Articles Posted in Corporations

California law requires employers to take reasonable steps to prevent and address alleged discriminatory and harassing conduct, to provide a government-issued brochure on sexual harassment to all employees, and to conduct sexual harassment prevention trainings if the employer has 50 or more employees.  As of April 1, 2016, the California Department of Fair Employment and Housing (DFEH) has enacted regulations that will require employers to develop written anti-discrimination and harassment policies with certain content requirements.

Under the new regulations, the anti-discrimination/harassment policy must be in writing, and must at a minimum:

  1. List all of the protected categories under California’s Fair Employment and Housing Act, which currently include race, creed, color, national origin, age, ancestry, physical and/or mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, sexual orientation, and military and/or veteran status,

If your business employs at least one person, you should be thoroughly familiar with both the California and federal wage and hour laws. These laws regulate many aspects of employment from minimum wage to guaranteed rest and meal breaks. One important part of compensation that is regulated by wage and hour laws is overtime payments for individuals who work more than 40 hours per week.


Overtime laws entitle certain employees to time-and-a-half payments for additional hours worked. However, not everyone is entitled to overtime and the laws that regulate overtime exemptions can be complex. One important rule under the Fair Labor Standards Act (FLSA) is that anyone who earns less than $455 per week for full-time work ($23,660 annually) is automatically entitled to earn overtime. If employees earn more, a closer examination into their job duties must be made. In addition, once an employee earns $100,000 annually, they are considered to be “highly compensated” and no longer have the right to overtime provided his or her job duties meet certain minimum requirements.

The Department of Labor updated the overtime rules with regard to the income threshold and the new rules will take effect on December 1, 2016. The new threshold for automatic entitlement to overtime will be $913 per week for full-time work ($47,476 annually) and the new highly compensated threshold will be increased to $134,004. It is estimated that over four million people will receive a new entitlement to overtime.

Issuing equity in a company is a popular form of employee compensation. This trend is especially popular here in Silicon Valley, where startup companies often defer cash compensation to their employees in exchange for a share of future growth through the issuance of equity. If you own a non-public company, you may wish to compensate your employees partially by issuing them equity in the company. Equity aligns incentives between employers and employees while enabling employees to build up wealth over a longer term. Equity issuance can be done in different ways, including by issuing restricted stock grants or by issuing stock options. Each of these forms of compensation can have its own pros and cons and you want to make sure you carefully analyze the decision and decide which is best for your circumstances.


Restricted Stock

Restricted stock is a stock award that will not fully transfer to the employee until certain conditions have been met. These conditions can include a certain length of time working for your company, meeting certain performance or financial goals or milestones, and more. These restrictions can be helpful for owners to ensure that employees do not simply walk away from your venture and that they must wait for the award to vest before they receive the stock benefits. In addition, by making an 83(b) election with the IRS within a certain period of time after the restricted stock grant, employees can save significantly on the tax burden once the stock vests. If no election is made, however, employees may face hefty tax liability at the time of vesting depending on the value of the shares. Restricted stock is less risky and easier to manage in comparison to regular stock.  However, restricted stock has less favorable tax treatment than options.

Starting a business with a partner can be highly beneficial: collaborations offer many benefits and are particularly popular with startups and firms providing professional services. When you start a business with another person or people, the last thing you expect is to end up in a disagreement about business ownership. Unfortunately, these kinds of disputes arise on a regular basis and can have a significant impact on the success of your business as well as your personal bottom line.

Business disputes can arise in a variety of contexts – here are some of the most common situations:

  • A party may attempt to assert authority which he or she does not have

It is not uncommon for businesses in today’s global economy to engage in international transactions. More often than not, these transactions require an exchange of business and/or legal documentation. Although these documents are signed and exchanged by those who have been engaged in business together, there are times when the documents must still be authenticated in order to be used in a foreign country from which the document originates.


The Hague Convention of 1961 established a certification to authenticate documents to be used in foreign countries. This certification is known as an apostille. The apostille is attached to the document that is being sent overseas and it certifies the authenticity of the signature of the documents; it does not actually certify the contents of that document. The apostille is required to be used by a designated verifying authority in a country party to the Hague Convention.

Apostille Requirements

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A business will select a certain business entity at the time of formation for a variety of different reasons. One of the most important reasons businesses elect a certain type of business entity is to protect owners and investors from personal liability. Business entities such as corporations and limited liability companies (LLCs) remain attractive because they protect owners, investors, members, etc. from personal liability. On the other hand, entities such as a sole proprietorship or partnership leave owners open to personal liability for corporate debts.


Yet, while limited liability protections exist for corporations and limited liability companies, these protections are not impenetrable. Rather, personal liability may, in some circumstances, run through the company and attach to its owners and investors. This is called “piercing the corporate veil” and it is something of which all businesses, whether starting out or established, should be well aware.

How Can the Corporate Veil be Pierced?

As an innovator or entrepreneur, you may launch a business for a variety of reasons. At first, a primary reason is to develop a profitable product or technology you believe will provide a nice return.  But, creating the next popular app or useable technology could lead to a life-changing acquisition of your business at a premium valuation.  At the same time, if your business is not performing as you had hoped, selling may be the best option for you. These are only a few reasons why you may want to sell your business.


It is important that businesses considering a sale of their company obtain the guidance of legal counsel. A Silicon Valley business attorney will be able to work with owners to identify and avoid potential legal issues that may arise with the potential sale of the business.  These pitfalls could include, for example, issues with due diligence, fiduciary duty and duty of care, voting requirements, corporate compliance, shareholder approval, intellectual property, and lien holder negotiation.  After all, once a decision is made to sell the business, the goal is not only to get a good offer but to be able to actually get the deal done.

Owners considering a sale of their business should consider the following four tips:

Business formation is imperative in order to properly operate a business. The selection of a business entity is important because it helps provide important benefits regarding ownership rights, taxes, and, depending on the entity selected, limited liability. Business law is governed on a state by state basis, and every business has the flexibility of incorporating in any state, not just the state of its principal place of business.llc

Delaware is the most popular state for incorporation. Delaware has a rich history of favorable business laws that have helped give it a very pro-business reputation. Because of this pro-business reputation, it may be very attractive to incorporate in Delaware. However, it is important that businesses be aware of both the pros and cons of incorporating outside of their state and in Delaware.

Pros of Incorporating in Delaware

Businesses are not immune to making mistakes, and many businesses will at some point be served with a lawsuit. Being sued is, without a doubt, very stressful. However, if you find yourself in this situation, you should ensure that you act in a manner that preserves your legal rights and positions while allowing for the best possible outcome. Here are some things that you should consider:

Seek Legal Assistance. Do Not Tackle Business Lawsuits Alone.

Businesses faced with potential lawsuits may not fully consider the potential negative fallout that may occur as a result of the litigation. Some businesses may be very concerned with the expenses that would be required to defend the suit. However, do not make the foolish decision of not obtaining legal counsel.

In a corporate merger or acquisition, it is important to ensure that both companies involved are on the same page early in the process. Mergers and acquisitions can be complicated and can require costly resources, so it is important to know what each party is prepared to offer before moving forward with the transaction. One way to ensure both parties are on the same page is to draft a letter of intent (LOI), which outlines the deal points of the merger or acquisition and serves as a type of “agreement to agree”.


The LOI should be carefully drafted by the purchasing company and submitted to the selling company and should set out important basic terms of the transaction. This letter is typically not viewed as a binding contract though that does not mean it should not be given careful consideration. When submitting an LOI, the buyer should put forth attractive though realistic terms. If it fails to do so, it could result in a breakdown in negotiations or a later legal dispute if the expectations set out in the LOI were not in good faith. On the other hand, the purchaser should fully realize that an LOI does not represent the final agreement and that the terms of the deal may change after due diligence is conducted. Because of the importance of an LOI to a merger and acquisition, you should always seek assistance from an experienced M&A attorney when drafting, reviewing, or negotiating the letter.

Provisions to Include in a Letter of Intent