What is the secret of forming a new company in San Diego or anywhere in California?  Many of the most expensive and destructive lawsuits your company can face down the road are actually internal disputes between owners, shareholders, members or investors.

Are You Thinking of Disputes Down the Road When Starting Your New Business?  You Should Be!

Why would anyone be thinking of ways to prevent disputes up front when forming a new company in San Diego?  The best counsel I can give to anyone who is starting a new company is this: The most effective and least expensive strategy to reduce dispute and expensive litigation at any time now or in the future occurs when you are forming a new company.

Unfortunately, the moment that business owners and entrepreneurs seem to have the least amount of openness to the advice of their business attorney is at the point where they are forming their new company.  This paradox has always challenged new business owners.  When forming a company, many entrepreneurs are boot-strapping their new venture, and want to put all available money into the new company or keeping it back to make sure they will make it through start-up.  I understand that.  I’ve not only helped thousands and thousands of new businesses come to life, I own a small business myself.

The Secret of Forming a New Company in San Diego or Anywhere in California

Here’s the secret of forming a new company in San Diego or anywhere in California: the most common source of disputes and expense, and the risk to a new business are internal shareholder, member, partnership or investor disputes.  Disputes over money, access to information or unexpected life events are the most common source of business disruption and litigation.  The best way to avoid them altogether is to take a small amount of extra time in the beginning to ensure that your corporate documents are well crafted.  If you are forming a new company in San Diego such as an LLC, do not “short change” the operating agreement.  We literally take our new start-up clients through an extensive interview that anticipates every foreseeable contingency, so that we can structure the operating agreement in a way that facilitates their new business, contributing to the likelihood of success.

Pro-Tip: “Well, the company documents, if you choose a corporation, not all corporations are the same. If you choose a limited liability company, if you choose a partnership, a limited liability partnership, there’s all types of different variations. And then you can get into the nitty gritty based on your profession and all the regs and all the uh, professional license requirements and all of the, depending on the kind of company, their resale license and permits. There’s all kinds of little things that your old business lawyer knows about <laugh> and can tell you about from the get go, as opposed to you finding out after you’ve made a few mistakes.

You’re giving birth to a living creature that’s been recognized by the United States Supreme Court. And so what it means is birth is what we call capitalizing. And so you have these corporate documents and you have to decide on how much ownership will be and who owns what. Then you decide about what potential ownership there are. Reserve shares, I mean other ways in which people can own it. And then you capitalize it. Either you capitalize it with cash or you capitalize it with goodwill or a combination or a property. But how you capitalize it can determine whether or not it’s a real company or you have all those protections of corporate veil and creditors and you’re personally shielded. So how you start it is very important. And thinking about it, we’ll send you on the right path to avoiding all kinds of pitfalls and trouble.” – Dan Watkins, Founding Partner

We anticipate the issues that will arise before they ever come up and provide clear language and a process for resolving the dispute or providing valuation for an owner’s interest in the business.  These issues are much easier to fruitfully discuss when a business is being started.  Everyone is working together with one spirit and the conversation is usually much more enjoyable, easier and faster than at any time in the future.

Learn about the secret of forming a new company in San Diego or anywhere in California: getting the corporate documents right up front.  Learn about the importance of working with our experienced business formation attorneys and seasoned business advisors who have literally helped thousands and thousands of California businesses to start, grow and thrive.  If you are forming a new company in San Diego or would like additional insight into your corporate documents we invite you to review our podcast Episode 34 – Business Formation as well as the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.