California C Corporations

C Corporations, the Standard Model for California businesses

A California C corporation is a standard business model for California businesses. Though not a very flexible structure for some businesses, they often will offer the best protection for shareholders. The defined structure of a C corporation may be a necessity for your business, if you are seeking financing for your business, be it through a bank or through venture capital funds.

Shares are issued by a C corporations and each shareholder becomes an owner in the company. There can be multiple classes of shares each with its own restrictions and benefits, and shares can be sold and new shares can be issued, as needed. A corporation must have at least three directors under California law, unless there are less than three shareholders. In that case, the number of directors may be equal to or greater than the number of shareholders. For example, if the corporation has only one shareholder, the number of directors may be one or two. If the corporation has two shareholders, the number of directors may be two (or three, which is the normal minimum).

How and when taxes are paid for C corporations

California C corporations do have some advantages in how and when taxes are paid. They are taxed as separate entities from their owners. Therefore, they do not undergo pass-through taxation. The income of the California C corporation is taxed before being divided amongst shareholders, when the corporation files its own tax return. Hence, most taxes are paid at the corporate level and are not “passed through” to the shareholder level.

However, the income is taxed again when shareholders file individual tax returns after receiving dividends. This is called double taxation, and can be avoided with S – corporations and California LLCs. As these dividends have already been taxed at the corporate level, they usually qualify for a lower rate of 15 percent upon being taxed at the individual level.

Employees and managing shareholder’s salaries can be deducted from a C corporation’s taxable income. The ability to control the distribution of your profits is the primary tax advantage of California C – corporations. Taxation is controlled by keeping money in the corporate bank account until you are ready distribute the funds the shareholders as dividends, thus paying taxes at the most advantageous time.

DiJulio Law Group

Investing in the United States: The E-2 Business Visa

Establishing a New Business in America

Entrepreneurs from other countries wishing to establish a new business in America, or purchase an existing one, may qualify for an investor visa, also known as an E-2 visa. The Treaty Investor Visa (nonimmigrant E-2 classification) is intended for nationals of a foreign country with which a qualifying Treaty of friendship, commerce, navigation, or a similar agreement exists with the United States. In order to develop and direct their investments with the US, nationals (individual persons or companies) of countries with such treaties with the United States can obtain visas to work in this country.

These non-immigrant visas allow foreign investors and employees to live and work in the U.S., or foreign companies with U.S. subsidiaries to send employees to work here. The DiJulio Law Group has been assisting clients for over 35 years in addressing a wide range of legal matters, including their immigration and business needs.

Guidelines for an E-2 Business Visa

As with any type of visa, there are guidelines that apply for an E-2 visa. The U.S. Department of State website lists many, but the following information provides highlights of those guidelines.

Generally, a citizen of a foreign country who wishes to enter the United States must first obtain a visa, either a non-immigrant visa for temporary stay, or an immigrant visa for permanent residence. Treaty Trader (E-1) and Treaty Investor (E-2) visas are for citizens of countries with which the United States maintains treaties of commerce and navigation.

You must be coming to the United States to engage in substantial trade, including trade in services or technology, in qualifying activities, principally between the United States and the treaty country; or develop and direct the operations of an enterprise in which you have invested a substantial amount of capital.

Examples of types of enterprises that constitute trade under E visa provisions include international banking, insurance, transportation, communications, or tourism.

You must be coming to the United States to develop and direct the enterprise. If you are not the principal investor, you must be considered an essential employee, employed in a supervisory, executive, or highly specialized skill capacity. Ordinary skilled and unskilled workers do not qualify.

It must generate significantly more income than just to provide a living to you and family, or it must have a significant economic impact in the United States.

The investment must be a real operating enterprise, an active commercial or entrepreneurial undertaking. A paper organization, speculative or idle investment does not qualify. Uncommitted funds in a bank account or similar security are not considered an investment.

DiJulio Law Group

Construction Claims: Cost Overruns and Delay Claims

Construction contract bidding is a complex process

Contract bidding is a complex process that requires owners and contractors to provide detailed information about a project. It is necessary in order to reasonably estimate the costs associated with building projects. Though detailed information and careful consideration may have been involved in the bidding process, inevitable changes made after contracts have been signed can result in significant differences between project bids and project costs.

Circumstances unforeseen prior to the start of a project can have significant negative financial impact on contractors, sub-contractors, and owners. At the DiJulio Law Group, we have an in-depth understanding of complex issues associated with documenting, proving and recovering the costs associated with changes to a contractor’s performance resulting from a variety of factors.

Construction cost overruns

Most construction projects benefit from a modicum of planning, but circumstances occur that cause some projects to go astray which make cost overruns inevitable. Contractors and sub-contractors must stay ahead of the project by acknowledging problems immediately and providing solutions. Informing owners is in the best interests of contractors as well.

A useful process in cost management of a project is to compare the budgeted/estimated project compares with the completed actual project. Reasons for cost overruns can quickly be determined by this method. Once the project is completely finished, and the project costs are paid, a project completion meeting with significant individuals of the project team to discuss what went right and what went wrong is highly recommended.

Our experience includes all types of construction cost overrun claims, such as impact and delay claims, changed conditions or differing site conditions claims, and defective specification claims. We use an well informed, in depth approach in resolving our clients’ disputes.

Construction delay claims

As a construction delays can create major problems and become very costly, the schedule is a critical part of any construction project. Careful scheduling can help protect the interests of contractors and property owners, but there may be unforeseen circumstances or events that give rise to construction delay issues.

These delay issues may cause any number of construction disputes. Effectively managing these disputes often requires seasoned legal judgment. Such judgment comes as a result of having protected the interests of contractors, sub-contractors, and owners with respect to a wide variety of delay-related issue such as weather, concurrent, or owner-caused delays.

DiJulio Law Group

The Limited Liability Company or LLC

A Limited Liability Company (LLC) is Flexible and Also Provides Tax Benefits

Unlike a corporation, a limited liability company (LLC) is a flexible, hybrid type of legal enterprise. They provide the limited liability features of a corporation and the tax benefits and operational characteristics of a partnership. The LLC’s main advantage over a partnership is that the liability of the LLC’s owners (members) for debts and obligations of the LLC is limited to their financial investment. This limited liability for its owners applies in the vast majority of United States jurisdictions. Businesses that engage in professional services requiring a state professional license, such as legal or medical services, may not form an LLC but may find that a Professional Limited Liability Company (PLLC) suits their requirements.

LLC’s Offer Tax Benefits and Liability Advantages

For U.S. federal income tax purposes, an LLC isn’t considered a separate entity from its owners. An LLC is treated by default as a “pass-through entity.” All profits and losses are “passed through” the business to each member of the LLC. This means that an LLC will not pay taxes by itself; rather, the members pay the taxes on their personal tax returns. If there is only one member in the company, the LLC is treated as a “disregarded entity” for tax purposes. The individual owner would report the LLC’s income or loss on Schedule C of his or her individual tax return. Thus, income from the LLC is taxed at the individual tax rates.

LLCs shield members from personal liability if the business goes bankrupt or injures someone or otherwise incurs legal liabilities. This means that, although your business might fold, courts and creditors will generally not be able to take the member’s personal assets. Separation between business and personal responsibility and assets is maintained.

There Are Some Disadvantages

LLCs generally do not have specific roles like directors, managers, and employees. Unlike corporations, they are not required to have a board of directors or officers. Lack of a traditional management structure can make it difficult for the company and especially investors to determine authority for various company functions. This management structure of an LLC may be unfamiliar to those used to corporations and could be used by some to gain unfair advantage. Creation of an LLC operating agreement may define roles and eliminate confusion.

LLCs are usually subject to self-employment taxes unless members choose to be taxed like a corporation. Choosing to be taxed like a corporation may lead to increased tax liabilities. For this reason, when choosing to start an LLC, it’s wise to speak to a knowledgeable lawyer who can explain this fully. Since laws and taxes vary from state to state, the best choice for a LLC may be some state other than the one under current consideration.

DiJulio Law Group