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Santa Cruz Business and Commercial Law Blog

Targeting the right business audience in California

One of the many reasons to create a business plan is to provide enough information to attract outside investors. In the quest to find financial backing, an entrepreneur will run into different types of investors with different goals when investing. The first group is the venture capitalists who receive so many requests that many business plans only get a quick glance.

When catering to a venture capitalist, it is important to grab their attention quickly and make them want to keep reading. However, the opposite is true when dealing with banks that care almost exclusively about the company's financial strength. Businesses that are talking to customers or suppliers should focus on their relationships and record of accomplishment with other customers and suppliers.

Considerations for business owners contemplating sales

Planning for the sale of a California business often begins even before the company is founded. Though many do not consider it until later, it is increasingly common to plan for succession early on. Owners should include a discussion of exit strategy in the business plan. An owner who has an exit strategy in place has an advantage when opportunities to sell arise. He or she is more knowledgeable about the process and more confident about the value of the business.

A business owner considering a sale should seek to determine the value of the company as early on as possible. The proper method of valuation may vary by industry or based on other factors. For example, it may make sense to value a company based on recurring revenue if it is a service firm, but a valuation based on assets may be more appropriate for a manufacturer.

Homebuyers need all the facts to make informed choices.

Owning a home is one of the primary means of wealth generation. California property values are especially high. Thus, it is important that anyone planning to buy a home understand the basic legal responsibilities involved in the process. The authorities have passed laws to ensure that those spending their hard-earned money receive information needed to make a wise investment decision.

Both sellers and real estate agents must disclose certain information about the property. The seller has to tell the buyer about physical conditions of the property. Taxes, defects and malfunctions are some examples. Agents also have to mention the relationships between those involved in the financial transactions, to prevent any appearances of conflicts of interest. They must also make the Natural Hazard Disclosure Statement available, especially the part about any known earthquake faults in the area.

Corporation taxes in California

Investors and business owners in California might be interested in learning more about tax laws, as described the state franchise tax board. Limited liability companies and other businesses recognized as corporations and conducting business in the state are required to file corporation franchise taxes. Enterprises and LLCs treated like corporations that are not conducting business in California but are generating income from sources within the state are also required to file corporation income taxes.

Conducting business in the state may be described as engaging in transactions within the state with the intent of realizing financial gains or profits. Even though some out-of-state corporations acting as members of an LLC, or as general partners in a partnership, are recognized as partnerships for tax purposes, they are still liable for filing the appropriate corporation franchise taxes. Out-of-state corporations serving as limited partners in partnerships conducting business within the state are also required to file corporate income tax.

Providing for digital assets in an estate plan

As the world has significantly changed with increasing numbers of people having a presence on the Internet, Californians should consider their digital information in their estate plans. If such information is not provided, families may be unable to access intangible but valuable assets such as stored photos, conversations and other mementos left behind by their loved ones.

Some people fail to think about digital accounts, passwords and other such things when reviewing their estate plans. It is a good idea for most people to review the estate plan, taking care to make certain it is updated to include the passing of digital assets such as access to social media accounts, online photo storage sites, cloud computing information storage and others.

Real estate contracts and backing out

California real estate contracts can involve significant negotiation as the rights and responsibilities of the buyer and seller are immortalized in a legally binding agreement. In some cases, however, either the buyer or the seller will want to back out of a contract that was already signed due to any number of reasons.

Buyers normally pay a percentage of the purchase price as earnest money. The purpose is to hold the real estate, and upon the close of the sale, it will be applied to the purchase price. A buyer who wants to renege on the contract without an allowable reason stands to lose the earnest money paid. In some cases, a better offer will be made after a seller has signed a contract to sell property. Unless the contract includes a kick-out clause, the seller will be bound to sell the property to the buyer with whom the seller entered into the contract.

Business planning strategies offer varied results

California entrepreneurs who want to build new firms have plenty of options when it comes to securing funding. Paths like accelerator programs, self-funding and private borrowing all provide viable alternatives to the basic business loan, but their benefits and faults are by no means equivalent. Different kinds of corporate structure may also be limited in terms of the funding they may accept, making planning critical to those who want to maintain regulatory compliance.

Self-funding a company, whether through crowdsourcing, personal savings, credit or personal loans, lets entrepreneurs maintain all the equity in the new firm. For many tech startups, this option also works out to be highly cost-effective, and performing tasks like application and code development in house also makes it possible to closely supervise product quality. Some startups combine self-funding strategies with outsourcing so they can focus on building their brands.

Estate planning is important for newlyweds

For many newlyweds in California, building a life together may involve choosing a home or a new car. Other practical considerations such as establishing or revising estate plans are important and provide safeguards for a new family. Knowing what is involved and where to start depends on each couple's specific situation.

Having a will makes it possible that one's wishes are followed after they die. It provides a spouse with the security of knowing that the estate is not left to a state's distribution laws. Several considerations should be discussed and implemented such as who will serve as a guardian for minor children and the choice of executor since that person will be empowered with making certain the will is handled as wished. A couple may wish to determine what happens if they die simultaneously or separately.

Small business incorporation in California

If someone is interested in starting a business, they may be wondering whether they should incorporate if they are a freelancer or have a partnership as well as what is involved in incorporating. Individuals are not legally obligated to incorporate, but there are benefits of doing so, including personal asset protection if a client sues them and tax benefits. Additionally, people who incorporate may find it easier to get a business loan.

Partnerships are unincorporated businesses, and while there is no obligation to file paperwork when one of these organizations is created, the owners are still required to register with the IRS for tax purposes. Additionally, it is a good idea to have a legal agreement put in writing that outlines how the business is to be run.

Seeking exceptions from zoning regulations

In California, as in other states, zoning regulations are used by municipalities to help plan growth in an orderly fashion with the intention of serving the public interest. For example, commercial areas are separated from residential areas by zoning regulations. Local governments are granted power by state governments to create zoning regulations to advance the safety, general welfare and health of the community.

However, a landowner's property may be affected by land use regulations in such a way that he or she cannot use the property in the way that he or she desires. For example, a person may want to continue operating a beauty salon in his or her residence but they would not be allowed to do so because the property has been re-zoned as an area designated for residential use.

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