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Why You May Need a California Pre-Incorporation Agreement, or Founders Agreement, before You Form a California Corporation, LLC or Partnership

 
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Why You May Need a California Pre-Incorporation Agreement, or Founders Agreement, before You Form a California Corporation, LLC or Partnership

Prepared By: Melissa C. Marsh, Los Angeles Business And Corporate Attorney
Written: March 2009
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If your business will be co-owned and you are not ready to form a California Corporation or a California limited liability company ( LLC ), we strongly suggest you and the planned co-owner(s) enter into a pre-incorporation agreement, also commonly referred to as a founders agreement. A pre-incorporation agreement can be an agreement to form a corporation, an agreement to form a limited liability company, or an agreement to incorporate a partnership. A well written general partnership agreement, in fact, often will contain not only buy-sell provisions but also an agreement to incorporate the partnership, or form a limited liability company upon the occurrence of some event or the meeting of some goal.

A pre incorporation agreement is an agreement among the future shareholders of a corporation or future members of an LLC that sets forth:

  1. the name and address of each planned owner of the new business;
  2. the proposed name for the new business;
  3. the proposed location for the new business;
  4. the purpose and activities the new business will engage in;
  5. a description of any assets the new business plans to purchase;
  6. the terms of each of the owners employment (proposed duties and pay);
  7. general buy-sell provisions to protect each of the owners;
  8. whether pass through taxation will be desired;
  9. who will handle the accounting and legal work for the new business; and most importantly; and
  10. how the business will be organized, capitalized and managed.

A pre-incorporation agreement can significantly reduce disputes that may later arise from assumptions and misunderstandings because it sets the ground rules under which proposed co-owners will set up and later manage their business in writing.

If pre-incorporation provisions are inserted into a well written partnership agreement, it can provide the owners of a new business time to establish the business before being burdened with following all of the formalities required by the California corporation and California limited liability company to maintain the owner personal limited liability protection.

If you would like to hire Los Angeles, California business law attorney Melissa C. Marsh to prepare a pre-incorporation agreement, please call Melissa C. Marsh at (818)849-5206 or Send us an E-mail.

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Ms. Marsh provides various low cost In House Counsel Plans designed specifically for the small business owner, and if you just have a few simple questions she provides a Telephone Consultation for as little as $85.

California business lawyer, Melissa C. Marsh, is based in Sherman Oaks and West Hollywood, and serves individuals and businesses throughout Los Angeles County, including: West Hollywood, Miracle Mile, Beverly Hills, Century City, Santa Monica, Burbank, North Hollywood, Valley Village, Toluca Lake, Studio City, Sherman Oaks, Van Nuys, Encino, and Woodland Hills.

© 2009 Melissa C. Marsh. All Rights Reserved.

 
 

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Disclaimer: The information presented on this web site was prepared by Melissa C. Marsh for general informational purposes only and does not constitute legal advice. The information provided in my articles and alerts should not be relied upon, or used as a substitute for professional legal advice from an attorney you retain to advise or represent you. Your use of this Internet site does not create an attorney- client relationship. Transmission of this article is not intended to create, and receipt of it does not constitute, an attorney-client relationship. All uses of the contents of this site, other than personal uses, are prohibited. You may print or email a copy of any information posted on this web site for your own personal, non-commercial, use, but you may not publish any of the articles or posts on this web site without the Express Written Permission of Melissa C. Marsh.


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Located in Los Angeles, California, the Law Office of Melissa C. Marsh handles business law and corporation law matters as a lawyer for clients throughout Los Angeles including Burbank, Sherman Oaks, Studio City, Valley Village, North Hollywood, Woodland Hills, Hollywood, West LA as well as Riverside County, San Fernando, Ventura County, and Santa Clarita. Attorney Melissa C. Marsh has considerable experience handling business matters both nationally and internationally. We routinely assist our clients with incorporation, forming a California corporation, forming a California llc, partnership, annual minutes, shareholder meetings, director meetings, getting a taxpayer ID number (EIN), buying a business, selling a business, commercial lease review, employee disputes, independent contractors, construction, and personal matters such as preparing a will, living trust, power of attorney, health care directive, and more.