Business & Real Estate Law
Running a business is complicated enough without having to handle legal issues, but employing a full-time in-house counsel for your day-to-day legal issues can be prohibitively expensive. SONA LEGAL APC solves this problem by offering cost-effective legal solutions that eliminate the need to employ a full-time attorney. Below are some common examples of the ways in which SONA LEGAL APC can be of service to you or business.
- Sole proprietorship
- General partnership (GP)
- Limited partnership (LP)
- Limited liability partnership (LLP)
- Professional Corporation
- Limited liability company (LLC)
Advantages of a sole proprietorship include:
- Ease of formation – a sole proprietorship does not require the filing of many documents. The only documents necessary may include a ‘doing business as’ (DBA) filing or a local business license, if necessary.
- Low cost – other than the fees related to the filing of a DBA or business license there are no legal fees associated with the creation of a sole proprietorship.
- Pass-through taxation – income is taxed on the owner’s personal tax returns.
Disadvantages of a sole proprietorship include:
- No liability protection – a sole proprietorship offers no liability protection whatsoever for its owner. The owner is personally liable for all business activities, debts, and liabilities. This extremely high degree of exposure is the reason most successful sole proprietorships eventually make the switch to a different business entity.
- No additional owners or stockholders – a sole proprietorship can only have one owner and cannot raise additional capital through the recruitment of additional owners or stockholders.
- No continued existence – a sole proprietorship ends upon the death or incapacity of its owner.
Sole proprietorships are appropriate for individuals with limited startup funds who want to start a small business and know that they will only face limited liability exposure. Alternatively, a sole proprietorship can be a useful vehicle for someone seeking to grow organically prior to switching to a different entity structure. SONA LEGAL APC can assist you with the filing of a DBA and/or business license for your sole proprietorship.
Advantages of a general partnership include:
- Ease of formation – a general partnership does not require the filing of many documents. The only documents necessary may include a ‘doing business as’ (DBA) filing or a local/county business license, if necessary.
- Low cost – a general partnership requires the drafting of a general partnership agreement and may require the filing of a DBA or business license. However, overall the costs and fees associated with a general partnership are low.
- Pass-through taxation – in California, general partners may report and pay taxes on their individual tax returns.
- Separate legal entity – in California, a general partnership is separate and distinct from its owners. A general partnership can own real estate and other property in the name of the partnership.
- Unlimited Owners – a general partnership can have an unlimited amount of owners, and its owners need not be U.S. residents or citizens.
Disadvantages of a general partnership include:
- No liability protection – a general partnership offers no liability protection whatsoever for its owners. The owners are personally liable for all business activities, debts, and liabilities. This extremely high degree of exposure is the reason most successful general partnerships owners eventually make the switch to a different business entity.
- Difficult ownership transfer – general partners cannot easily transfer their partnership ownership interests.
- Fiduciary obligations – each partner has a fiduciary obligation to the other partners, including a duty of loyalty, good faith, and fair dealing. This high standard can potentially lead to partner conflict and litigation in the event of adverse circumstances.
- No continued existence – generally a partnership terminates when one of the general partners: (1) quits the partnership; (2) becomes incapacitated; or (3) is deceased.
General partnerships are appropriate for individuals or entities with limited funding who want to start a small business and know that they will only face limited liability exposure. SONA LEGAL APC can assist you with the drafting of a partnership agreement as well as the filing of a DBA and/or business license.
Advantages of a limited partnership include:
- Limited liability for limited partners – generally, a limited partner’s liability for the limited partnership’s debts and liabilities is proportional to the amount of their investment.
- Pass-through taxation – in California, limited partners may report and pay taxes on their individual tax returns so long as the partnership is in compliance with partnership formalities.
- Ownership transfer – limited partners can easily transfer their respective interests in the partnership.
- Capital transfer – limited partners can easily contribute capital to the partnership.
Disadvantages of a limited partnership include:
- No liability protection for general partners– a general partnership offers no liability protection whatsoever for its general partners.
- Higher cost – limited partnerships are more expensive to form than sole proprietorships or general partnerships.
- Limited partnership formalities – a limited partnership loses liability protection for its limited partners if the limited partnership fails to follow corporate formalities.
Limited partnerships are appropriate for single or short-term projects, or for projects where one partner is to be the manager and the others simply provide capital. Formation of a limited partnership requires the filling of a certificate of limited partnership and execution of a limited partnership agreement. SONA LEGAL APC can assist you with the drafting of a limited partnership agreement, observance of partnership formalities, and the filing of the limited partnership certificate.
Advantages of a limited liability partnership include:
- Limited liability – generally a partner in an LLP is not responsible for the debts and liabilities of the other partners.
- Pass-through taxation – in California, limited liability partners may report and pay taxes on their individual tax returns so long as the LLP is in compliance with partnership formalities.
Disadvantages of a limited liability partnership include:
- Limited to certain professions– in California, each partner in a limited liability partnership must be a person licensed under California law to practice accountancy, law, or architecture.
- Insurance – California LLPs are required to have insurance or a minimum net worth.
- Difficult ownership transfer – the partnership cannot be sold as whole, limited ownership transfer options.
Limited liability partnerships are used by licensed professionals who are prohibited from forming an LLC or who prefer the less rigid legal requirements of a partnership structure over a corporate structure. Formation of a limited liability partnership requires the filling of a certificate of limited liability partnership and execution of a limited liability partnership agreement. SONA LEGAL APC can assist you with the drafting of a limited liability partnership agreement as well as the filing of the limited liability partnership certificate and observance of partnership formalities. SONA LEGAL APC can also assist you with ownership transfer and insurance issues.
Advantages of a C-corporation include:
- Limited liability – providing that all corporate formalities are followed, the C-corporation provides excellent protection against the liabilities and debts of its shareholders. Management participation or lack thereof is not determinative for liability purposes.
- Attractive to investors – from both a tax perspective and funding perspective, C-corporations are by far the most attractive investment vehicles for investors and venture capital firms.
- Flexible share structure – unlike S-corporation, C-corporations allow for multiple classes of stocks, and unlike LLCs a C-corporation may issues stock options to employees and agents of the corporation. Financial instruments and vehicles available include preferred stock, warrants, notes, subordinated debt, and others. There is no limit to the number of permissible shareholders.
- Continued Existence – C-corporations continue to exist beyond the death or incapacity of shareholders.
Disadvantages of a C-corporation include:
- Double taxation– a C-corporation is taxed at both the corporate level on corporate income and on the shareholder level after the C-corporation distributes profits to its shareholders (income tax).
- Corporate Formalities – a C-corporation requires adherence to numerous corporate formalities, record keeping, and filing requirements. Failure to follow corporate formalities can potentially eliminate the liability protections afforded by the corporation.
- Cost – the cost to start and operate a C-corporation is higher than for other business entities.
C-corporations are the ideal vehicle for business seeking both extensive liability protection as well as significant capital funding. C-corporations are the entities of choice for business that eventually want to go public. Although the corporate formalities can be onerous, it is this extensive record of business activities and finances that adds to the attractiveness of the C-corporation as a investment vehicle. SONA LEGAL APC can assist you with setting up a C-corporation – including the drafting of all necessary documents-, observing the required corporate formalities, and ensuring that all required paperwork is filed on a timely basis.
Advantages of an S-corporation include:
- Limited liability – providing that all corporate formalities are followed, the S-corporation provides excellent protection against the liabilities and debts of its shareholders. Management participation or lack thereof is not determinative for liability purposes.
- Pass-through tax treatment – unlike C-corporations, S-corporations are only taxed at the shareholder level. Therefore, early losses on an S-corporation can be written off on individual tax returns up to the amount of the investment. Certain types of corporate debt can also be written off.
- Option to convert to C-corporation – provided the correct procedures are followed when the S-corporation is created, an S-corporation can easily be converted into a C-corporation.
- Accounting – accounting is generally less complex for an S-corporation than for a C-corporation.
Disadvantages of an S-corporation include:
- Shareholder limitations– an S-corporation is limited to U.S. Citizens or residents, certain types of trusts, and individual estates.
- Share limitations – S-corporations can only issue one class of stock, although different voting rights are permitted.
- Corporate formalities – an S-corporation requires adherence to numerous corporate formalities, record keeping, and filing requirements. Failure to follow corporate formalities can potentially eliminate the liability protections afforded by the corporation.
S-corporations are the ideal vehicle for businesses seeking both extensive liability protection and pass-through tax treatment. S-corporations also have the added benefit of being able to convert into a C-corporation when the time is right. SONA LEGAL APC can help you set up an S-corporation and prepare the required paperwork, observe the required corporate formalities, and ensuring that all required paperwork is filed on a timely basis.
Advantages of a limited liability include:
- Limited liability – Generally the members of a limited liability company are not personally liable for debts and liabilities in proportion to the amount of shares owned. Management participation or lack thereof is not determinative for liability purposes.
- Pass-through tax treatment – limited liability companies are only taxed at the member level (unless the LLC elects to be taxes as a corporation).
- Management simplicity – limited liability companies have far more flexibility in the management of the business than corporations.
- No ownership limits – unlike an S-corporation, LLCs are not subject to ownership limitations.
Disadvantages of a limited liability company include:
- Complex accounting and tax requirements– an LLC is generally subject to partnership tax rules, which can be complex and time-consuming.
- Capital funding more difficult – institutional investors typically do not invest in LLCs, and the conversion of an LLC to a C-corporation is time consuming and expensive.
- Structure – an LLC cannot easily grant options to employees and agents and cannot easily issues complex securities.
- Certain Professions Not Permitted – certain types of professional services, including but not limited to legal and accounting services, may not be offered through an LLC.
- Public benefit corporation, which exists for a social, educational, recreational, or charitable purpose;
- Religious corporation; and
- Mutual-benefit nonprofit corporation, a type of nonprofit corporation chartered by a state government.
Nonprofit corporations are often taxed differently than for-profit corporations and are subject to different laws and regulatory mechanisms. SONA LEGAL APC can assist you with both the formation of a nonprofit corporation and day-to-day legal issues facing such entities.
- incorporation documents.
- purchase and sales agreements;
- contribution agreements;
- merger and separation agreements;
- share and stock agreements.
SONA LEGAL APC drafts and reviews the above contracts as well as any other contracts that are necessary for the planning issues of your business entity.
- reorganization agreements;
- equipment/material leases;
- government contracts;
- joint venture agreements;
- sales and marketing agreements;
- services agreements;
- vendor agreements;
- employment agreements;
- independent contractor agreements;
- warranty agreements;
- limitation of liability/assumption of risk agreements;
- subscription agreements;
- licensing agreements;
- strategic alliances;
- real property leases.
SONA LEGAL APC can assist you with the drafting and review of these contracts and many more.
- charitable giving plans;
- governance agreements;
- nondisclosure agreements;
- corporate resolutions;
- shareholder and/or board agreements;
- corporate bylaw amendments;
- share offerings.
SONA LEGAL APC can assist with any of the above and more.
Real Estate Transactions
- commercial leases.
- commercial real estate sales and purchases.
- commercial financing.
- due diligence.
- preparation of form documents for client costumers and tenants.
- negotiation and drafting of residential leases.
- negotiation and drafting of residential real estate sales and purchases.
- lender financing.
- due diligence.
- unlawful detainers.
- landlord/tenant disputes.
- easement and right of way disputes.
Other Business Law Issues
- Whether the person performing services is engaged in an occupation or business distinct from that of the principal;
- Whether or not the work is a part of the regular business of the principal or alleged employer;
- Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
- The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;
- Whether the service rendered requires a special skill;
- The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
- The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;
- The length of time for which the services are to be performed;
- The degree of permanence of the working relationship;
- The method of payment, whether by time or by the job; and
- Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.
In certain circumstances, a worker can even be found to be an employee even where there is an absence of control over work details. The fact that an owner has an independent contractor agreement is not determinative as to the existence of such a relationship.
A failure to properly designate an employee as such can not only lead to a situation where the owner is required to provide back pay for overtime, back taxes, and other assorted costs, but can also lead to severe statutory penalties that are assessed in multiples of the original amount owed. It is therefore crucial for business owners to adequately designate its workers as either employees or independent contractors. SONA LEGAL APC can ensure that your business is in compliance with California law and can help you avoid the significant costs and legal fees that can result from erroneous worker classifications.
Sona Legal APC offers competitive subscription packages for business with recurring legal needs that provide peace of mind without breaking the bank. For a low monthly subscription fee, Sona Legal is available for consultation, drafting, comprehensive legal audits, and discounted hourly rates for overflow work. Please contact us for more details regarding our legal subscription packages.