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The Top Six Reasons Your Company Should Have Strategic Bylaws

California does not require a company to have written bylaws, but below you will find six reasons why every business owner should invest in a strategically planned out set of bylaws for their company: 1.  The Bylaws are the Company’s Legal Backbone A company’s bylaws provide the legal framework for how it operates, including the number… Read More

California does not require a company to have written bylaws, but below you will find six reasons why every business owner should invest in a strategically planned out set of bylaws for their company:

1.  The Bylaws are the Company’s Legal Backbone

A company’s bylaws provide the legal framework for how it operates, including the number of people who may serve on the board of directors, how to call a board of directors meeting, and the officer positions for the company.

2.  What if Your Company Does Not Have Bylaws?

If your company does not have bylaws in place, the laws of California will control how the company is run.  It is much better for the owners to determine how it would like to have the company operate than to rely on the state’s statutes.

It is similar to an individual not having a will or trust.  If they die, the state’s statutes determine how the individual’s assets are distributed.  Instead, the individual should thoughtfully think through how they would like their assets distributed and to set up the legal mechanism to enforce their plan.

Similarly, it is much better for business owners to strategically think about how they would like their company to operate. Relying on state statutes might not always be the best fit for the company.

3.  Bylaws Provide Owners With Piece of Mind

Every company eventually runs into challenges.  It is better to consider some of the potential turning points in your company and provide for them in your bylaws. This preemptive approach allows you to determine how you would like the outcomes of these situations to be determined, rather than waiting to make tough decisions when interested parties and passions may create the perfect storm for litigation.

For example, what will happen if there is a legal dispute between the owners?  Do you want the company to be tied up in the expense and distraction of litigation or would you prefer arbitration?  What happens if one of the owners dies?  What if one of the owners wants out of the company?

The bylaws present an opportunity to calmly and objectively reflect on these issues before they occur.  It is wiser to answer these types of questions ahead of time and determine what might be the best solutions for your company than to rely on the default rules in the state’s statutes or to try to resolve them when clear heads are less likely to prevail.

 4.  Bylaws Help Protect Your Company’s Limited Liability Protection

One of the primary reasons to form a corporate entity is to possibly have personal limited liability from the potential business debts and judgments against your company.

If a company does not have bylaws and is sued, a plaintiff could try to “pierce the corporate veil” by claiming the company should not be provided with the shield of limited liability protection because its owners did not follow corporate formalities.

In determining whether to pierce the corporate veil, the court would evaluate a number of factors to determine whether your company is legitimate, including whether you have the proper corporate documents and records.  By not having bylaws, a business owner is risking not being provided limited liability protection if sued.

5.  Bylaws Help Avert Misunderstandings Among Owners

Communication and clear expectations are key to any successful relationship including the relationship between business owners.  Bylaws clearly lay out how the company will be run which can be crucial in preventing misunderstandings over how the owners expect the company to be managed.

6.  You May Need Bylaws To Get a Bank Account, Loans, and Insurance.

Finally, if you would like to open a business account or apply for loans most banks will require you to provide a copy of your bylaws.  In addition, insurance companies may require you to provide a copy of your company’s bylaws before providing certain types of polices.

As a business owner, it is often tempting to cut corners to lower costs. A strategically thought out set of bylaws should not be one of these corners.   Instead, bylaws should be recognized for what they are – one of the wisest investments a business owner can make to ensure the long-term effectiveness of their company.

If you have any questions regarding bylaws or any other business legal issue, please contact us at (415) 633-6841 or info@bendlawoffice.com.

Disclaimer: This post discusses general legal issues, but it does not constitute legal advice in any respect.  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 post.

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How Can You Incorporate In Delaware Without Having an Office In The State?

Business owners are often interested in incorporating in Delaware, but are unsure how they can do so without having a physical office in the state. You do not need a physical location to incorporate in Delaware, but you do need to have a registered agent for service of process. A registered agent for service of… Read More

Business owners are often interested in incorporating in Delaware, but are unsure how they can do so without having a physical office in the state.

You do not need a physical location to incorporate in Delaware, but you do need to have a registered agent for service of process. A registered agent for service of process is where your company would be served if it were to be sued.

LegalInc. Corporate Services Inc. ($99/year),  BizFilings ($129/year), LegalZoom ($159/year) and a number of other companies provide a registered agent for service of process in Delaware.

If you need a registered agent for service of process in California, our firm charges $99/year.

It is important to remember that even if you incorporate in Delaware, you will also need to register your business in each state you are doing business.  Most states have a very low registration threshold because they not only want to know which businesses are operating in their state, but they also want to maximize revenue from franchise taxes.

You can read about the pros and cons of incorporating in Delaware here. If you have any questions regarding incorporating in Delaware or any other business legal issues, please contact us at (415) 633-6841 or info@bendlawoffice.com.

Disclaimer: This post discusses general legal issues, but it does not constitute legal advice in any respect.  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 post.

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Why Your Website Most Likely Needs a Privacy Policy and What Must Be In It

The California Online Privacy Protection Act requires a website to “conspicuously post” a privacy policy if it “collects and maintains personally identifiable information from a consumer residing in California.” “Personally identifiable information” is very broadly defined to include a first and last name, a physical address, an e-mail address, a telephone number, or any other… Read More

The California Online Privacy Protection Act requires a website to “conspicuously post” a privacy policy if it “collects and maintains personally identifiable information from a consumer residing in California.”

“Personally identifiable information” is very broadly defined to include a first and last name, a physical address, an e-mail address, a telephone number, or any other information that permits the contact of an individual.  So, even if you are not selling a product or service, your website will need a privacy policy if visitors can submit their e-mail addresses to receive news and updates from you.

What Must Be In Your Privacy Policy?

If a privacy policy is required, it must contain seven items:

  1. Information Collected – The categories of personal information the website collects.
  2. The categories of third-parties with whom the company shares the information.
  3. How the consumer can review and request changes to their information collected by the company.
  4. How your site responds to “do not track” indicators from web browsers.
  5. Whether there are third party tracking cookies (or other tracking mechanisms), such as advertising cookies. 
  6. How the company notifies consumers of material changes to its privacy policy.
  7. The effective date of the privacy policy.

Where Should Your Privacy Policy Be Posted?

If you are required to have a privacy policy, it must be “conspicuously posted.”  The policy is conspicuously posted if it:

  1. Appears on the homepage of your website – usually not an aesthetically pleasant option.
  2. The website can have an icon on the home page that contains the word “privacy” – not a bad option.
  3. The most popular option is to have a link at the bottom of the homepage that contains the words “Privacy Policy.”

What Can Happen If You Don’t Have A Privacy Policy?

Under the California Unfair Competition Law, website operators who do not comply with the California Online Privacy Protection Act could be sued by the California Attorney General, District Attorneys, County Counsel, or City Attorneys for “unfair competition.”

There Is Not A One Size Fits All Privacy Policy

Privacy policies vary depending on how the website collects and uses consumer information.  The key is to not only make sure the privacy policy complies with the law, but to also have the policy be easy to understand so visitors do not get frustrated with legalese when trying to determine how their personal information is being collected and used by your website.

If you have any questions regarding privacy policies or any other business legal issue, please contact us at (415) 633-6841 or info@bendlawoffice.com.

Disclaimer: This post discusses general legal issues, but it does not constitute legal advice in any respect.  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 post.

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Top Questions to Ask A Business Attorney Before You Hire One

As a business owner, you face many challenges and expenses. One of the most important decisions is how to meet the legal requirements of your business while balancing the need to preserve time and capital.  Below is a list of tips you may want to consider when selecting a qualified, trusted business attorney. Where do… Read More

As a business owner, you face many challenges and expenses. One of the most important decisions is how to meet the legal requirements of your business while balancing the need to preserve time and capital.  Below is a list of tips you may want to consider when selecting a qualified, trusted business attorney.

  1. Where do I start to find a business attorney?

The best method for selecting a great business attorney is to consult other business owners and your trusted advisors.  Does a business owner you trust have an attorney they would recommend?  Does your CPA, financial planner, or banker have an attorney they know and trust?  An attorney who has the money or aptitude to have their website on page one of a Google search is not necessarily the attorney who is best suited to help your business.

2.  Is the business attorney well qualified to handle your specific legal needs?

Once you have a list of attorneys your biggest concern should be whether they are qualified to handle your legal needs.  An attorney who is fresh out of law school may be inexpensive, but it may be worthwhile to pay more for an attorney who has experience with your industry or navigating the nuances of your city and state.  For example, a family law attorney may be well qualified to handle a child custody dispute, but they may not be the best attorney to set up a new business entity.  It is important to keep in mind that attorneys are business owners as well and some are reluctant to turn away new business – even if they are not particularly well qualified to handle your legal needs.

How can you determine if an attorney is well qualified to handle your legal needs?  The first step is to review the attorney’s biography.  Do they seem like they would be a good fit for your company’s legal matters? If so, contact the attorney and interview them for the position for which they are “applying” – one of the most important roles in your company.  Some questions you may want to ask include:

  • How long have you been practicing law?
  • Have you had any ethics complaints filed against you?
  • Have you done this specific type of work before?
  • How many times?
  • Can you please give specific examples of work you have done in the past that is similar to the work you would be doing for me?
  • Can you please put me in contact with a client with whom you have done similar work?

You should also ask the attorney specific questions that are important to your legal needs to determine if they have the necessary background knowledge.  For example, if you are setting up a new company, you may want to ask the attorney to describe the difference between an S corporation and an LLC or how much the annual franchise tax is for a corporation in California.  These types of questions can be a good method to gauge the knowledge base of the attorney and whether they are best suited to help your business.

 3.  Are the business attorney’s rates reasonable?

Good business attorneys in the Bay Area typically charge between $275 to $595 per hour.  Partners in large law firms can charge as much as $1,200 per hour.  This can lead to large, unexpected legal bills.  What may seem like a simple legal question can result in you receiving a ten page memo and a three thousand dollar invoice.

However, some attorneys are willing to offer flat project rates, which can better allow you to budget for your legal needs.   An attorney may also be willing to put a cap on the amount they charge for a project.  For example, an attorney might say that it typically takes them three to five hours to set up a corporation.  If an attorney will not provide a flat rate for the project, they might be willing to agree to a cap that the project will not cost anymore than fives times their hourly rate.  Having a flat project rate or cap on the legal costs for a project can be key in helping you prevent surprise legal bills.

 4.  Prioritize Your Legal Needs.

It is easy to forget that an attorney is a small business owner and may encourage you to buy additional legal services that your business may not immediately need.  You should ask the attorney how they would prioritize the timing of the legal projects they recommend.  For example, can you pay to set up your company now, but wait to file for a trademark until you see if your business is actually viable?

5.  Is the Business Attorney Not Only Well Qualified, But Also Someone You Would Enjoy Interacting With?

It is important to not only find an attorney who is reasonably priced and well qualified, but someone you feel comfortable working with.  Is the attorney someone you want to develop an ongoing relationship with over the years as your business grows?  Will you enjoy interacting with them or will you dread having to contact them?

6.  The Business Attorney Should Be A Member of Your Team of Trusted Fiduciary Advisors.

The attorney should be a member of a trusted group of fiduciary advisors who provide your company with quality advice for a fair price.  This team of trusted fiduciaries will vary from business to business, but will often include a business attorney, a CPA, a financial planner, a personal banker, and other individuals who will not only provide you with sound advice, but also genuinely care about the success of your business.

7.  Meet With Several Business Attorneys and Trust Your Instincts.

You should meet with several business attorneys.  Selecting the right business attorney is extremely important and you should take the time to make the right decision.  Most business attorneys provide a free initial consultation.  Take that opportunity to meet with several attorneys.  You are no doubt very busy, but finding a good fit early on can save dozens of hours down the road.  Trust your instincts in determining which business attorney is going to best help your business grow and succeed.

If you have any questions regarding hiring a business attorney or any other business legal issue, please contact us at (415) 633-6841 or info@bendlawoffice.com.

Disclaimer: This post discusses general legal issues, but it does not constitute legal advice in any respect.  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.  Doug Bend expressly disclaims all liability in respect of any actions taken or not taken based on any contents of this post.

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