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Forming a Corporation
Forming a Partnership
Operating a Corporation
Buying/Selling a Business
Contracts & Transactions
Avoiding Litigation
Law Office of James E. Lund, APC - Business Solutions

Operating businesses should generally avoid sole proprietorships or partnerships. Corporations, LLC's, and LLP's can protect business owners from liability and may provide significant tax advantages. We provide a one hour instruction on the six forms of business entities. We explain control, liability, and tax differences and similarities. We provide a Corporate Questionnaire that help our clients plan their business formation. We coordinate with our client's accountant to determine whether a C-corporation or S-corporation is better for tax purposes.

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We discourage partnerships of individuals (See Forming a Corporation above) but recommend partnerships of corporations or LLC's. We counsel our corporate clients on the control, liability, and tax issues related to both general partnerships and limited partnerships. We provide a helpful Partnership Formation Questionnaire that helps our clients organize the formation of their business.

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One purpose of forming a corporation is to avoid the exposure to personal liability for the business because a corporation provides a liability shield to the owner. In the early case of Associated Vendors the California Supreme Court listed 18 ways in which a creditor can pierce the corporate shield and sue the business owner directly. Serious omissions include failing to issue stock, failing to have annual meetings, failing to have written minutes, and comingling personal and corporate assets. On an annual basis we send a written reminder to all of our corporate clients advising them of the need to have a meeting, with written minutes, that addresses the issues required by the Associated Vendors case. We discuss the startup phase and the retained earnings phases of the business. We discuss with our clients and their accountants the tax consequences and the differences between C-corporations and S-corporations. At our annual meetings we discuss topics relevant to that specific client such as medical reimbursement plans, special employee benefit packages, retirement planning, successorship planning, and corporate governance issues. We also cooperate with the corporate accountant in minimizing tax consequences and maximizing tax avoidance through the corporate form of doing business.

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We advise sellers and buyers, we negotiate and draft purchase agreements, and we properly document transactions so our clients are protected. We provide a Business Buy/Sell Questionnaire so our clients know from the start what information is necessary and so they can make better choices.

There are two basic ways to buy or sell a business: a stock purchase or an asset sale.

In a stock purchase, the seller sells the corporate stock to the buyer. At all times the corporation continues doing business and it may maintain the same bank accounts. Ongoing relationships with customers, vendors, and employees do not change.

In an asset sale the seller sells the assets of the business which may include a location, name, phone numbers, customer files, equipment, and/or inventory. Frequently, the buyer will only want part of the assets or may already have an existing business. An asset sale is the only way to sell a sole proprietor owned business. We advise asset buyers to consider using a Bulk Sale Notice and escrow to protect from claims by customers, vendors, or employees of the seller, which may be brought after the buyer has purchased the business.

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We assist our clients to comply with government regulations in regard to all of their transactions. Our contractor clients receive documentation which complies with the rules and regulations of the Contractor's State License Board. Our real estate broker clients receive documentation which fully and adequately addresses required disclosures. Business clients receive employment documentation which complies with both state and federal laws.

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All business clients are constantly exposed to litigation and it is our job to train our clients with the skills and systems necessary to avoid litigation. Litigation provention requires a legal audit in which all of the contractual relationships of our business clients are reviewed. Our clients relationships with their customers, their vendors, and their employees need to be documented in a way that avoids uncertainty and unforeseen consequences. Our documents maximize clarity in business relationships. In most cases we recommend documents which are simple, easy to understand, and provide our clients with a framework of legal documentation that inherently avoids threats of litigation. We also advise regarding employment solutions that include employment agreements, employment handbooks, covenants not to compete, non-disclosure agreements, and agreements which prohibit former employees from soliciting current employees to leave our business clients.

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249 East Fourth Avenue
Escondido, CA 92025
760.747.7800 | (Fax) 760.489.8423