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San Diego Business Organizations Law Blog

Is a written agreement a good idea for partnerships?

When forming a partnership with a friend or loved one, is it advisable to write a partnership agreement? Creating a legal document may seem like such a formal action to take with someone with whom you may be on very informal or even intimate terms. Nevertheless, an attorney that focuses on business organizations knows that it usually a good idea to write a partnership agreement.

As a practical matter, writing an agreement can be a useful tool for strategic thinking. Although unexpected problems may always arise during the course of a business, a partnership agreement can at least start the process of proactive planning. 

How might an online start-up approach business organization?

In our last post, we explored some of the common questions facing California start-ups. As we observed, the selection of a business organization will impact many aspects, from individual liability to filing requirements. But does the manner in which a business conducts its operations impact that selection? Specifically, does an online business have unique business organization concerns? 

Even if online or web-based transactions will not be an entity’s primary mode of operation, it is hard to deny the ubiquitous face of online shopping. From smartphones to tables and laptops, it seems that consumers want to have the convenience of making their purchases online, or at least their initial deliberations. 

Common questions facing California start-up businesses

Two of the biggest issues facing a start-up company are how to raise capital and selecting a business entity type. Although raising capital might not be easy, deciding which form of business entity to establish can be downright confusing. 

The decision should not be taken lightly, as the selection of a business organization will carry unique filing requirements, implicate specific rules about personal liability for any investments or debts of the business, and have specific tax consequences. In California, the choices for a business entity include a sole proprietorship, a general partnership, a limited partnership, a limited liability partnership, a limited liability company, and a corporation. 

Does raising capital vary based on a business' organization type?

Regardless of entity classification, one issue faced by almost every new business is raising the capital needed to cover formation costs and projected operating expenses for a limited period. In capital markets, a business may sell shares. However, small businesses or startup firms may not have that access. Is an arrangement comparable to corporate shareholders available to them?

One solution might be venture capital firms that pool funds from a group of investors. An individual may prefer this approach if he or she does not want to bear any responsibility for the debts of a business. An investor simply has a financial stake in a business entity's profits, if it is successful. If the business is unsuccessful, the worst thing that can usually happen is losing the amount of one's investment.

In California, the prevalence of start-up technology companies has given rise to a number of different venture capital firms. A business owner may find that venture capital is a convenient way to raise funds. However, a smart business owner would be well advised to seek an attorney's input regarding the documents needed to memorialize that relationship in a business agreement or other legal documentation.

Corporate form no defense to illegal price manipulation

Municipal and state entities need to enter into contracts with vendors just like other businesses. Unfortunately, that also presents the potential for contract disputes. If those disagreement remain unresolved, business entities may find themselves involved in a breach of contract litigation.

In today’s example, a whistleblower from gas and energy company BP disclosed an alleged scheme of systematic overcharging. The former BP employee alleges that the company made a higher profit margin from its sales to California than from its other customers. 

What are the benefits of an LLC?

The website of the California Secretary of State clarifies that a limited liability company’s name must include that business entity description in its name, or the abbreviations LLC or L.L.C. Ever wonder why?

As a business lawyer knows, a LLC is a type of business entity classification that provides certain protections to its owners. Some view this type of business structure as offering the benefits of both corporations and partnerships. Owners are protected against personal liability for debts incurred by the LLC. Yet unlike a corporation that is generally assigned its own tax identification number and pays its own taxes, the owners of an LLC report profits and losses of the business on their personal tax returns, similar to a business partnership.

What makes a good business organizational relationship?

When business is booming, disputes between business owners may seem unimaginable. When profits start declining, however, the potential for the type of disputes that can escalate into business litigation may increase.

At least, that seems to be storyline in a recent dispute between former partners in a California investment management company called G Squared Media Holdings. 

Business organization no defense against claim of fraud

Generating revenue is essential to a company's bottom line. One way to do that is through creative marketing. There is no shortage of creative advertising agencies and consulting firms in California. Yet there can be legal consequences to even seemingly safe advertising.

Take the case of Red Bull, which for the past ten years has used the slogan "Red Bull gives you wings." Surely no court of law would consider a false advertising claim from a consumer who expected to sprout wings, right?

California lawmakers consider change to franchise law

A business’ organizational type can greatly affect the liabilities and rights of its owners. With a franchisee, the franchisor retains the right to terminate the relationship for reasons such as brand protection or grounds more specifically enumerated in the franchise agreement. In a corporation, the articles of incorporation and bylaws are generally governing documents.

An attorney that focuses on business agreements knows that the fine print can translate into huge financial gains or losses for individuals and businesses. For that reason, a business owner can benefit from the legal guidance that only an experienced lawyer can offer about business agreements

Oil lawsuit tossed out by judge in California

Kinder Morgan began bringing crude oil to a train station in California earlier this year, and they started unloading the crude oil from rail cars. This was all done rather quietly, but it still earned the ire of local environmental groups, which decided to start a lawsuit against the company. Kinder Morgan stated that they had not done this quickly enough.

That lawsuit went to a Superior Court in San Francisco, but it now appears to have come to an end. The judge who was residing over the case has thrown it out.

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