Business Transactions: Our Services

Attorney David Romney has assisted entrepreneurs and business owners of all kinds for more than 30 years.

At Romney Law Offices our focus is on business formation and operation, from purchase to sale, as well as day-to-day operations. We also resolve business litigation covering a wide range of disputes.

To discuss your situation with us, call 805-392-9639 or contact us online.

Small Business Formation and Operation

Romney Law Offices assists clients in evaluating which legal entity is most efficient and cost effective for the expected purposes and then drafts the documents necessary to establish it and operate it as a legal entity. In addition, Romney Law Offices serves as business counsel for day-to-day operations of these entities.

Limited Liability Company (LLC)

An LLC is a hybrid business entity that blends elements of partnership and corporate structures. Its main advantage over a partnership, as for the owners (shareholders) of a civil law corporation, is that the liability of the owners or members of an LLC its debts and obligations is limited to their financial investment. However, like a general partnership, members of an LLC have the right to participate in its management, and profit/losses flow through to its members.

Certain types of businesses that provide professional services requiring a state professional license (legal, medical) may not form an LLC. For California income tax purposes, an LLC will be classified as a partnership if it has more than one owner and will be treated as a disregarded entity if it has only one member.

However, an LLC is allowed to elect to be treated (taxed) as a corporation. To be taxed as a corporation, the LLC files an election on Federal Form 8832, Entity Classification Election, with the IRS. California conforms to the federal entity classification regulations commonly known as "check-the-box regulations" that allow an LLC to elect to be taxed as a corporation.

Limited Liability Partnership (LLP)

An LLP is a form of ownership in which all the partners receive limited liability protection. However, an LLP is similar to a general partnership in that all the partners can take an active role in managing the day-to-day affairs of the business.

The LLP form of ownership is limited in the State of California to persons licensed to practice in the fields of public accountancy, law, or architecture. In addition, per recently chaptered SB 284, engineers and land surveyors are also included in the professions that can be formed as an LLP. In order to form in California, an LLP must first register with the California Secretary of State. An LLP formed in another state must register with the California Secretary of State prior to conducting business in the state.

Limited Partnership (LP)

Like shareholders in a corporation, limited partners have limited liability. This means that the limited partners have no management authority and are not liable (unless they obligate themselves by a separate contract such as a guaranty) for the partnership's debts.

The LP provides the limited partners a return on their investment (similar to a dividend), the nature and extent of which is usually defined in the partnership agreement. General partners thus bear more economic risk, as in cases of financial loss, in which the GPs are personally liable.

Although limited partners are subject to the same alter-ego piercing theories as corporate shareholders, it's more difficult to pierce the limited partnership veil because LPs do not have many formalities to maintain. So long as the partnership and the members do not co-mingle funds, it would be difficult to pierce the veil.

Family Limited Partnership (FLP)

The most common way of setting up an FLP is to create a general partnership first with limited partnership interests. The general partner(s) then gift the limited partnership interest to the children or other eligible family members. Whoever holds the general partner title maintains control over the enterprise or assets, but the limited partnership interest lets children or other eligible family members share in ownership.

Partnership Agreement

A California general partnership, as stated above, is created simply by two or more people engaging in a commercial venture with the intent to share profits and losses. In terms of ownership, a general partnership can be split into whatever percentages the partners want pursuant to an agreement.

Subchapter S Corporation

These are corporations that elect to pass corporate income, losses, deductions and credits through to their shareholders for federal tax purposes. Shareholders of S Corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S Corporations to avoid double taxation on the corporate income.

But S Corporations are responsible for tax on certain built-in gains and passive income at the entity level.

A major benefit of the S Corporation, however, is that it generally offers liability protection to its owners (shareholders), as individuals, from the acts or omissions of other owners (shareholders) and from the acts or omissions of the S Corporation's employees.

Subchapter C Corporation

A corporation is a C Corporation in California unless an election has been made to become an S Corp. A C Corp is taxed as a separate entity and must report profits and losses on a corporate tax return. The C Corp pays corporate taxes on its profits while the shareholders are not taxed on the corporation's profits.

C Corp shareholders report and pay income taxes only on what they are paid by the corporation. Now when the corporation chooses to pass along any of its after-tax profits to shareholders in the form of dividends, the shareholders must report those dividends as income on their personal tax returns even though the corporation has already paid corporate taxes. This is commonly referred to as "double taxation," something that is avoided with an S Corp (a pass-through tax entity).

Small and Family Business Purchase and Sale

Sale and purchase of small businesses, including small family businesses, can be difficult for both buyer and seller due to inadequate record keeping, loose undocumented vendor relationships, lack of objective comparable criteria to enable proper valuation and lack of readily available funding resources. Romney Law Offices assists in asking the right questions and getting accurate and complete answers before the deal is closed.