Business & Contract Law ✦ California
Build It Right. Paper It Right. Sell It Right.
Entity formation, operating and shareholder agreements, contracts, business purchases and sales, and franchise counsel for California owners, from an attorney who is also a CPA and reads the numbers behind every deal. Flat fees for the work that can be scoped, and a written quote before you commit.
Overview
What does our business practice cover?
Most business legal work is really about three moments: when you start, when you make a deal, and when you get out. North Star handles all three, and because the same attorney is a CPA, the tax result is designed into the documents rather than discovered later on the return. We are not general litigators; when a matter needs a courtroom, we bring in or refer to litigation counsel and stay involved on the financial side.
- LLC and corporation formation, with the tax election filed correctly the first time
- California Secretary of State filings, Statements of Information, and annual compliance
- Operating agreements, bylaws, shareholder agreements, and buy-sell agreements
- Partner and co-owner arrangements: capital, control, and exit terms
- Contract drafting, review, and negotiation: customer, vendor, service, and lease
- Independent contractor agreements built for California’s ABC test
- Buying or selling a business: letters of intent, due diligence, purchase agreements
- Asset vs. stock structuring, price allocation, and seller financing
- Franchise purchases: FDD review and franchisee counsel
- Franchising your own concept and franchise relationship disputes
The California Layer
How do the entity choices compare in California?
California taxes entities differently than most states, and the differences drive the choice. The figures below are the state layer only; federal treatment stacks on top, and it is the combination that we model before you file anything.
| Entity | California entity-level tax | Owner tax on profits | Best fit |
|---|---|---|---|
| Sole proprietor / general partnership | None (partnerships file an information return) | Personal rates up to 13.3%, plus self-employment tax federally | Very small, low-risk ventures; rarely the right long-term answer |
| LLC (default) | $800 annual tax plus a gross-receipts fee from $900 to $11,790 once revenue passes $250,000 (R&TC §§ 17941, 17942) | Personal rates; SE tax federally on active members | Real estate holding, passive ventures, early-stage businesses |
| LLC or corporation taxed as S corporation | 1.5% of net income, $800 minimum (R&TC § 23802) | Personal rates; reasonable salary subject to payroll tax, distributions are not | Profitable operating businesses with one to a handful of owners |
| C corporation | 8.84% of net income, $800 minimum (R&TC § 23151) | Second tax on dividends when profits are distributed | Businesses raising outside capital or planning for a qualified small business stock sale |
| Limited partnership / LLP | $800 annual tax | Personal rates | Investment funds, professional practices that cannot use an LLC |
Formation Is a Tax Decision
What does an attorney-CPA do differently at formation?
Anyone can file Articles of Organization online in twenty minutes. What the filing services do not do is ask whether the LLC should elect S corporation status before its first payroll, whether the members’ capital accounts should be tracked on a tax or book basis, whether the operating agreement’s distribution waterfall matches the allocation rules the IRS will enforce under I.R.C. § 704, or whether the founders should be issued their equity now, while it is worth nothing, and file an 83(b) election.
Those are the decisions that determine what you pay for the next decade and what happens when a partner leaves or the business sells. We make them at the start, document them in the operating agreement or bylaws, and calendar the elections and filings so nothing lapses. If you already formed the entity and skipped those steps, the second-best time to fix them is now, and most are fixable.
The document is only as good as the decisions behind it.
How do I form an LLC or corporation in California?
Formation is a filing with the Secretary of State (Articles of Organization for an LLC, Articles of Incorporation for a corporation), a Statement of Information within 90 days, an EIN, a registered agent, and, if you want S corporation treatment, a timely Form 2553. California adds a few of its own: the $800 first-year tax, city business licenses, seller’s permits from the CDTFA if you sell goods, and EDD registration the moment you have an employee.
We handle the filings, draft the governing documents, and produce a compliance calendar so the Statement of Information, the franchise tax, and the annual meeting minutes are done on time. Missing the Statement of Information leads to suspension by the Secretary of State and the FTB, and a suspended entity cannot enforce its own contracts in a California court. It happens more than you would think. Read more →
Do I really need an operating agreement or shareholder agreement?
If you have a co-owner, yes, and you need one before the first disagreement, not after. California’s default rules under the Revised Uniform Limited Liability Company Act (Corp. Code § 17701.01 et seq.) fill the gaps in a missing or thin operating agreement, and the defaults are rarely what the owners would have chosen: equal management rights regardless of capital, distributions in proportion to contributions, and no clear path for buying out a departing member.
A well-drafted agreement answers the questions in advance: who decides what, how profits and losses are allocated and distributed, what happens on death, disability, divorce, or a falling-out, how a departing owner’s interest is valued, and how it gets paid for. The buy-sell provisions are where the CPA side matters most, because a valuation formula that looks fair in the abstract can produce an absurd number in practice. We test the formula against your actual financials before it goes in the document. Read more →
What contracts should a California business have reviewed?
The ones that carry money or risk: customer agreements and terms of service, vendor and supplier contracts, commercial leases, service agreements, and anything with an indemnity, a limitation of liability, an automatic renewal, or a personal guaranty. Commercial leases in particular deserve attention; a triple-net lease with a personal guaranty is often the largest liability a small business owner has, and the landlord’s form is written entirely in the landlord’s favor.
California has its own rules that catch out-of-state forms: non-compete clauses are void under Bus. & Prof. Code § 16600 and, since 2024, it is unlawful even to include one; independent contractor agreements must survive the ABC test of Labor Code § 2775 or the contractor is your employee; and automatic renewal terms in consumer contracts must meet the disclosure requirements of Bus. & Prof. Code § 17600. We draft to California law and flag the clauses that will not hold up. Read more →
How does buying or selling a business work?
A business sale runs from a letter of intent through due diligence to a purchase agreement and closing, and the tax structure is decided at the letter of intent stage whether the parties realize it or not. Buyers generally want to buy assets, to get a stepped-up basis and leave the seller’s liabilities behind. Sellers of corporations generally want to sell stock, for capital gain treatment on the whole price. The price allocation among asset classes under I.R.C. § 1060 is negotiated, reported by both sides on Form 8594, and determines what each side pays in tax.
On the seller side we also handle the California-specific closing items: the CDTFA successor liability clearance so the buyer does not inherit unpaid sales tax, the EDD clearance, bulk sale notice requirements under Com. Code § 6101 where they apply, and the withholding rules if the seller is leaving the state. On the buyer side, due diligence with a CPA means the financial statements, tax returns, and payroll records are read by someone who knows where the problems hide. Read more →
What should I know before buying a franchise, or franchising my own business?
A franchisor must give you a Franchise Disclosure Document at least 14 days before you sign or pay anything, and California requires the franchise to be registered with the Department of Financial Protection and Innovation under the Franchise Investment Law (Corp. Code § 31000 et seq.). The FDD is long, and the parts that matter most (Item 7 initial investment, Item 19 financial performance representations, Item 20 turnover, and the franchise agreement itself in the exhibits) are where a franchisee-side review earns its fee. We have represented multiple franchisees, including owners whose franchises failed, and the warning signs are usually visible in the FDD.
If you are the one franchising, the work is building the FDD, the franchise agreement, and the operations manual, and registering in California and the other registration states. Phillip Zagotti has helped a company franchise its concept and helped a restaurant franchisor go public, so the practice covers both sides of the table. California’s Franchise Relations Act (Bus. & Prof. Code § 20000 et seq.) also limits when a franchisor can terminate or refuse to renew, which matters in a dispute. Read more →
The Attorney-CPA Difference
The deal is a legal document and a spreadsheet. We read both.
- Entity choice and elections modeled on your actual numbers before the paperwork is filed
- Operating agreements and buy-sell terms tested against real financials, not abstract formulas
- Purchase agreements negotiated with the tax allocation and the basis consequences in view
- Due diligence performed by someone who reads financial statements for a living
- Flat fees for formation, agreements, and contract review, quoted in writing
Questions & Answers
Business law questions California owners ask us
How much does it cost to form an LLC or corporation with you?
Formation with a drafted operating agreement or bylaws, the S election if appropriate, and a first-year compliance calendar is a flat fee quoted before you engage. State filing fees and the $800 franchise tax are separate and paid to the state.
Can you handle a business dispute with a partner or customer?
We handle the analysis, the demand, and the negotiation, and we can act as the forensic accountant if the dispute is about money, which most are. If the matter needs to be litigated, we associate with or refer to litigation counsel and stay on the case for the financial work.
I already formed my LLC online. Is it too late to fix the tax setup?
Usually not. An S election can be made late with reasonable-cause relief under Rev. Proc. 2013-30 in many cases, an operating agreement can be adopted or amended, and equity that was never documented can be papered. The cleanup is easier the sooner it happens.
Do you work with businesses outside the Inland Empire?
Yes. Formation, agreements, contract review, and transactions are handled statewide by phone, video, and secure portal. Nothing in this practice requires a trip to an office.
The best time to get the structure right was before you started. The second best time is now.
A free consultation with an attorney-CPA, and a flat fee in writing before you commit.