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CALIFORNIA CORPORATE & SECURITIES LAW

California Court Green Lights Reverse Veil Piercing Of Delaware LLC

Courts historically have applied the alter ego doctrine to “pierce the corporate veil” so that a shareholder may be held liable for the debts or conduct of the corporation.  California has extended the possibility of alter ego liability to members of California limited liability companies: A member of a limited liability company shall be subject to…

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Court Declines To Impose Alter Ego Liability On LLC’s President

In general, the debts, obligations, or other liabilities of a California limited liability company do not become the debts, obligations, or other liabilities of a member or manager solely by reason of the member acting as a member or manager acting as a manager for the LLC.  Cal. Corp. Code § 17703.04(a).  An important exception to this…

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Fictitious Name Use Fails To Engender Standing Or Jurisdictional Issue

California Code of Civil Procedure Section 367 requires that every action must be prosecuted in the name of the real party of interest.  What happens when a plaintiff sues under a fictitious business name of a dissolved foreign limited liability company?  Yesterday, the Court of Appeal answered that question in The Rossdale Group, LLC v.…

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Alter Ego and the Nevada LLC

California’s version of the Revised Uniform Limited Liability Company Act expressly subjects members to potential alter ego liability:  A member of a limited liability company shall be subject to liability under the common law governing alter ego liability, and shall also be personally liable under a judgment of a court or for any debt, obligation,…

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One More Thing That A Limited Liability Company May Not Be Able To Do

California law does not permit limited liability companies to render a variety of professional services.  See,  Contractors Do It, PIs Do It; Why Not Real Estate Brokers?  To add insult to injury, the California General Corporation Law does not explicitly authorize LLCs to act as incorporators, even while permitting a wide variety of natural and unnatural persons to…

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Contractors Do It, PIs Do It; Why Not Real Estate Brokers?

Individuals and corporations, but not limited liability companies, may be licensed as real estate brokers under the California Real Estate Law.  This is a result of a bargain reached when California’s enacted its first limited liability company law – the Beverly-Killea Act.  In order to overcome the objection of the California Trial Lawyers Association, the act proscribed…

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Court Rules Attorney-Client Privilege Ceases To Exist When Corporation Ceases To Exist Without Successor

The LLC May Well Be The Platypus Of Business Organizations What happens to the attorney-client privilege when a corporation dissolves?  Magistrate Judge Sallie Kim recently answered that question in Virtue Global Holdings Ltd. v. Rearden LLC, 2016 U.S. Dist. LEXIS 53076 (N.D. Cal. April 5, 2016): When a corporation ceases to exist, “the corporate powers, rights and…

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Are LLC Interests Securities in California?

Does California consider membership interests in a limited liability company to be securities?  There are two correct answers to this question – yes and no. As I discussed a few years back, the California Corporate Securities Law preceded even the idea of limited liability companies.  When California’s first LLC law (the Beverly-Killea Act) was adopted,…

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FTB Issues Legal Ruling Addressing Filing And Franchise Tax Obligations of LLCs And Their Members

I’ve written several posts on discussing the meaning and ramifications of “doing business” for California tax purposes.  See, e.g., Why Your LLC May Be Doing More Than You Think In California Even When It’s Doing Nothing, 60 Acres And A Lawsuit Challenging The FTB’s Interpretation of “Doing Business” (sorry, I don’t know the current status of…

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Court Of Appeal Reaffirms Lender’s Refusal To Loan To LLC Based On Felonious Investor In Manager

In May, I wrote this post about a decision by the Second District Court of Appeal finding that a lender did not violate California’s Unruh Civil Rights Act when it declined to make a loan to a limited liability company whose managing member included a convicted felon.  The Court of Appeal on its own motion…

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