spouse technically has a 50% ownership interest in those shares.

Does this mean your spouse is a shareholder of the company, or a member of your LLC? Not exactly. They are not the named recipient of the shares or membership interest, so they don’t have all the rights and privileges that come along with them. For example, the right to vote on company decisions such as electing the Board of Directors or to approve decisions for the LLC. They do, however, have certain rights that attach to community property, and this can cause issues for the company.

One rule of community property is that a spouse cannot gift, sell, or give away community property without the consent of the other spouse. This may be an issue if, for example, a founder’s stock purchase agreement is subject to vesting. What happens if they leave the company and some shares of stock are unvested? Those shares are, according to the terms of the agreement, supposed to return to the company. But what about the ownership interest of the non-founder spouse, who never signed that stock agreement? Technically, the founder spouse can’t “give” that stock back to the company without their consent, but the company has the right to automatically repurchase the stock. To avoid this type of conflict, it’s imperative that all spouses sign the spousal consent waiver at the time the shares are purchased or received.

Another example is electing to have your LLC or C-corporation taxed as an S-corporation. The S-corp election requires all “owners” of membership interest or shares to consent via signature on Form 2553. This includes the spouses of LLC members or corporate shareholders. If you don’t include signatures from all spouses, the IRS can revoke your S-corp status.

These principles apply equally to stock grants to employees, advisors, consultants, and investors, or new members to your LLC who join after formation. You should always include the spousal consent waiver in any grant of shares or membership interest to residents of a community property state. It is important to note that the spousal consent form doesn’t affect the ownership rights of the second spouse. They still retain their usual community property rights in the assets. The consent form simply allows the company and the receiving spouse to treat all the equity as subject to the agreed-upon terms of the stock agreement or LLC operating agreement.

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

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Beyond Bills: Leveraging Accounting, Finance & Insurance for Growth in 2024

Doug partnered with Pilot.com and Founder Shield on a webinar on Beyond Bills: Leveraging Accounting, Finance & Insurance for Growth in 2024.  You can learn about his journey building Bend Law Group & insights on how to grow a successful professional service company here. Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may… Read More

Doug partnered with Pilot.com and Founder Shield on a webinar on Beyond Bills: Leveraging Accounting, Finance & Insurance for Growth in 2024.  You can learn about his journey building Bend Law Group & insights on how to grow a successful professional service company here.

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

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How To Form A Subsidiary In The United States

This article was first published by the Young Entrepreneur Council. By: Doug Bend International companies that are looking to expand into the U.S. market often form a U.S. subsidiary. By doing so, they help isolate any liability that might arise in the U.S. to the subsidiary to protect the parent company. There are seven steps… Read More

This article was first published by the Young Entrepreneur Council.

By: Doug Bend

International companies that are looking to expand into the U.S. market often form a U.S. subsidiary. By doing so, they help isolate any liability that might arise in the U.S. to the subsidiary to protect the parent company. There are seven steps to forming the subsidiary:

1.  Certificate of Incorporation

More than half of all Fortune 500 companies and most U.S. subsidiaries are formed in Delaware because it is the preference of investors.

You first will need to file a Certificate of Incorporation with the Delaware Secretary of State’s Office.

If you do not have a U.S. mailing address, you could use a mail forwarding service. For example, some of our clients use Alliance starts which starts at $50 per month.

2. Federal Employer Identification Number (EIN)

Next, you will need to obtain a Federal Employer Identification Number (EIN) from the IRS for the subsidiary.

If you have a U.S. tax identification number, you can obtain the EIN online here.

If you do not have a U.S. tax identification number, you will need to file IRS Form SS-4.

3. Bylaws, Indemnification Agreements and A Board Consent

You should also prepare bylaws, indemnification agreements for the officers and directors of the subsidiary and an initial Board consent approving the issuance of shares to the parent company.

4. City Business License

You most likely will also need to obtain a city business license for the subsidiary.

5. Registering Any DBAs

Depending on where the subsidiary is headquartered you may need to register the additional names that the subsidiary will be operating under besides for its full legal name.

For example, if the subsidiary is headquartered in California you will file a Fictitious Business Name Statement with the county clerk’s office. Once Fictitious Business Name has been approved by the county clerk’s office, you will need to have it published in a legally adjudicated newspaper.

6. Bureau of Economic Analysis

You are also required to file a report with the Bureau of Economic Analysis.The initial report must be filed no later than 45 days after the date of the investment transaction.

Which form you file will depend on how much money you are investing in the subsidiary. For example, if the total cost of expansion is less than $3m, then Form BE–13 Claim for Exemption can be filed.The BE-13 can be filed online here.

7. Additional Government Filings

There may be additional government filings. For example, if the subsidiary is headquartered in California and has employees, you will need to register it with the California Employment Development Department (EDD) so you can run payroll. If it is selling goods, you will also need to obtain a seller’s permit from the California Department of Tax and Fee Administration.

You should consult with your attorney as your jurisdiction might have different requirements, but this checklist is a good starting point for forming a U.S. subsidiary.

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction.  Bend Law Group, PC expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

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The Corporate Transparency Act: A Guide For Small-Business Owners

This article was originally published on Forbes. By: Doug Bend The road to onerous corporate compliance is paved with good intentions. I believe there is no better example than the Corporate Transparency Act (CTA), which took effect on January 1, 2024. The goal of the CTA is to combat money laundering by requiring business entities… Read More

This article was originally published on Forbes.

By: Doug Bend

The road to onerous corporate compliance is paved with good intentions. I believe there is no better example than the Corporate Transparency Act (CTA), which took effect on January 1, 2024. The goal of the CTA is to combat money laundering by requiring business entities to report their beneficial owners. However, there are strict deadlines and steep penalties for noncompliance, so owners must understand the CTA and how it might affect their businesses.

Explaining The Corporate Transparency Act

Under the CTA, certain businesses are required to submit a Beneficial Ownership Information report to the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). The report must include the names of each beneficial owner who either owns at least 25% of the business or exercises “substantial control,” according to FinCEN’s FAQ page about the act.

“Substantial control” can be direct or indirect, such as serving as a senior officer; having authority over the hiring and removal of senior officers or the majority of the board; having substantial influence over important decisions or “any other form of substantial control over the reporting company,” FinCEN’s FAQ page also said. You are required to disclose each beneficial owner’s name, date of birth and address and upload an image of either their driver’s license or passport.

Businesses formed after January 1, 2024, are required to file their first report within 90 days of creation or registration. Those formed before January 1, 2024, will have until January 1, 2025. Additionally, you are required to file an updated report within 30 days of any change in your company’s beneficial ownership information, according to FinCEN.

If you would like to file the report for your business entity, I suggest first obtaining a FinCEN ID for the report. You can obtain one here and file the report here.

Exemptions

There are 23 types of entities that are exempt. I recommend reviewing FinCEN’s Small Entity Compliance Guide checklist to see whether your company qualifies for any of these exemptions.

Fraudulent Solicitations

FinCEN has put out an alert to be careful of “fraudulent attempts to solicit information from individuals and entities who may be subject to [CTA] reporting requirements.” Be particularly cautious of e-mails with the subject line “Important Compliance Notice” and that ask you “to click on a URL or to scan a QR code.”

Penalties

If a report is not timely filed, FinCEN can impose civil penalties of $500 per day per entity, a $10,000 criminal penalty per entity and imprisonment for up to two years. To say the least, the consequences of not being in compliance are enormous.

An Ounce Of Prevention Is Worth A Pound Of Cure

Many small-business owners will likely either spend several hours navigating the details of these requirements each year or choose to hire an attorney to make sure each report is properly submitted. For owners who already have too much on their plates, this might feel like one more headache with very stiff penalties for noncompliance.

To make navigating changing compliance requirements more manageable and stay informed of regulatory changes, business owners can consider working with a reputable business attorney and a CPA. Have an annual check-in meeting with your business attorney to discuss any regulatory changes and to make sure you are completing the legal requirements for your business. I believe it is a good idea to meet with your CPA at least twice a year: once in the fall before the books have closed for the year and again early the next year to discuss your corporate tax return.

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. Bend Law Group, PC, expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

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Major Factors To Consider When Selling Your Business

Doug was recently quoted in an article on Forbes and about how you need to be wary of potential bad actors when you sell your business “[c]ompetitors often express an interest in purchasing a business merely to gain as much information about that business as possible with no intent of actually completing the purchase. Be… Read More

Doug was recently quoted in an article on Forbes and about how you need to be wary of potential bad actors when you sell your business “[c]ompetitors often express an interest in purchasing a business merely to gain as much information about that business as possible with no intent of actually completing the purchase. Be sure to have a solid mutual non-disclosure agreement in place before you share any of your confidential information, and trust your gut before you share too much of your company’s secret sauce.”

If you are interested in reading the remaining factors to consider when selling your business, feel free to check out the full article on Forbes!

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. Bend Law Group, PC, expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

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Caution – Copyrights Ahead!

By: Alyssa Ziegenhorn A picture is worth a thousand words – and can spice up any blog  entry, business website, or  social media post. When so much content  is vying for people’s attention, every little bit of pizzaz matters to driving traffic to your online presence, whether it is for personal use, business promotion, or… Read More

By: Alyssa Ziegenhorn

A picture is worth a thousand words – and can spice up any blog  entry, business website, or  social media post. When so much content  is vying for people’s attention, every little bit of pizzaz matters to driving traffic to your online presence, whether it is for personal use, business promotion, or educational content. However, you must be careful when searching for images online. Although it may appear that an image is available for free, it’s easy to accidentally infringe on  a copyright holder’s rights. Unfortunately some  businesses make it their model to go after this accidental infringement and demand large sums of money for the infraction. Because the use is unauthorized, it can be hard to fight back against these demands.

First: Look for a caption or link next to the photo. If the name of the image creator, artist, photographer, etc. appears, you should look them up and request permission to use the photo. There may be a link to the author or owner’s website, or an email address. The caption may also include the license the image is distributed under. Some licenses allow for free commercial use, while others may allow use if you provide credit (attribution) to the author.

Second: Check the metadata. To view a photo’s metadata, right click the image and save or download it to your computer desktop. On the desktop, right click the file and select “properties” then go to the “details” tab. Stored information about the image will appear, which may include the author and/or owner of the image.

If you are frequently searching for images to use and want a more convenient option, you can add the EXIF Viewer extension to your browser in Google Chrome.  This allows you to right click an image in a web page on or your device and view its metadata.

Third: Run a Google reverse image search.

  1. Go to Google images and click the camera icon in the search bar. Then drag or upload the photo you want to check into the search box (you can do this directly from the image search results page, too – just click on the camera icon then drag the image from results up to the box).
  2. The results will pop up with the image in a large box on the left, with a button that says “Find image source” on top.
  3. Click on that image and you can see where Google is sourcing the image from. This may not directly display the owner of the image. However, the results can help lead you to that information. Magazine and newspaper articles will usually include photo credit to the owner of the image, so those are a great place to start.

Fourth: Look for images licensed under a Creative Commons license, or in the public domain.

  1. The Creative Commons 3.0 license allows copying, modification, and distribution of an image. Some versions are restricted to non-commercial uses, so make sure you check before using an image for business or commercial purposes.
  2. Images in the public domain are available for use without restriction, although it is still best to credit the image’s creator when possible.

If you are not sure about whether an image is available for use, it’s safest to move on. The benefits of a using particular image rarely outweigh the potential risk of infringing on a copyright. If you have questions about copyright restrictions, using a particular image, or need assistance with a copyright claim, please reach out to us at info@bendlawoffice.com  

Disclaimer: This article discusses general legal issues and developments. Such materials are for informational purposes only and may not reflect the most current law in your jurisdiction. These informational materials are not intended, and should not be taken, as legal advice on any particular set of facts or circumstances. No reader should act or refrain from acting on the basis of any information presented herein without seeking the advice of counsel in the relevant jurisdiction. Bend Law Group, PC, expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this article.

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