Choosing a business structure for your company? Two of the most common business entities in Orange County, California are corporations and limited liability companies. You need a good business attorney to help you incorporate your business or form a limited liability company.

But whether you are incorporating your business or forming a limited liability company in California, you also need to consider the requirements that you should comply with when your company has transitioned into an LLC or a corporation. There are various ongoing requirements that corporations and LLCs need to comply with regularly, and failing to do so in a timely manner can have major consequences. Learn more by reading through this page.

Basic Requirements of Businesses in CA

Business 101: Understanding the Types of Requirements

There are two categories for business compliance requirements and these are internal and external. Here are their differences:

1. Internal Requirements

Internal requirements refer to the actions that must be taken within the company. For corporations, the directors and shareholders are responsible for taking action while the members and managers are responsible in limited liability companies. Internal requirements are the most commonly overlooked type of requirements. These requirements must be documented as part of the company records. If there is a need to sell the company or in the event of a lawsuit, these records may need to be presented.

Corporations have the strictest internal requirements in Orange County, California. This includes holding both initial and annual director and shareholder meetings, creating and adhering to a set of bylaws, issuing stock to stockholders, and recording all stock transfers. This strictness in compliance with internal requirements applies to all types of corporations.

Limited liability companies are recommended to maintain an updated operating agreement, issue membership shares, diligently record all membership interest transfers and hold annual meetings of members and of managers.

Many business lawyers in California advise businesses to use a compliance kit to organize their corporate records. In corporations, these records may include bylaws, stock certificates, transfer ledger, a corporate seal, and sample meeting minutes. In an LLC, these may include the operating agreement, membership interest certificates, transfer ledger, the LLC seal, and also sample meeting minutes.

To simplify the internal requirements compliance process, it would be good to have document templates. Your corporate attorney can provide you with the templates for bylaws, operating agreements, and meeting minutes.

What are the Requirements for your Business?

2. External Requirements

External requirements are those that are imposed by the state of California. State compliance requirements include an annual report filing and payment of a corresponding state fee. It is important for all businesses in Orange County, California to comply with external requirements diligently.

Both corporations and limited liability companies in Orange County, California are required to file their annual reports. Annual reports are sometimes called annual statements. These reports are the means by which the state can track corporations and LLCs that were formed in Orange County, California. There is a corresponding fee to be paid when these reports are filed.

You should pay your tax annually to the Franchise Tax Board in the State of California for the privilege of operating as a corporation or a limited liability company in this state. This is one of the external requirements imposed by the state that all corporations and LLCs must comply with.

It is imperative that you keep track of the due dates for the filing of annual reports and for the paying of franchise taxes. Failure to comply within the due dates has corresponding consequences. Because these are ongoing external requirements, all businesses should research thoroughly and be aware of all requirements before they incorporate their business or form an LLC so that they can plan their budget properly.

Lastly, the state of California requires all corporations and limited liability companies to file initial reports and pay the corresponding fees. This should be done within months following business incorporation or LLC formation. For more information on these, you need the assistance of a competent corporate lawyer in Orange County, California.

The Consequences of Non-Compliance

If a corporation or a limited liability company is sued and is shown to have been unable to comply with all corporate or LLC formalities and state requirements, the judge can rule that the company has been acting like a sole proprietorship or general partnership business structure. This results in the piercing of the corporate veil. This means that the liability protection is stripped from them and the individual owner(s) could lose their personal assets in the event that a judgment is made against them.

Before the piercing of the corporate veil, there are other consequences that can also happen on the state level. For instance, if a corporation or a limited liability company does not comply with the state of California’s annual or ongoing requirements, that particular company will no longer be in good standing. There are many consequences of losing good standing. One disadvantage is that it will eventually lead to an administrative dissolution wherein all benefits of being a corporation or a limited liability company are lost. Ask your corporate attorney what the parameters are to maintain good standing for businesses in Orange County, California.

Legal Assistance from a Business Lawyer

Proper Assistance for Business Requirements Compliance

Whether you own a corporation or a limited liability company, you need to comply with both internal and external requirements to avoid unnecessary problems. To make sure you are able to comply with the necessary requirements, it is recommended that you have proper assistance. A competent business lawyer is a perfect advocate for you. Hiring one will protect your company from legal issues later on.

There are many competent business attorneys in California. The attorneys of Gale and Vallance are some of the most trusted corporate lawyers in Orange County, California. They also offer a variety of services including forming a limited liability company and incorporating a business in Orange County, CA. They also offer a corporate records program. For more information about them, contact them at (714) 634-1414 today!