It has been said that one of the best qualities of US corporation law, is its federalist organization. A firm may choose its state of incorporation, a domicile that is independent of its actual physical presence, and one that can be changed at any time with shareholder approval. The corporation codes in each state contain the standard provisions for corporate governance and function as default provisions in corporate charters. The firm therefore can tailor their corporate charters to fit their needs more precisely under the state code. Just as important to them, firms may also look for a state whose corporation law best matches their needs.

The provisions in various corporation laws run the gamut from trivial housekeeping to the more fundamental need for fashioning the relationship between shareholders and managers. Corporation laws may provide for things as mundane as specifying that a corporation’s name be placed in its charter, to as esoteric a thing as specifying the fiduciary duties of managers and voting rights of shareholders, when these can be waived and procedures for corporate combinations, including when managers’ – as opposed to shareholders’ – decisions are controlling. States have provided a different set of governance defaults for small privately held firms, which are called ‘close corporation codes’. The varieties of corporation laws have an enabling approach thereby accommodating the diversity in organization, capital structure, and lines of business found in different business firms.

Most corporation laws have to wrestle with the problem of separation of ownership from control in the modern public corporation. The big, publicly held firms typically have numerous shareholders with small holdings, who cannot actively exercise control over the firm or monitor management. The holdings of the managers running such firms are usually infinitesimal. This creates what is called an ‘agency’ problem, in which the managers’ operation of a firm may deviate from the shareholders’ wishes to maximize the value of the firm.

It is not inconceivable, for example, to find managers implementing a policy that makes their jobs more secure, such as engaging in defensive tactics to thwart a corporate takeover, even though this policy may reduce the company’s value. Or, because the managers’ wealth is indexed to both present and prospective compensation in the firm, they may follow a corporate strategy to reduce firm-specific risk. A typical example is the diversification of corporate acquisitions, in spite of the knowledge that the shareholders will not benefit because they are holding diversified stock portfolios which are subject to market, not firm-specific, risks.

The primary role of corporation laws in this regard is to establish corporate governance policies that mitigate this agency problem by aligning managerial incentives with shareholder interests. Corporation laws have governance devices such as promoting shareholder-elected boards of directors to monitor managers, strengthening shareholder voting rights for fundamental corporate changes, and defining fiduciary duties that impose liability on managers and directors who act negligently or with divided loyalty (i.e. favor their own financial interest over that of shareholders). Perhaps, managers should be reminded that corporation law presumes that firms should be managed for shareholders’ interests, not those of managers, in situations when those interests are in conflict.

My name is Ashley Castellanos, and I have been helping Internet business owners set up and run their businesses correctly since 1997. I own Corporation Soft, a company that was created for, and is dedicated to teaching business owners about corporation law.

A partnership agreement is a relationship between individuals or organizations. Parties involved should be in close cooperation and share responsibilities. A partnership agreement isn’t necessarily a legal contractual relationship but a relationship where you come in union to accomplish common goals and purposes that will benefit both parties. A partnership agreement is basically one where you both try striving to meet success.

These partnerships could include federal/state/local government, educational institutions, trade associations, or other organizations. A partnership is defined as a “working relationship” which means mutual participation and joint interest.

Partnership agreements are a good way to achieve goals that would otherwise be to far out of your reach. When people and/or organizations come together you can share responsibility and therefore focus harder on things you feel need the most attention. Partnerships can be effective ways to re-stabilize unorganized businesses, expand, go global, go national, increase customer base, increase sales through referrals, provide even more services your customers may desire, and much more.

Often times partnerships are used when resources are limited, partnerships are a way of maximizing your resources to achieve goals and strengthen existing relationships through consumer protection, etc.

Also, companies in need of skilled, talented workers will often times partner with a company/organization that has the talented, skilled, experienced employees you need to train workers and keep your business on the right track.

The requirements to file and sign a partnership agreement form usually are:

- You both must be at least 18 years old.
- Both partners must be present when filing the partnership agreement
- A legal picture I.D. card is required from each partner.
- If you had a previous partnership you must file a notice for ending the partnership with the County Clerk or Notary Public before you can file a new partnership agreement.
- Usually there’s a filing fee of 10-50 dollars often times and they usually accept all forms of payment.

This article was brought to you by Legal Forms Bank .Biz where you can download your state’s Partnership Agreement Form.

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There is much misinformation that is often spread regarding Nevada corporations and LLC’s. When deciding whether you should form a Nevada Corporation or LLC, you should understand precisely what a Nevada corporation or LLC can provide. With this in mind, you need to be aware of the myths and half-truths that are commonly (and incorrectly) taken as facts.

MYTH # 1:
Having a Nevada corporation will provide me with complete asset protection.

TRUTH: This simply is not true. While having a Nevada corporation can provide some asset protection benefits, the extent of these benefits depends on each unique situation. (You should consult with a lawyer to find out if a Nevada corporation is right for you.) Further, it is common that the principal shareholder(s) of a corporation will have to provide a personal guaranty for many obligations of the corporation, such as leases, credit accounts, etc… As such, when a personal guaranty is given, the Nevada corporation does not provide any asset protection benefit for the obligation that is guaranteed.

MYTH # 2:
I can avoid taxes in my home state by having a Nevada corporation

TRUTH: NO! If a Nevada corporation is conducting business in another state, and that state has a state income tax, then the corporation will have to pay that state’s income tax on the income earned in that state. Simply depositing any income into a Nevada bank account will not magically relieve you having to pay tax on the income.

MYTH # 3:
Bearer shares are a great way to provide privacy and bolster my asset protection.

TRUTH: RUN, don’t walk, away from anyone who recommends bearer shares. The rationale for bearer shares is that since the laws of the State of Nevada do not prohibit them, then they must be allowed. It is true that bearer shares are not illegal under the laws of the State of Nevada. However, just because it may not be illegal, does not mean it is a good practice. The proponents of the bearer share strategy will say that you can use bearer shares to provide asset protection because, whenever you may have a potential claim/creditor try to attach your assets, you can simply hand the shares of the corporation over to a friend or family member to hold the shares. That person is now the owner (i.e. bearer) of the shares, and thus you can tell the creditor that you have no interest in the company or stock for the creditor to attach. This strategy also assumes that the attorney trying to collect on the debt/claim is a moron. Any remotely competent attorney will ask if you ever owned any interest or stock in the corporation, and when did you transfer your interests. To which, you will either: 1) tell the attorney of the bearer share strategy, which creates all kinds of fraudulent transfer issues, as well as possible income and/or gift tax ramifications that you do not even expect; or 2) commit perjury to avoid telling the attorney who you transferred your shares to.

HINT: Any asset protection theory that relies on you committing perjury is not much of a strategy.

MYTH # 4:
Using a nominee director/officer is a good way to provide privacy and bolster my asset protection.

TRUTH: Why would you trust a total stranger to have control over your company and assets? The use of nominee directors and officers are usually recommended by self-proclaimed business and legal experts. You will be hard pressed to find a licensed attorney who recommends this strategy. While you may derive some privacy from having a nominee officer and director, this privacy will be lost once the nominee is served a subpoena and asked to provide the contact information for the owners of the company. The nominee will then be legally required to provide this information, and your privacy is gone. Further, the use of a nominee also offers no additional asset protection.

MYTH # 5:
Privacy = Asset Protection.

TRUTH: Just because something is slightly more difficult to find out does not mean you get any additional asset protection benefits.

MYTH # 6:
Nevada does not share information with the I.R.S., so I can keep my information private.

TRUTH: Just because Nevada does not share information with the I.R.S. does not mean that the I.R.S. will not have any information on the company. You will need to provide the I.R.S. with the name and social security number of someone involved with the company to obtain an EIN. Further, the company will be required to prepare tax returns (informational returns for S-corp’s and most LLC’s), on which the names and social security numbers of the owners or members will be provided. Thus, the I.R.S. will end up with this information anyway.

SUMMARY:
Please do not confuse the lack of an audit with being legal and proper. It is almost comical that there are numerous corporate formation companies that are dispensing legal advice when they are not attorneys. Why would anyone take advice on protecting their assets from someone who is not legally allowed or qualified to provide such advice, much less actually had to argue in support of any of their half-true positions before a judge?

The truth is that a Nevada corporation or LLC may be useful to some, but it is not the end answer for every small businessperson, especially those who do not operate in Nevada.

Shawn Christopher is an attorney licensed in Nevada and California. His office is located in the Las Vegas area. For more information on his form, please visit his website, http://www.shawnchristopherltd.com or for more specific information on Nevada corporations, please review http://www.shawnchristopherltd.com/nevcorp.php or on Nevada LLC’s http://www.shawnchristopherltd.com/nevllc.php

Many professionals are barred from forming limited liability companies or basic corporations for their practices. Instead, their only option is often to form a professional corporation.

When it comes to business entities, there are many forms a business can choose from. For certain professions, however, states restrict the choices because of a public policy. This policy boils down to the idea that professionals should not be able to escape personal liability if they fail to perform properly. For instance, a doctor or lawyer should not be able to hide behind a corporation if they fail to provide competent services.

In many states, the only business entity available to a professional is a “professional corporation.” This corporation is a hybrid business entity that is created by state law. Every state handles the issue differently, but there are some general aspects that almost always appear.

With your average professional corporation, the shareholders usually must all be licensed in the field of services being rendered by the corporation. For instance, a professional corporation offering medical care can only have licensed doctors as shareholders.

Another twist to the professional corporation is limited liability. Simply put, the corporate entity provides no protection for the professional against claims he or she rendered the services in question in a tortuous manner. For instance, an incorporated surgeon who is accused of malpractice during a surgery will receive no liability protection from the professional corporation. He or she is personally liable as a matter of law if the plaintiff is successful in bringing a claim.

So, why would anyone form a professional corporation? The primary reason is the entity does provide a liability shield against all disputes not arising from the rendering of services. If our incorporate surgeon has someone slip and fall in his office, the person cannot sue the surgeon personally. Instead, the professional corporation will provide liability protection.

So, who must use a professional corporation? Well, the answer depends on the state you are in. Some restrict the entity to doctors, lawyers and accountants while other states go much further. In California, for instance, doctors, lawyers and accounts are on the hook but so are shorthand court reporters, marriage therapist and architects to mention only a few. You should check the requirements in your state if you are a professional considering incorporation.

All and all, professional corporations are often treated much differently than general corporations. Forming and running a professional corporation can be complex and should only be done with professional legal help.

Richard A. Chapo is with SanDiegoBusinessLawFirm.com - providing California professional corporation formation services.