What is the Business Judgment Rule?

A director will not be found personally liable for a breach of duty of care if he or she meets the requirements of the business judgment rule ("BJR"). Under the BJR, a court will not second guess a business decision that in hindsight turned out to be poor or erroneous if the director acted in good faith and exercised due caution. Under California law, in discharging his or her duties “a director is entitled to rely on...

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Tips for Selling a Business in California

There are many reasons to consider selling a business, and there are just as many things to consider before and during the process. To streamline a sale, it would be helpful to be (or get) highly organized, making sure all assets are in order, the logistics of an exit strategy are in line, and all legal forms are squared away. There will be a lot to do to prepare for the sale, so the best thing to do is...

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Legal Considerations When Buying A Business

Buying a business requires a significant undertaking during which you will want to do your best to protect yourself and navigate around risks and hidden issues. This will include hefty market research, financial analysis, and of course legal advice.  Every transaction is unique, and there will be different considerations for different business types, but there are some general steps that each buyer should take when buying a business or assets. Investigate Prior to Buying a Business Once a buyer...

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What is an S Corp?

An S Corporation (“S Corp”) is known as a pass-through tax entity because business profits are only taxed at one level: the owner’s personal tax returns. Partnerships and LLCs may elect to be taxed as an S Corp, but corporations’ profits are taxed pursuant to the owner’s personal tax returns and the corporation pays its own taxes. This feature makes an S Corp an attractive business entity for those considering formation. S Corp An S Corp...

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RULLCA: California’s Revised LLC Act

In January 2014, California replaced its Limited Liability Company (LLC) law with the California Revised Uniform Limited Liability Company Act (RULLCA). RULLCA repealed the law that had governed California LLCs for two decades, and provides new provisions governing the formation and operation of limited liability companies. RULLCA will govern all California LLCs organized on or after January 1, 2014. The new law made several new changes to the formation process of an LLC. For example, if the...

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Requirements of a Properly Formed Business Entity

There are a number of options when it comes to choosing a business entity for a particular organization or business venture.  Business owners and entrepreneurs can greatly limit their personal liability by forming a business entity or reorganizing a business. Which entity is best suited to a particular owner, organization, or business venture will depend on evaluating which entity is most aligned with their business model and objectives. In California, entity options include a...

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