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So you want to start a new business and your accountant tells you to have an attorney form an LLC or Corporation. If there is no tax difference between the two, how do you know which one is better for your business?

Your attorney will probably guide you on which one provides better liability protection. But here is what you need to know as the business owner:


  1. The owners are shareholders and receive stock certificates. The shareholders elect the board of directors annually.
  2. The board of directors sets the general direction of the corporation and votes on major decisions, but does not engage in day-to-day management. It also elects/fires the officers on an as-needed basis.
  3. In California, if a corporation has one shareholder, there only needs to be one director (but there can be more). If a corporation has two shareholders, there needs to be at least two directors (but again, there can be more). If a corporation has three or more shareholders, there needs to be at least three directors (but there can be more). (California Corporations Code Section 212.)
  4. The officers run the business on a day-to-day basis.
  5. In California, three officers are required: President, corporate Secretary and CFO/Treasurer. Other officer positions – CEO, Vice President, etc. – are optional. One person can fill all three (or two of the three) required positions, but banks often require that different fill the President and Secretary positions unless there is only a single shareholder.
  6. California corporations must hold one shareholders meeting annually and it is strongly recommended that they hold at least one board of directors meeting annually (actually, the resolutions simply can be signed by all directors) and whenever a major decision needs to be made.
  7. With a corporation, each owner has the same percentage of ownership, voting power and, if the corporation is a Subchapter S, profits and losses.
If you are starting a business, you need to find out if you business should be a Corporation or an LLC.

Limited Liability Companies (LLC’s)

  1. LLC’s generally do not have shareholders, directors or officers. (Although an LLC can be organized to have these, it’s rare.)
  2. The owners of an LLC are members and frequently have membership “units”.
  3. LLC’s can have one of two management structures: member-managed – where each member takes an active role in running the business and can sign contracts (like a general partnership) — and manager-managed – where one or more managers operate the business and sign contracts (like a limited partnership). In any case, no meetings of the managers or members are required to be held.
  4. Often the operating agreement requires that extremely major decisions (such as sale or dissolution of the LLC) be made by a majority or super-majority (more than 50%) of the ownership interests.

With an LLC, an owner can have different percentages of ownership (meaning the percentage of proceeds if the LLC is sold), voting power and profits and losses. For example, an LLC owner can have 25% of the ownership (meaning 25% of the proceeds if the LLC is sold), 10% of the voting power and 5% of the profits and losses


This article is informational only and meant to provide guidance. It is not meant to be legal advice and it does not create an attorney-client relationship. For what to do in your specific situation, please consult with a qualified Construction Law attorney.


Mahyar was a big part in helping start our company and setting up our corporation. She also went to battle with a Billion dollar Corporation to keep our doors open when they tried everything to shut us down.

Danny Lamping

Classic Refrigeration Company

In 2008 -2009, our company was involved in a lawsuit with over 1 million dollars claimed against us. Mahyar Ghassemian handled our case expertly and conscientiously. She explained on a regular basis the progress of our case and how each of the actions of our opponent would ultimately affect our case. At no time did we feel alone or compromised as Mahyar boldly stayed her course which eventually provided us with the satisfactory outcome we had hoped to achieve. She will be our first call should the need arise in the future.

Kelly Owen

Clarion Construction, Inc.

Many years ago an insurance carrier hired Mahyar Ghassemian to defend my construction firm in civil litigation. Not only was Ms. Ghassemian very knowledgeable and competent regarding the legal proceedings, but she was also personally vested in our well-being; she cared what happened. She counseled us regarding the various options, listened to our input and proceeded accordingly. In multiple cases with Ms. Ghassemian, we have never experienced a negative outcome. Today my first call when a potential legal issue is on the horizon is to Ms. Ghassemian. She is both extremely effective and cost conscious.

Russell Patterson

The Patterson Company

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