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Basics of Incorporating a Business

san jose business attorneysAmong the various forms a business can take, the corporation is both the most complicated and difficult to create and maintain. However, a corporation provides certain advantages, such as limited personal liability, that some other structures do not.  San Jose business attorneys can help you determine whether a corporation is the right form for your business.

Limitations on Personal Liability

As mentioned, one of the chief advantages of corporations is that the owners are not usually liable for debts or lawsuits against the business. Only an owner’s investment in the business is at risk. As your San Jose business attorneys will advise, however, there are exceptions to this protection. You, as an owner, can be personally liable for corporate debt if:

  • A bank loan is made with your personal guarantee.
  • You misappropriate funds withheld from employee wages.
  • You mingle your personal affairs with those of the business.
  • You commit fraud that brings harm to the business.
  • Your actions personally injure another.

It is important to note that, in some cases, a court can rule that a corporation never existed. This may occur if you fail to abide by rules of incorporation. Note also that, just as your personal assets are protected by virtue of the corporate form, you should carry liability insurance to protect the company.

How to Form a Corporation

  • You may find it helpful to work with a San Jose business lawyer as you set up your corporation. The following are steps necessary to this end:
  • File articles of incorporation with the state secretary of state.
  • Create the corporate bylaws.
  • Issue stock certificates to the initial shareholders.
  • Make sure to keep a record of who possesses ownership interest.

In addition, you need to abide by certain rules in order to remain a corporation. These include holding annual shareholders’ and directors’ meetings, keeping minutes of all major decisions, retaining accurate financial records, and filing an income tax return.

Contact San Jose Business Attorneys

If you would like assistance with setting up a corporation, San Jose business attorneys can help. Call The Freed Law Firm today at 831-661-0300.

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