California Business Lawyer Blog

Undue influence (as a term in jurisprudence) is an equitable doctrine that involves one person taking advantage of a position of power over another person. It is where free will to bargain is not possible says California Business Lawyer Steven C. Peck.

Undue influence in contract law:
If undue influence is proved in a contract, in U.S. law, the contract is voidable by the innocent party, and the remedy is rescission. There are two categories to consider:

Actual undue influence:
An innocent party may also seek to have a contract set aside for actual undue influence, where there is no presumption of undue influence, but there is evidence that the power was unbalanced at the time of the signing of the contract.

Undue influence in probate law:
"Undue influence" is the most common ground for will contests and are often accompanied by a capacity challenge. In probate law, it is generally defined as a testator's loss of free agency regarding property disposition through contemporaneous psychological domination by an advisor which results in an excessive benefit to the advisor. It is important to note that "undue influence" is only an issue when the advisor is benefiting, not when advisor is getting a benefit for someone else; in that case it would be considered fraud. In litigation most jurisdictions place the burden of proving undue influence on the party challenging the will.

Continue reading "What is Considered The Basis of Undue Influence?" »

The major difference between a corporation being a C corporation or an S corporation is that S corporations use the pass-through taxation that partnerships use, while C corporations are subject to double taxation says Van Nuys, California Business Lawyer Steven C. Peck.

If this is an issue you are considering, you should meet with an business attorney and/or a tax advisor so that you can figure out what works best for your situation. Also, you should remember that this decision is not a permanent one, so if you initially elect to set your corporation up as an S corporation, you can always change it over to a C corporation later. In addition, if you are giving serious consideration to an S corporation because of the pass-through taxation, you should also consider setting up your business as an LLC, which also generally has pass-through taxation indicates Los Angeles Buisness Lawyer Steven C. Peck.

Continue reading "Should I Set Up a C Corporation Or An S corporation?" »

Gossiping is many people's favorite pass time. They just cannot stop talking about everybody else's life. If they come to know about somebody else's secret, they have to discuss it with their daily gossip partners. But imagine, if someone ever gets charged with criminal offense for leaking out a secret? You must be wondering what is the connection between gossiping and confidentiality agreement. Well, Confidentiality agreement came in to existence, so that, certain secrets or confidential informations are not leaked out.

As the name suggests, confidentiality agreement is signed when, parties involved in the contract do not want to disclose the information to the third party. It is generally signed between individuals, companies, corporations, societies, etc. who want to share each other's knowledge, information, business strategies, trade secrets, or any other confidential information. Any third party is restricted from accessing this information. Within a contract period, if any of the party discloses confidential information to the party outside the contract, it is considered a crime, and is liable to punishment. Confidentiality agreement is also known as, non disclosure agreement. Confidentiality agreement can be unilateral, where only one party shares information with another and wants to keep it confidential. Other type of confidential agreement is mutual agreement, wherein, both the parties share confidential information. The agreement is essentially signed by the lawyers of respective companies. Below given is a confidentiality agreement template and example, that will explain to you what confidentiality agreement is all about.

Suppose, a company manufactures a popular cola drink. There is one more rival company in to cola manufacturing. They both decide to come together and share each other's cola drink ingredients and marketing strategies hoping that this may improve the sales of their cola drink, fetching them more revenues and profits. This would be beneficial to both the companies to establish their monopoly in the market. But, if either of the company, shares the other company's secret with a third cola manufacturing company, then the victim company may have to suffer severe losses. In order to avoid this, both the companies sign the confidentiality agreement, which is a legal document.

Since a sole proprietorship is not a separate legal entity from its owner, the owner is on-the-hook for any liability attached to the business. So if someone wins a lawsuit against your sole proprietorship (such as in a claim for negligence, or default on a contract), you will be legally obligated to cover that judgment. This is one of the greatest risks in starting a sole proprietorship (because several other business forms offer their owners limited liability), particularly where there is any potential danger connected to your business, its operation and/or its products.

Continue reading "What Happens If A Sole Proprietorship Is Sued?" »

There are times when a business or entrepreneur would benefit from sharing confidential and valuable information with a third party. Yet, some business owners and entrepreneurs hesitate because they are concerned about what the third party will do with the information. They do not want the confidential information shared with others or used by the third party for that party's own benefit. The law recognizes the important business interest of keeping certain information confidential and the need to consult with third parties in order to make a business more profitable or to allow a new idea to be implemented. A confidentiality or nondisclosure agreement can allow the business or entrepreneur to share information with a third party and be confident that it the information will remain classified says California Business Lawyer Steven C. Peck.

When to Use a Confidentiality Agreement or Nondisclosure Agreement:
Confidentiality and nondisclosure agreements can be used in many business situations. Some common situations where these types of agreements may be useful include when:
You are soliciting investors, partners or contractors for an invention or new business idea;
You are negotiating with a potential buyer of your business, invention or idea; or
A contractor or employee will have access to confidential data that could be financially detrimental to your business should it be disclosed.
What to Include in a Confidentiality or Nondisclosure Agreement
There are two types of confidentiality or nondisclosure agreements.
One type is called a unilateral agreement where the party presenting the agreement is requesting that the other party keep the information confidential but does not require itself to maintain confidentiality. The other type is called a mutual agreement where both sides agree to maintain confidentiality.
In order to enforce a confidentiality or nondisclosure agreement it is important that the agreement be in writing. When you are drafting your agreement, it is useful to consider whether the following elements should be included:
A description of the confidential information so that both parties understand the scope of the agreement;
A description of why the confidential information is being shared in this case and how it may be used. Generally, parties receiving confidential information must use it only for the limited purpose of the contract and not in any other way;
An agreement by the parties that the information will not be disclosed during the term of the contract; and
Other provisions as are necessary to the needs of the parties to the confidentiality or nondisclosure agreement.
Most confidentiality and nondisclosure agreements are in writing, dated and signed by both parties. While state law may allow for oral contracts, it is important for business contracts to be in writing in case of a future dispute. It is particularly important in narrowly drafted confidentiality agreements indicates Los Angeles Business Lawyer Steven C. Peck.
Confidentiality and nondisclosure agreements fulfill an important business objective. They allow businesses to obtain financing, outsource certain jobs to experts and to pursue selling their business with the security that important business secrets will remain confidential and will not be used to compete with their own business interests.

If you have decided to start up a business, you are require to include an articles of association within your documents. Once you have established the name and team members, you must be sure to take care of the administrative items. Prior to operating a business, you are required to complete a few forms, one of those items needed to start up a business are the Articles of Association.

What is the Article of Association?
The Articles of Association is a contractual document, required by law. It details the owner, its board members and finances. The document spells out the roles and responsibilities of its members, position terms of board members, voting rights, the guidelines for how meetings are conducted and how often the board meets.

It also documents general information about the business such as the name and physical location and the purpose of the company. In addition, the articles of association must include the shares of the company, the value, and how it is split between the board. Overall, the article of association spells out who, what, why, financial reconciliation, and dissolution process of a company. It works as a blueprint of the business.

Continue reading "The Articles of Association In A Business Startup" »

Whether you are looking to start a business anywhere in Los Angeles, reorganize an existing business, or simply need advice concerning day-to-day business transactions, you want a law firm or experienced corporate law attorney in Los Angeles who will be able to give you and your corporate legal concerns as much attention and effort as possible. Corporate law attorney understands that in business, time is real money. They respect both their clients' time and money and are energetic in their efforts to provide the most efficient, economical, and successful legal services. The most successful companies not only start out with quality financial guidance, but also with proper legal counsel from a qualified and experienced corporate law attorney.

General Business and Corporate Law Services:

A corporate law attorney is eager to put his knowledge and proficiency to work for you with the following practice matters:

Entity Formation
Acquisitions and Dispositions
General Business Contracts
Attentive- Proficient- Tenacious

When you need legal assistance, contact California Business business Lawyer Steven C. Peck. He has helped countless families,individuals, and business owners finding expert solutions to the legal problems clients face.

They are experts and provide a comprehensive range of services to their business clients ranging from:

Preparation of agreements, filing and publication requirements
Sale and purchase of Businesses
Mergers,acquisitions, and joint corporate ventures
Corporate Dissolution
Business succession planning
Advising clients in businesses recapitalizations, redemptions, reorganizations, and formation.
Legal Contract Preparation
Handling all documentation, filing and publication requirements for the creation of corporations
Help in determining which entity will best suit your needs.
Reasons for hiring Corporate Law Attorney for Business Majors

Attorneys do their job by having a firm grasp of Federal, State, and Local laws, and they use their specialized knowledge to help their clients' cases. The occupation of lawyers, or attorneys, is a professional field that will always be needed. If you are facing litigation, you need to hire a qualified corporate law attorney. Even if you aren't faced with litigation, an experienced corporate law attorney can advise and assist you in drafting business plans, fundamental business formation and structuring financing provisions.

The risks and costs of business litigation later down the road are too great to not engage a business litigation attorney before you enter into entity formation, or general business contracts legal formalities. Business law attorneys can help you with all of your business litigation needs. They are committed to working closely with you to come up with solutions that achieve your objectives in an efficient and cost-effective manner. They respect the value of your time and money, and are expert in handling your transactions correctly the first time, alleviating any errors.

Contact Steven Peck's Premier Legal toll free at 1.866.999.9085 to talk to an experienced California Business Attorney and visit us on-line at www.premierlegal.org.

When you first set up your corporation, you incorporate in one particular state, which is where you file your articles of incorporation and pay the necessary filing fees. All states except for the state you incorporate in are generally referred to as "foreign states." If your corporation is going to be doing business in foreign states, you generally have to register your corporation with that state as a foreign corporation. This is known as qualifying as a foreign corporation says California Business Attorney Steven C. Peck.

The process of qualifying as a foreign corporation is similar to the process of incorporating your corporation. You generally have to file your articles of incorporation (along with any other information required by the foreign state) with the foreign state's secretary of state. You also usually have to include certain filing fees when you do this and you will have to establish a registered agent who is resident in that state. As with your state of incorporation, you will have to make periodic filings and/or fee payments to the foreign states you are qualified in, so you will have to ensure that you keep on top of this indicates California Business Lawyer Steven C. Peck.

While most states require foreign corporations doing business in their states to qualify, many smaller companies generally do not do this. While this is a violation of state law, most states do not actively enforce these violations against small business. However, if you chose not to qualify your corporation, you should realize that you are doing so at your own risk.

Continue reading "Registering Your Corporation In a "Foreign" State" »

A mechanic's lien is a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property. The lien exists for both real property and personal property. In the realm of real property, it is called by various names, including, generically, construction lien. It is also called a materialman's lien or supplier's lien when referring to those supplying materials, a laborer's lien when referring to those supplying labor, and a design professional's lien when referring to architects or designers who contribute to a work of improvement. In the realm of personal property, it is also called an artisan's lien. The term "lien" comes from a French root, with a meaning similar to link; it is related to "liaison." Mechanic's liens on property in the United States date from the 1700s.

Reasons for existence:
With respect to real property, mechanic's liens are purely statutory devices that exist in every state (although in one state, as noted below, they have a constitutional foundation). The reason they exist is a legislative public policy to protect the contractors. More specifically, the state legislatures have determined that, due to the economics of the construction business, contractors and subcontractors need a greater remedy for non-payment for their work than merely the right to sue on their contracts. In particular, without the mechanics' lien, subcontractors providing either labor or materials may have no effective remedy if their general contractor isn't sufficiently financially responsible because their only contractual right is with that general contractor.

Without the mechanic's lien, the contractor would have a limited number of options to enforce payment of the amounts owed. Further, there is usually a long list of claimants on any failed project. To avoid the specter of various trades, materialmen and suppliers attempting to remove the improvements they have made, and to maintain a degree of equality between the various lienors on a project, the statutory lien scheme was created. Without it, Tradesperson A may try to "race" Supplier B to the courthouse, the project site or the construction lender to obtain payment. Most lien statutes instead mandate strict compliance with the formalized process they create in return for the timely resolution and balancing of claims between all parties involved - both owners and lien claimants.

In the state of California, mechanic's liens are a constitutional right guaranteed to contractors by the California Constitution.This right has been implemented in detail by statutes enacted by the California State Legislature. In Texas the Texas Constitution give builders the right to lien and sub contractors are given the right under Chapter 53 of the Texas State Property Code.
Vehicles:
If a person has repaired, furnished supplies or materials, towed or stored a vehicle and has not been paid for the services rendered, that person has a lien against the vehicle. The lien arises at the time the registered owner is presented with a written statement of charges for completed work or services. Although if services were performed that were not agreed upon and no written and signed estimate was issued beforehand, a mechanic has no right to keep the title owner from reclaiming the vehicle. If a mechanic asserts a fee that is not reasonably related to the work performed, and refuses to return the vehicle until that price is paid, the owner of the vehicle will be able to recoup a storage fee from the mechanic, as the mechanic is in the wrong for refusing to return the vehicle. In doing so the mechanic would commit the crime of conversion, or Embezzlement

If the vehicle is towed by a public agency or private towing company, the lien arises when the vehicle is towed or transported. The lien may be satisfied by selling the vehicle through the lien sale process.

To conduct a lien sale, the person/lienholder must have possession of the vehicle and have lien sale authorization from DMV. Interested parties, including the registered and legal owners of record will be notified before the sale occurs.

Creation:
Mechanic's liens exist to secure payment for services, labor and material on both personal and real property. However, the creation and enforcement mechanisms differ depending on whether real or personal property is involved. The law of mechanic's liens on real property governs the creation and enforcement of these liens on items of personal property that have been attached to real property in such a way as to be a fixture.

Creation and enforcement - personal property:
The English common law recognized mechanic's liens respecting only personal property. The lien was created by operation of law by the fact of the artisan working on the personal property item or attaching additional material to it. However, to maintain the lien, the artisan had to retain possession of the article until he or she was paid. If the property were returned to the owner before that time, the lien was lost. The lien was enforced by a "self-help" sale of the property and applying the sale proceeds to payment of the amount owed for the workmanship. The sales were non-judicial, i.e., they were held in the same way as a sale of property pawned for a debt.

Some 34 states now appear to have statutes providing for mechanic's liens on personal property.] These statutes tend to modify the common law rules. For example, in Virginia, a mechanic's lien can only be enforced up to the amount of $625, and if the property is valued at over $5,000, it must be sold at a sheriff's auction ordered by the court of appropriate jurisdiction.

Creation, perfection, priority and enforcement - real property:
Mechanic's liens on the title to real property are exclusively the result of legislation. Each state has its own laws regarding the creation and enforcement of these liens, but, overall, there are some similar elements among them.

Real property of the government (public property) is ordinarily not subject to the claims of private parties. Therefore, unless the state specifically so provides, mechanic's liens do not attach to the title owned by the state or its administrative subdivisions, such as cities. Similarly, mechanic's liens under state law are invalid on federal construction projects. To protect subcontractors and suppliers working on federal projects where the contract price exceeds $100,000.00 the Miller Act requires general contractors to provide a surety bond which guarantees payment for work done in accordance with the terms of the contract. Many state and municipal governments similarly require contractors on public works projects to be bonded.

Creation and perfection:
Under the statutes, the lien is usually created by the performance of labor or the supplying of material that improves the property. Just what type of contribution counts as a valid basis for a mechanics lien varies, depending on the particular state statute that applies. Some common examples are:

Laborers, carpenters, electricians, mechanical/HVAC contractors and plumbers working on the project site;
Lumber yards, plumbing supply houses and electrical suppliers;
Architects and civil engineers who drew up the construction plans and specifications; and
Offsite fabricators of specialty items that are ultimately incorporated into the project.
Often, there is no simple dividing line that is useful in every state, or even in every case, for determining this eligibility. Deciding whether a party has a legitimate lien right may depend on examining court cases that have either upheld or rejected lien claims in the same state.

Unlike other security interests, in most states, mechanic's liens are given to contractors and material suppliers who may or may not have a direct contractual agreement with the owner of the land. In fact, this is often the norm because in most cases, the owner of the land contracts only with a general contractor (often called a "prime contractor"). The general contractor, in turn, hires subcontractors ("subs") and material suppliers ("suppliers") to perform the work. These subs and suppliers are entitled to liens on the owner's property to secure their payment from the general contractor.

However, to have an enforceable lien, it usually must be "perfected." This means that the holder of the lien must comply with the statutory requirements for maintaining and enforcing the lien. These requirements, which contain time limits, are generally as follows:

Providing the required preliminary notice to the property owner disclosing the entitlement to the lien (some states).
Filing notices of commencement of work (some states).
Filing notices in the required public records offices of the intention to file a lien if unpaid (some states).
Filing the notice or claim of lien in the required public records offices within a specified period of time after the materials have been supplied or the work completed (all states). The law varies from state-to-state on both the triggering event and the timing of this. Some states require the filing within a period measured from the time when the claimant completes its work, while others specify the event as being after all work on the project has been completed. The filing time periods after the triggering event vary, with 4-6 months being common.
Filing a lawsuit to foreclose the lien within a specified time period.
Priority respecting other interests
The statutes creating mechanic's liens usually give them a higher priority with respect to other interests in the title than the law gives most real property security interests. Among other things, priority is the attribute that determines which of several competing security claims will have the first claim to the funds of a foreclosure sale. In this context, the priority of a mechanic's lien is determined either by the time the lien attaches to the title to the property or by the point in time to which it "relates back." With some exceptions, the lien attaches or relates back to a time prior to the time that any notice of it appears in the public records. In many states, this is specified as the time when the first visible construction commences on the building site. In others, it is when the contract is executed for the work to be done. In still others, each contractor or supplier's lien attaches at the time when it commences its own work. Therefore, persons dealing with the owner of the title to the property risk having their interests unexpectedly subject to mechanic's liens of which they had no knowledge.

Special provisions are made in some states for determining the priority between a mechanic's lien and the lien of a mortgage that is financing the construction on the land. For instance, in the State of New York, the appearance of specified language in the mortgage to the effect that it is a construction loan preserves its priority over mechanic's liens arising out of the construction, as long as subsequently filed lien claims that are legitimate are not ignored. In other states, such as Florida, it is an all or nothing proposition. There, the recording of the construction mortgage before the filing of a statutory notice of commencement of construction provides the mortgage with absolute priority over mechanic's liens arising out of the construction. Still other states, such as California, provide priority for a construction loan mortgage recorded before the visible commencement of construction where the lender is obligated to disburse the funds. In the State of Illinois, there is a statutory funds disbursing scheme that, if followed, provides construction loan mortgage priority. In other states, there are still other arrangements and some states, such as Colorado, provide almost no practical means for a construction loan mortgage to obtain priority at all.

Enforcement:
Mechanic's liens are enforced exclusively through judicial foreclosure sales, i.e., through court proceedings similar to mortgage foreclosures. The court must determine whether the requirements of the statute have been met and, if so, the priority of the mechanic's lien being foreclosed relative to the other liens or encumbrances on the title. Once that is determined, the court will order the property sold and the proceeds of the sale applied to the liens in the order of their priority.

Protecting real property from burdens imposed by a mechanic's lien:
Often a mechanic's lien is discovered long after it's been filed in the public records, but by taking a few proactive measures, property owners can ensure their properties are protected from the burdens imposed by such mechanic's liens.

Releases of Lien:
Prior to making any payment, the property owner should receive a Release of Lien from every supplier, contractor and subcontractor, which covers the materials used and the work performed on the project. The Release of Lien is a written statement that removes the property from the threat of lien. If the contract requires partial payments be made before the work is completed in full, the get a Partial Release of Lien covering all workers and materials used up to that point in time.

Before final payment, obtain an affidavit from the contractor that specifies all unpaid parties who performed labor or services, or provided materials to the property. Make sure the contractor obtains releases from all of these parties before making final payment.

Notice of Termination of Notice of Commencement:
At the end of the project and after the contractor is paid in full and obtained all of the necessary Releases of Lien and affidavits as described above are obtained, file a Notice of Termination of Notice of Commencement with the Clerk of the Circuit Court in the county where the property being improved is located.

Arbitration, a form of alternative dispute resolution (ADR), is a legal technique for the resolution of disputes outside the courts, wherein the parties to a dispute refer it to one or more persons (the "arbitrators", "arbiters" or "arbitral tribunal"), by whose decision (the "award") they agree to be bound. It is a settlement technique in which a third party reviews the case and imposes a decision that is legally binding for both sides indicated California Business Lawyer Steven C. Peck.

Other forms of ADR include mediation (a form of settlement negotiation facilitated by a neutral third party) and non-binding resolution by experts. Arbitration is most commonly used for the resolution of commercial disputes, particularly in the context of international commercial transactions. The use of arbitration is far more controversial in consumer and employment matters, where arbitration is not voluntary but is instead imposed on consumers or employees through fine-print contracts, denying individuals their right to access the courts. says California Business Law Attorney Steven C. Peck.

Arbitration can be either voluntary or mandatory and can be either binding or non-binding. Non-binding arbitration is, on the surface, similar to mediation. However, the principal distinction is that whereas a mediator will try to help the parties find a middle ground on which to compromise, the (non-binding) arbitrator remains totally removed from the settlement process and will only give a determination of liability and, if appropriate, an indication of the quantum of damages payable.

Continue reading "Arbitration is a Legal Technique to Resolve Disputes Outside The Court System" »

Most business litigation attorneys will tell you that breach of contract lawsuits are the most common business litigation cause of action in California. Breach of contract encompasses a variety of different scenarios: partnership disputes, breach of lease and other real estate litigation, sales transactions, promissory notes and collections, and any situation where two or more parties have reached an agreement, either orally or in writing says California Business Lawyer Steven C. Peck.

Every breach of contract lawsuit has to establish the following elements: (1) a contract, (2) plaintiff's performance of his or her obligations under the contract or an excuse as to why plaintiff did not perform, (3) defendant's breach of the contract, (4) plaintiff's damage arising from the breach of contract.

A contract can come in different forms. Oftentimes businesses carry on their transactions with written contracts. However, parties may enter into oral contracts. The law can also imply a contract. This is usually the case when there is no express writing but the parties are engaging in a pattern of conduct which evidence an agreement. For example, where one party performs work and the other party begins paying for that work, a court may imply a contractual relationship between the parties even though there is no express written or oral contract.

The second element of a breach of contract lawsuit is that the plaintiff performed her or her obligations under the contract or has an excuse as to why he or she did not. The idea behind this requirement is that you cannot sue another for breach of contract if you did not perform your obligations under the contract.

In California the third element of a breach of contract cause of action is the other party's breach. Breach most often includes a failure to pay monies owed, but can take other forms as well. In real estate litigation a tenant may breach a lease, for example, by failing to maintain property insurance, by failing to maintain the property as required by the lease, or failing to follow the rules and regulations. A landlord, on the other hand, can breach a lease by failing to provide the promised amenities.

In other business litigation contexts, breaches of contract can be almost anything agreed to by the parties that one party has failed to perform. Manufactured goods that are defective or late, a partner that fails to perform his obligations to the other partners, a construction project that is improperly built--all of these can be breaches of the agreement between two or more parties.

Lastly, a breach of contract does not create a viable legal cause of action unless the other party is somehow damaged by it. Usually the breach causes damage, such as an invoice that is unpaid, a rented space that is unusable or even profits that are lost due to some act. Depending on the circumstances, a breach of contract action can lead to an award of damages, an injunction (to prevent an ongoing wrong) and even specific performance. Specific performance is often used in real estate litigation since California finds that real property is unique. Therefore a breach of contract to purchase real property can be specifically performed, meaning the court will order the sale or the purchase of the property rather than just awarding monetary damages.

Continue reading "Breach of Contract Lawsuits Are The Most Common Type of Business Litigation" »

The LLC operating agreement is a document created when setting up an LLC which governs how the LLC is going to be maintained and operated (the LLC operating agreement is similar to a partnership agreement or corporate bylaws) says California Business Attorney Steven C. Peck.

As a result, the LLC operating agreement is considerably more detailed than the articles of organization. The LLC operating agreement should address whether the LLC is going to be member-managed or manager-managed, and should outline what powers the members and/or managers will have. It should also address how the LLC handles meetings - how, when and where meetings are held, what notice is necessary before holding a meeting, what qualifies as a quorum, how voting and elections are handled, etc. The LLC operating agreement typically covers some other related issues, as well, such as who has the power and right to audit the company books and records, how the fiscal year is defined and how the agreement itself can be updated and amended.

Once you have prepared your LLC operating agreement, you do not need to file them, like you do with articles of organization. Instead, they should simply be maintained in your company records. However, you may need to formally adopt the agreement - you should check the laws for the state you are organizing in. In some states, the incorporator has the power to adopt the agreement, other states require the first board of directors to formally adopt the agreement, and the remaining states leave both options open.

Continue reading "The Limited Liaibility Company Operating Agreement" »

A limited liability partnership is a special type of partnership only used by businesses organized by certain types of professionals. For example, a group of lawyers or doctors may start a law firm or a health clinic as a limited liability partnership. The major distinction between this and other types of partnerships is that the owners of an LLP are not personally liable for the negligence of other partners, although they remain liable for their own negligence and for any debts or losses of the business itself say California Business Lawyer Steven C. Peck.

Thus, these are useful in states where the law or professional ethics rules will not allow the professionals to form a corporation or LLC, as it affords the owners at least some limited liability. For example, many state ethics rules do not allow lawyers to form anything other than a partnership, so a limited liability partnership at least affords the owners a little protection in the event that one attorney commits malpractice or some other negligent act.

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There are several advantages to setting your business up as a sole proprietorship. Principally among these advantages is that sole proprietorships are very cheap and easy to setup, and fairly cheap and easy to run. This is because there are not a lot of laws and formalities that you have to worry about complying with. Thus, you do not generally have to hold any formal meetings, make any filings with the state (unless you are using a fictitious name) or pay the state any ongoing fees says California Business Lawyer Steven C. Peck.

Running a sole proprietorship can also make your life easier because you can mix your business and personal assets without worrying about running afoul of any legal requirements (although this is not necessarily a good practice from a practical standpoint), and your business taxes are relatively easy to prepare and file as your profits and losses are simply reported on your personal tax returns. Finally, if you start your business as a sole proprietorship and later find that your needs have grown and you need to run the business in a more complex form (such as an LLC), it is relatively easy to change the business form.

Many times, a creditor will ask a court to ignore the liability protection offered by the corporation or LLC status of a business. In doing so, the creditor is asking the court to pierce the corporate veil and make the business owners personally liable for the debts, liabilities and obligations of the business itself (which they generally would not be liable for, due to the limited liability protection afforded to corporations and LLCs). This is generally a remedy which the court will consider where the owners of the company in question used their business to defraud the business creditors, or do some other wrongful and illegal act states California Business Lawyer Steven C. Peck.

This sometimes occurs, for example, where owners are using the business as a shell and a court determines that the business is really just an alter ego of the owners (this is known as alter ego liability, and while there are some technical differences, it boils down to basically the same thing as piercing the corporate veil). Courts are also willing to pierce the corporate veil where not doing so would lead to some type of fraud or injustice. The main idea here is that owners who abuse the company entity in some way which harms others will find themselves personally liable. For example, if a corporation takes on immense debt that far exceeds its assets, so that it's obvious from the start that the business could never hope to repay these debts, the court may pierce the corporate veil so that the creditors are not unjustly out-of- pocket for all of the money they loaned.

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