California tax attorney Blog

Articles Posted in Business Transactions

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When beginning a business in California, you must decide what form of business structure to create. For federal tax reporting purposes, your form of business determines which income tax return form you have to file with the IRS. The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. Tax and legal considerations enter into selecting a business structure.

LLCs – limited liability companies – are also available in California. The federal government does not recognize an LLC as a classification for federal tax purposes. An LLC business entity must file a corporation, partnership or sole proprietorship tax return. A Limited Liability Company (LLC) is a business structure allowed by state statute. LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.

A California LLC generally offers liability protection similar to that of a corporation but is taxed differently. Domestic LLCs may be managed by one or more managers or one or more members. In addition to filing the applicable documents with the Secretary of State, an operating agreement among the members as to the affairs of the LLC and the conduct of its business is required. The LLC does not file the operating agreement with the Secretary of State but maintains it at the office where the LLC’s records are kept.

A sole proprietor is someone who owns an unincorporated business by himself or herself. However, if you are the sole member of a domestic limited liability company (LLC), you are not a sole proprietor if you elect to treat the LLC as a corporation.

A California general partnership must have two or more persons engaged in a business for profit. Except as otherwise provided by law, all partners are liable jointly and severally for all obligations of the partnership unless agreed by the claimant. Profits are taxed as personal income for the partners. A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.

A California limited partnership (LP) may provide limited liability for some partners. There must be at least one general partner that acts as the controlling partner and one limited partner whose liability is normally limited to the amount of control or participation of the limited partner. General partners of an LP have unlimited personal liability for the LP’s debts and obligations.

S corporations are corporations that elect to pass corporate income, losses, deductions and credit 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. S corporations are responsible for tax on certain built-in gains and passive income.

To qualify for S corporation status, the corporation must meet various requirements.

A California corporation generally is a legal entity which exists separately from its owners. While normally limiting the owners from personal liability, taxes are levied on the corporation as well as on the shareholders. The sale of stocks or bonds can generate additional capital and the longevity of the corporation can continue past the death of the owners. Legal Counsel should be consulted regarding the variety of options available.

To form a corporation in California, Articles of Incorporation must be filed with the California Secretary of State’s office.

Effective January 1, 2012, there are two new subtypes of stock corporations in California – a “flexible purpose corporation” and a “benefit corporation.” The new corporation subtypes allow entrepreneurs and investors to organize stock corporations that can pursue both economic and social objectives.

In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation’s capital stock. A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. A corporation can also take special deductions. For federal income tax purposes, a C corporation is recognized as a separate taxpaying entity. A corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders.

The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation.

Useful links on this topic include:

Business Structures

Starting a Business – Entity Types

Call business attorney Mitchell A. Port to form a new entity.

The Government Proposes To Increase Certainty With Respect To Worker Classification

Current Law

For both tax and nontax purposes, workers must be classified into one of two mutually exclusive categories: employees or self-employed (sometimes referred to as independent contractors).

Worker classification generally is based on a common-law test for determining whether an employment relationship exists. The main determinant is whether the service recipient (employer) has the right to control not only the result of the worker’s services but also the means by which the worker accomplishes that result. For classification purposes, it does not matter whether the service recipient exercises that control, only that he or she has the right to exercise it.

Even though it is generally recognized that more highly skilled workers may not require much guidance or direction from the service recipient, the underlying concept of the right to control is the same for them. In addition, only individuals can be employees. In determining worker status, the IRS looks to three categories of evidence that may be relevant in determining whether the requisite control exists under the common-law test:

(i) behavioral control, (ii) financial control, and (iii) the relationship of the parties.

For employees, employers are required to withhold income and Federal Insurance Contribution Act (FICA) taxes and to pay the employer’s share of FICA taxes. Employers are also required to pay Federal Unemployment Tax Act (FUTA) taxes and generally state unemployment compensation taxes. Liability for Federal employment taxes and the obligation to report the wages generally lie with the employer. For workers who are classified as independent contractors, service recipients engaged in a trade or business and that make payments totaling $600 or more in a calendar year to an independent contractor that is not a corporation are required to send an information return to the IRS and to the independent contractor stating the total payments made during the year. The service recipient generally does not need to withhold taxes from the payments reported unless the independent contractor has not provided its taxpayer identification number to the service recipient. Independent contractors pay Self-Employment Contributions Act (SECA) tax on their net earnings from self-employment (which generally is equivalent to both the employer and employee shares of FICA tax). Independent contractors generally are required to pay their income tax, including SECA liabilities, by making quarterly estimated tax payments.

For workers, whether employee or independent contractor status is more beneficial depends on many factors including the extent to which an independent contractor is able to negotiate for gross payments that include the value of nonwage costs that the service provider would have to incur in the case of an employee. In some circumstances, independent contractor status is more beneficial; in other circumstances, employee status is more advantageous.

Under a special provision (section 530 of the Revenue Act of 1978 which was not made part of the Internal Revenue Code), a service recipient may treat a worker as an independent contractor for Federal employment tax purposes even though the worker actually may be an employee under the common law rules if the service recipient has a reasonable basis for treating the worker as an independent contractor and certain other requirements are met. The special provision applies only if (1) the service recipient has not treated the worker (or any worker in a substantially similar position) as an employee for any period beginning after 1977 and (2) the service recipient has filed all Federal tax returns, including all required information returns, on a basis consistent with treating the worker as an independent contractor.

If an employer meets the requirements for the special provision with respect to a class of workers, the IRS is prohibited from reclassifying the workers as employees, even prospectively and even as to newly hired workers in the same class. Since 1996, the IRS has considered the availability of the special provision as the first part of any examination concerning worker classification. If the IRS determines that the special provision applies to a class of workers, it does not determine whether the workers are in fact employees or independent contractors. Thus, the worker classification continues indefinitely even if it is incorrect.

The special provision also prohibits the IRS from issuing generally applicable guidance addressing the proper classification of workers. Current law and procedures also provide for reduced penalties for misclassification where the special provision is not available but where, among other things, the employer agrees to prospective reclassification of the workers as employees.

Reasons for Change

Since 1978, the IRS has not been permitted to issue general guidance addressing worker classification, and in many instances has been precluded from reclassifying workers – even prospectively – who may have been misclassified. Since 1978 there have been many changes in working relationships between service providers and service recipients. As a result, there has been continued and growing uncertainty about the correct classification of some workers.

Many benefits and worker protections are available only for workers who are classified as employees. Incorrect classification as an independent contractor for tax purposes may spill over to other areas and, for example, lead to a worker not receiving benefits for unemployment (unemployment insurance) or on-the-job injuries (workers’ compensation), or not being protected by various on-the-job health and safety requirements.

The incorrect classification of workers also creates opportunities for competitive advantages over service recipients who properly classify their workers. Such misclassification may lower the service recipient’s total cost of labor by avoiding workers’ compensation and unemployment compensation premiums, and could also provide increased opportunities for noncompliance by service providers.

Workers, service recipients, and tax administrators would benefit from reducing uncertainty about worker classification, eliminating potential competitive advantages and incentives to misclassify workers associated with worker misclassification by competitors, and reducing opportunities for noncompliance by workers classified as self-employed, while maintaining the benefits and worker protections associated with an administrative and social policy system that is based on employee status.


The proposal would permit the IRS to require prospective reclassification of workers who are currently misclassified and whose reclassification has been prohibited under current law. The reduced penalties for misclassification provided under current law would be retained, except that lower penalties would apply only if the service recipient voluntarily reclassifies its workers before being contacted by the IRS or another enforcement agency and if the service recipient had filed all required information returns (Forms 1099) reporting the payments to the independent contractors. For service recipients with only a small number of employees and a small number of misclassified workers, even reduced penalties would be waived if the service recipient (1) had consistently filed Forms 1099 reporting all payments to all misclassified workers and (2) agreed to prospective reclassification of misclassified workers. It is anticipated that, after enactment, new enforcement activity would focus mainly on obtaining the proper worker classification prospectively, since in many cases the proper classification of workers may not have been clear. (Statutory employee or nonemployee treatment as specified under current law would be retained.)

The Department of the Treasury and the IRS also would be permitted to issue generally applicable guidance on the proper classification of workers under common law standards. This would enable service recipients to properly classify workers with much less concern about future IRS examinations. Treasury and the IRS would be directed to issue guidance interpreting common law in a neutral manner recognizing that many workers are, in fact, not employees.

Further, Treasury and the IRS would develop guidance that would provide safe harbors and/or rebuttable presumptions, both narrowly defined. To make that guidance clearer and more useful for service recipients, it would generally be industry- or job-specific. Priority for the development of guidance would be given to industries and jobs in which application of the common law test has been particularly problematic, where there has been a history of worker misclassification, or where there have been failures to report compensation paid.

Service recipients would be required to give notice to independent contractors, when they first begin performing services for the service recipient, that explains how they will be classified and the consequences thereof, e.g., tax implications, workers’ compensation implications, wage and hour implications.

The IRS would be permitted to disclose to the Department of Labor information about service recipients whose workers are reclassified.

To ease compliance burdens for independent contractors, independent contractors receiving payments totaling $600 or more in a calendar year from a service recipient would be permitted to require the service recipient to withhold for Federal tax purposes a flat rate percentage of their gross payments, with the flat rate percentage being selected by the contractor. The proposal would be effective upon enactment, but prospective reclassification of those covered by the current special provision would not be effective until the first calendar year beginning at least one year after date of enactment. The transition period could be up to two years for independent contractors with existing written contracts establishing their status.

California became the seventh state to adopt two new subtypes of stock corporations – a “flexible purpose corporation” and a “benefit corporation” as of January 1, 2012. Now, investors and entrepreneurs can pursue both social and economic objectives allowed by the new corporation subtypes. These two types of new entities may sound like marketing hype but they help shield them against lawsuits brought by shareholders who say that company do-gooding has diluted the value of their stock.

The new stock corporation subtypes differ from traditional for profit corporations that are organized to pursue profit and nonprofit corporations that must be used solely to promote social benefits.

Entrepreneurs who wanted to incorporate social causes or green initiatives often had to become non-profits which limited their ability to raise venture capital.

Approval from 2/3 of a company’s outstanding shareholders is needed to become a benefit corporation. A similar vote is needed to return to the traditional type of corporation.

The Articles of Incorporation for a benefit corporation must include the following additional statement: “This corporation is a benefit corporation.” The Articles of Incorporation for a benefit corporation may identify one or more specific public benefits that shall be the purpose or purposes of the benefit corporation. For complete legal authority, look at California Corporations Code sections 14600-14631.

For a flexible purpose corporation, the Articles of Incorporation must include one of the purpose statements required by California Corporations Code section 2602(b)(1), as well as a statement that a purpose of the flexible purpose corporation is to engage in one or more of the specific purposes provided in California Corporation Code section 2602(b)(2). For complete legal authority, look at California Corporations Code sections 2500-3503.

To help form one of these two new corporations, call business attorney Mitchell A. Port at (310) 559-5259.

Nevada Once Again Leads the Way in Debtor-Friendly Legislation

In his recent article describing the benefits of using a Nevada LLC as an asset protection tool, Jacob Stein wrote all of the following:

The laws of the 50 states aren’t uniform when it comes to shielding or exposing a debtor’s assets from the claims of creditors. For example, some states fully expose a debtor’s residence to a creditor. Other states, such as Florida and Texas, provide a complete homestead exemption. But no state beats Nevada when it comes to consistently and aggressively enacting legislation designed to assure that a debtor’s assets remain with the debtor and out of the clutches of creditors.

The Background

We repeatedly recite the mantra to all who will listen that investment real estate, be it commercial real estate, apartment building or raw land, should not be owned by the individual, but should be titled in a limited liability company (“LLC”). The laws of most states follow a pattern that prevents a creditor of a member of an LLC from reaching the assets of the LLC. Most states — including California — limit the creditor of a member to a charging order, an order issued by a court and directed to the manager of the LLC ordering that any distributions of LLC income or profits that would otherwise be distributed to the debtor-member be instead distributed to the creditor. But if there are no distributions, the charging order is ineffective and the creditor gets nothing. If the LLC is controlled by the debtor-member or someone friendly to the debtor-member, it’s not too difficult to withhold distributions until the creditor tires of the hunt or to make distributions to one or more other members who are friendly to the debtor.

The rationale for treating creditors of members of LLC’s this harshly is as follows: Let’s assume that ten investors pool their resources and start a business, forming an LLC. The LLC purchases real estate and other business assets. Later, one of the members of the LLC develops a problem with creditors. It would disrupt the operations of the business and impact the investment of the other nine members if the creditors of one member were permitted to seize the assets of the LLC. So the law tracks a middle ground: The creditors of the debtor-member cannot seize the assets of the LLC, but they are permitted to intercept any distributions of profits or gains that might be made to the debtor-member, by means of a charging order.

Which brings us to the bottom-line question: If the charging order limitation is grounded in the protection of the other members, should the charging order limitation apply at all if the LLC has only one member, viz., the debtor-member? No state statute excludes single-member LLC’s from the purview of the charging order limitation. Nevertheless, most careful practitioners counsel their clients to have more than one member in their LLC’s if at all possible.

The Courts Speak

In 2003, the United States Bankruptcy Court for the District of Colorado addressed the issue head-on. In In re Albright, the Court ruled that, where a Colorado LLC had only one member, the Colorado charging order limitation did not apply, because

“the charging order limitation serves no purpose in a single member limited liability company, because there are no other parties’ interests affected.”

In light of the fact that this was the decision of a trial court, little credence was given to it. Last year, however, the first appellate court had the opportunity to squarely address the issue. In Olmstead v. Federal Trade Commission, WL 2518106 (July 6, 2010), the Florida Supreme Court was confronted with the efforts of a creditor of a 100% owner of a Florida LLC. Of course, the issue was whether the creditor was limited to a charging order. Florida’s governing statute is somewhat unusual in that the operative restriction provides that:

“Unless otherwise provided in the articles of organization or operating agreement, an assignee of a limited liability company interest may become a member only if all members other than the member assigning the interest consent.”
Florida Stats. 608.433(1).

The Florida Supreme Court held that this statute could not apply, because in the single-member LLC, there are no other members who could withhold or give their consent. Many states, notably California and Nevada (see California Corporations Code §17302(e)) are explicit in providing that the charging order is the only remedy available to a creditor of a debtor-member. Florida has no such provision, and this distinction may render Olmstead inapplicable, or at least distinguishable, from those states that have such a provision.

The Nevada Response

In what appears to be a direct response to the Florida Supreme Court’s decision in Olmstead, in June, 2011, Nevada amended its governing statute to add the following highlighted clause:

This section…[p]rovides the exclusive remedy by which a judgment creditor of a member may satisfy a judgment out of the member’s interest of the judgment debtor, whether the limited liability company has one member or more than one member.
N.R.S. 86.401.2(a).
In Nevada, at least, the issue is settled.

Will California Defer to the Nevada Statute?

Let’s assume that a real estate investor forms a Nevada LLC. The LLC owns a parcel of investment real estate in California. The investor is the sole member of the LLC. Because the LLC is conducting business in California, the LLC registers as a foreign limited liability company with the California Secretary of State. The investor defaults on a promissory note having nothing to do with the operation of the Nevada LLC. The judgment creditor seeks to satisfy his judgment against the assets of the LLC. Is the creditor limited to obtaining a charging order and waiting — perhaps forever — until there are distributions to the debtor-member? If the action were brought in Nevada, we know the result. But what if the action were brought in California?

California Corporations Code §17450(a) provides:

The laws of the state or foreign country under which a foreign limited liability company is organized shall govern its organization and internal affairs and the liability and authority of its managers and members.

A cursory reading of this statute might lead one to conclude that a California court should defer to Nevada’s statute. After all, the issue of whether a creditor of a member is limited to a charging order or may have other remedies available would appear to be an issue involving the “liability” of the “members.” But a creditor might argue that this statute, on its face, is intended to apply to the internal relations of the members and managers, not the liability of a member to third parties.

There is a bottom line here: If a person desires to form an LLC and has no other person to act as a co-member, the LLC should be formed under Nevada law. If a California court defers to the Nevada statute, so much the better. If the attempt fails, the debtor is no worse off than if he or she had formed the LLC under California law in the first place.

Still More Good News from Nevada

One of the basic distinctions between an LLC and a corporation — at least from a debtor-creditor standpoint — is that a creditor of a shareholder of a corporation can seize the shareholder’s shares, usually by means of a “turnover order.” If the debtor is the controlling — or sole — shareholder of the corporation, the seizure of the stock means that the creditor has a straight shot at all of the corporation’s assets. But there is no possibility of a turnover order for a membership interest of an LLC, especially in those states such as California and Nevada that specify that the charging order is the only remedy that a creditor of a debtor-member has. It is for this reason that we often convert closely-held corporations into limited liability companies.

But this distinction no longer obtains in Nevada, which is now the first state to provide a charging order limitation to the shareholders of Nevada corporations! See N.R.S. 78.746. The limitation exists only for those Nevada corporations that have no more than 75 shareholders (close corporations), and does not apply at all to the subsidiaries of public companies or to professional corporations. But for every other shareholder of every other Nevada corporation, it’s nice to know that the legislature is always there, vigilant in protecting their assets.

Read Jacob’s other articles at the following websites:

The IRS has an informative online resource for business owners in California counties of Los Angeles, Orange and Ventura that is worth reviewing before starting a new business. It is also a good review for existing businesses. Below is a list of topics covered by the IRS:

Business Forms and Pubs
This is a list of IRS Tax Publications for Business.

Small Business Resources
This page provides you links to sites that have specific information dealing with Small Business
Starting a Business
If you’re considering starting a business, then start here. This section provides links to everything from a checklist for a new business to selecting a business structure and more.

Operating a Business
This section is packed with the information you need to operate your business. Learn about operating a business with employees, business deductions and tax credits, filing and paying taxes, recordkeeping, and choosing an accounting method.

Online Internal Revenue Bulletins
The online Internal Revenue Bulletin (IRB) is the authoritative instrument of the IRS for announcing all substantive ruling necessary to promote a uniform application of tax law.

IRS Notices and Letters
This page provides links to topics found in the category of IRS Notices.

Employer ID Numbers (EINs)
A full explanation about the EIN, also known as a federal tax identification number.

Avoiding Problems
This section provides links to resources to help the small business owner create a recordkeeping system, get the latest on the cash vs. accrual accounting methods, and tips on understanding their IRS notice.

Employment Taxes
The subject of employment taxes is not as formidable when you consult our comprehensive resources.

Closing a Business
There is more involved in closing your business than just locking the doors. This section provides procedures for getting out of business, including what forms to file and how to handle additional revenue received or expenses you may incur.

Appeal a Tax Dispute
The Office of Appeals is independent of any other IRS office. Our mission is to settle tax disagreements without having to go to Court and a formal trial.

Audit Technique Guide
The Market Segment Specialization Program focuses on developing highly trained examiners for a particular market segment. A market segment may be an industry such as construction or entertainment, a profession like attorneys or real estate agents or an issue like passive activity losses.

Community Based Outlet Programs
The IRS and local community organizations across the country are working together to increase the availability of tax forms, publications, and other tax materials. After joining the appropriate program, we will send you free copies of material (CD-ROM or paper) that can be used to provide tax information to your employees or the public.

Coordinated Issue Papers – LB&I
The IRS works to identify, coordinate, and resolve complex and significant industry wide issues by ensuring uniform application of the law through the issuance of coordinated issue papers. Although these papers are not official pronouncements on the issues, they do set forth the Service’s current thinking.

Federal Payment Levy Program
Certain federal payments (OPM, SSA, federal employee salaries, and federal employee travel) disbursed by the Department of the Treasury, Financial Management Service (FMS) may be subject to a 15 percent levy through the Federal Payment Levy Program (FPLP) to pay your delinquent tax debt. Find out your appeal rights and how to resolve any dispute.

Information for the Tax Exempt Bond Community
Tax Exempt Bonds (TEB) provides specialized information and services to the municipal finance community, including tailored educational programs which focus on bond industry segments; pro-active education and outreach products which address non-compliance trends; and compliance programs devised to foster voluntary resolution of tax law infractions.

Internal Revenue Bulletins Picklist
Link to new IRB picklist.

IRM Part 4 Index
This section of the Internal Revenue Manual (IRM) discusses information reporting and record keeping for businesses.

Internal Revenue Manual (IRM)
The Internal Revenue Manual (IRM) and the Chief Counsel Directives Manual (CCDM) contain the policies, procedures, instructions, guidelines, and delegations of authority which direct the operation and administration of the Internal Revenue Service. Topics include tax administration, personnel and office management, and others.

IRS Non-Retaliation Policy
IRS has a zero-tolerance policy for retaliation and has had one in place since 1998.

Join “e-News For Tax Professionals”
The IRS e-News For Tax Professionals is an electronic mail service designed to provide general news for tax professionals, access to resources on the Web site and a section for local news and events specific to each State, The District of Columbia and International.

Main Index of Tax Topic Categories
An online version of our voice-response system. This area contains helpful tips and pointers to relevant resources for taxpayers.

Market Segment Understandings (MSU)
The MSU Program, first introduced in 1993, is a means of enhancing tax compliance while reducing taxpayer burden. This Program envisions that the IRS and taxpayers in particular market segments, work together to improve tax compliance in those areas through educational efforts and other collaborative approaches rather than through traditional audit techniques.

Procedures, Regs, Rulings FAQs

Qualified Intermediaries (QI)
A Qualified Intermediary (QI) is any foreign intermediary (or foreign branch of a U.S. intermediary) that has entered into a qualified intermediary withholding agreement with the IRS. A QI is entitled to certain simplified withholding and reporting rules.

Research Tax Credit – Internal Use Software

Tax Calendar
This tax calendar has the due dates for the current tax year that most taxpayers will need. The tax calendar is designed primarily for employers, however the calendar has important due dates for all types of businesses and for individuals.

Tax Code, Regulations and Official Guidance
The place to start for researching publicly accessible versions of the Internal Revenue Code, Treasury (Tax) Regulations, or other forms of official IRS tax guidance.

Small Business Tax Workshops and Webinars
These workshops are designed to help the small business owner understand and fulfill their Federal Tax responsibilities. Self-study formats are available online in both English and Spanish at the IRS online classroom. Webinars are designed to provide presentations on key topics.

In California, since different laws may be involved in a particular employment situation, it is possible that the same individual may be considered an employee for purposes of one law and an independent contractor under another law.

Not all workers are employees as they may be volunteers or independent contractors.

Employers sometimes improperly classify their workers as independent contractors so that the employers are not liable for payments under disability insurance, unemployment insurance, or social security. And, treating a worker as an independent contractor means the employer does not have to pay payroll taxes, the minimum wage or overtime. Finally, not treating workers as employees means the employer does not comply with other wage and hour law requirements and does not have to cover independent contractors under workers’ compensation insurance.

The state agencies most involved with the determination of independent contractor status are the Employment Development Department (EDD), which is concerned with employment-related taxes, and the Division of Labor Standards Enforcement (DLSE), which is concerned with whether the wage, hour and workers’ compensation insurance laws apply. There are other agencies, such as the Franchise Tax Board (FTB), Division of Workers’ Compensation (DWC), and the Contractors State Licensing Board (CSLB), that also have regulations or requirements concerning independent contractors.

Here are some good questions to help you decide what to do about your status as a worker. The answers to these questions can be found by clicking here.

1. How do I know if I am an employee or an independent contractor?

2. The person I work for tells me that I am an independent contractor and not an employee. He does not make any payroll deductions or withholdings for taxes, social security, etc., when he pays me, and at the end of the year he provides me with an IRS form 1099 rather than a W-2. By paying me in this manner does it mean I am automatically an independent contractor?

3. Does it make any difference if I am an employee rather than an independent contractor?

4. When I started my current job my employer had me sign an agreement stating that I am an independent contractor and not an employee. Does this mean I am an independent contractor?

5. How can it be that the Labor Commissioner determined I was an employee with respect to a wage claim I filed and won, and the Employment Development Department (EDD) determined I was an independent contractor, and denied my claim for unemployment insurance benefits?

6. As an employer, what obligations do I have to purchase Workers’ Compensation Insurance or comply with other labor laws for persons classified as independent contractors?

7. What can I do if I believe my employer has misclassified me as an independent contractor and as a result am not being paid any overtime?

8. What is the procedure that is followed after I file a wage claim?

9. What can I do if I prevail at the hearing and the employer doesn’t pay or appeal the Order, Decision, or Award?

10. What can I do if my employer retaliates against me because I thought I was misclassified as an independent contractor and objected to not being paid overtime?

Here are a few links – which is not all-inclusive – to basic federal tax information for people who are starting a business, as well as information to assist in making basic business decisions. Other steps may be appropriate for your specific type of business.

Checklist for Starting a Business

Selecting a Business Structure (Sole Proprietorships, Partnerships, Corporations, S Corporations, Limited Liability Company (LLC))

Business Taxes

Selecting an Accounting Method


When Do I Start My Tax Year?

Employer Identification Number (EIN)

Establishing a Retirement Plan

Small Business Publications

Is it a Business or a Hobby?

The California Franchise Tax Board has excellent information about the life of a business from start-up to liquidation and dissolution. Topics include the following:

Small Business Assistance Center

California Business Portal

Keeping Records

Avoiding Problems

Business tax credits

How to dissolve, cancel or surrender a California business entity

For more legal help from a California business attorney, call Mitchell A. Port at (310) 559-5259.

Closing your California business? There’s much to do. The Internal Revenue Service provides procedures for getting out of business, including how to handle additional revenue received or expenses you may incur and what forms to file. Here are some useful links:

Closing a Business Checklist

Sale of a Business

Changing Your Business Structure

Declaring Bankruptcy

Terminating a Retirement Plan

See the Video

Need additional help? Call an attorney experienced in business transactions; call Mitchell A. Port at (310) 559-5259.