Start-up Business
What is corporate law?
Corporate law deals with the creation, functioning, and governance of corporations and other business forms. It determines legal rights, duties, and responsibilities.
What are the principal forms of business organizations?
Sole proprietorships, partnerships, LLCs, and corporations: C-corp and S-corp
How do I determine the appropriate business structure?
Consider the extent of liability protection, tax effect, operational complexity, and potential for growth when selecting a business structure.
What is the difference between an LLC and a corporation?
Also read:
- https://truelegalexpert.com/40-expert-answers-to-corporate-law-questions-for-startups/
- https://truelegalexpert.com/20-corporate-law-faqs-for-business-owners/
- https://truelegalexpert.com/25-questions-and-answers-on-corporate-compliance-and-regulations/
Answer: LLCs are easier to form, have pass-through taxation, and are more flexible with management, whereas corporations have a formal structure involving shareholders, directors, and officers.
Do I need an attorney to form a business?
Answer: No, but it would be wise to consult an attorney to ensure you comply with the state laws and draft the necessary documents correctly.
Business Formation and Registration
What is a corporate charter?
Answer: A document (Articles of Incorporation) filed with the state to officially create a corporation.
What are bylaws, and are they required?
Answer: Bylaws are internal rules governing a corporation’s operations. While not always legally required, they are essential for proper governance.
What is an operating agreement?
Answer: A document outlining ownership and management rules for an LLC, including roles, responsibilities, and profit distribution.
What is a registered agent?
Answer: A registered agent is a person or entity authorized to receive legal and official documents on behalf of the business.
What is an Employer Identification Number (EIN)?
Answer: A unique number issued by the IRS for tax reporting and identification purposes, similar to a Social Security number for businesses.
Corporate Governance
What is the role of the board of directors?
Answer: The board manages the corporation, makes top-level decisions, and ensures the corporation is in compliance with laws and policies.
What is a fiduciary duty?
Answer: A legal obligation requiring directors and officers to act in the best interests of the corporation and its shareholders.
What is corporate liability protection?
Answer: Protects owners’ personal assets from business debts and liabilities if the business is properly maintained as a separate entity.
What is piercing the corporate veil?
Answer: Owners may be held personally liable by courts for failing to keep personal and business finances separate or committing fraud.
What is a shareholder agreement?
Answer: A document stating the rights and obligations of shareholders in voting, profit distribution, and share transfer.
Compliance and Reporting
What are annual reports, and are they required?
Answer: Many states require corporations and LLCs to file annual reports to update information about ownership, management, and contact.
What is a certificate of good standing?
Answer: A document from the state confirming that a business complies with regulations and is authorized to operate.
What are the consequences of non-compliance?
Answer: Penalties include fines, loss of good standing, dissolution, or personal liability for debts.
Do corporations need to hold annual meetings?
Answer: Most states require corporations to hold annual shareholder meetings to review performance and make major decisions.
What is corporate recordkeeping?
Record Meetings, Resolutions, Financials, and Filings
This will help with compliance and being accountable.
Contracts and Agreements
Do I need written contracts for business dealings?
Answer: Yes, to avoid confusion and potential lawsuits.
What is a non-disclosure agreement (NDA)?
Answer: A legally binding document that is meant to prevent parties from leaking information during discussions or partnership dealings.
What is a non-compete agreement?
Answer: A covenant not to compete, which limits an employee or business partner from engaging in competitive business activities in a given region for a set period.
What is IP protection?
Answer: Legal protection for inventions such as trademarks, copyrights, patents, and trade secrets, allowing the owner exclusive rights to the property.
What is the purpose of employment agreements?
Answer: Employment agreements provide details on terms and conditions of employment, employee expectations, and employer and employee rights.
Tax and Financial Matters
What taxes do businesses need to pay?
Answer: Federal income tax, state taxes, payroll taxes, and possibly sales tax, depending on the nature and location of the business. What is the difference between S-corp and C-corp taxation?
Answer: C-corps are taxed at the corporate level, while S-corps allow income to pass through to shareholders’ personal tax returns. What is double taxation in a corporation?
Answer: Double taxation refers to the corporation paying taxes on profits and, in addition, the shareholders are taxed on their dividends.
What is the job of a business accountant?
Answer: An accountant assists in keeping financial records in order, filing taxes, and complying with financial requirements.
Do I need a business bank account?
Answer: Yes, to keep separate personal and business finances and keep liability protection in place.
Takeaways
Corporate law ensured that business organizations were structured, managed, and operated legally and in an efficient manner.
Knowing about the governance, compliance, and contractual obligation can help avoid legal risks.
Attending to legal and financial consultants can enable entrepreneurs to navigate complex laws and grow their businesses successfully.
Knowing these questions allows for a proper foundation to be laid and running a business properly while remaining compliant with corporate laws.