Perhaps you have set up your startup or are managing an already established company, but being familiar with corporate law would have certainly given you some insight into protecting your business, assuming risks, and being in compliance. Corporate law deals with how companies are created, operated, and regulated—making sure the company and all interested parties do so within the boundaries of law.
As a business owner, here are a few fundamental principles of corporate law that can aid you in making better business decisions and avoiding legal pitfalls.
Business Formation: Deciding on the Proper Legal Entity
Formation of businesses must first determine what type of legal entity the business will have. Some of the corporate forms include:
- Sole Proprietorship
- Partnership
- Limited Liability Company (LLC)
- Corporation (C-Corp and S-Corp)
Corporate law deals with the frameworks around the formation, taxation, and management of these entities. Many business owners decide to incorporate or form an LLC so that they limit personal liability and separate business debts from personal assets.
Corporate Governance: Differentiating Roles and Duties
Once your business is incorporated, it is then governed according to corporate law. Shares are distributed amongst three groups:
- Shareholders – Owners of the company
- Directors – Those elected by shareholders to oversee strategic direction
- Officers – Charge of the running of the day-to-day (e.g., CEO, CFO)
To comply with the corporate governance regulations and maintain an orderly business structure, keep copies of basic documents such as articles of incorporation, bylaws, and minutes of meetings.
Contracts and Agreements
Corporate law deals with contracts like vendor agreements, employment contracts, terms for clients, and arrangements with investors. A well-drafted contract protects the interests of your business and minimizes the chances of conflict.
Corporate lawyers help you ensure that your contracts:
- Are entered legally
- Clearly define some roles, responsibilities, and expectations
- Include protective clauses (non-compete, indemnification, confidentiality)
Compliance and Recordkeeping
Certain laws and regulations must be followed by business operations, including these:
- Filing annual reports
- Corporate tax payment
- Keeping licenses up to date
- Keeping current records and minutes of board meetings
If these are not carried out, the business may be penalized through fines, lawsuits, or even loss of limited liability status.
This article was written by Alla Tenina. Alla is one of the best tax attorneys in Los Angeles California, and the founder of Tenina Law. She has experience in bankruptcies, real estate planning, and complex tax matters. Click here for more information. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. This website contains links to other third-party websites. Such links are provided for the convenience of the reader, user, or browser; the ABA and its members do not recommend or endorse the content of the third-party sites.