Business Law FAQs
Frequently Asked Questions: Business Law
Many business owners wait too long and call us after something has already gone wrong. Best practice is to speak with a business attorney before forming a company, taking on a partner, signing a significant contract, raising capital, hiring employees, or facing a dispute. Early legal guidance can often help avoid more complex and costly problems later. If you’re unsure whether your situation warrants a consultation, the answer is usually yes.
An indemnification clause determines who is financially responsible if a third-party claim arises out of a contract. Poorly drafted indemnification language is one of the most consequential, and most overlooked, provisions in a business contract. You could unknowingly agree to cover losses that were entirely the other party’s fault, or fail to protect yourself from liability that should clearly be theirs. Before signing any contract with broad indemnification language, have an attorney review exactly what you might be agreeing to.
A few of the most consequential early-stage oversights we see include:
- Skipping a founders’ agreement. If you have a co-founder and no written agreement defining ownership, roles, and exit terms, disputes can become difficult and expensive to resolve.
- Mixing personal and business finances. Commingling funds can expose your personal assets to business liabilities by piercing the corporate veil. This is a risk that is easy to avoid with proper entity structuring from the start.
- Relying on generic online contract templates. Standard templates often omit California-specific protections and fail to capture the specific terms governing your business relationship.
- Inadequate clearance of your brand name and logo. Without conducting proper searches before use or registration, you risk infringing on existing rights or building a brand you may not be able to legally protect.
Avoiding these early legal pitfalls help protect your business, your business relationships, and everything you are working to build.
What should a partnership agreement or shareholder agreement cover?These documents are the operating rules for your business relationship. A solid agreement should address:
- ownership percentages and how they can change
- decision-making authority
- buy-sell provisions for when a partner wants out or passes away
- bringing on other partners
- non-compete obligations
- compensation and profit distributions
- how disputes will be resolved
Many of the disputes we handle could have been avoided or resolved far more cleanly with a well-drafted agreement in place from the beginning.
If your brand has value or you intend for it to have value, yes. A federal trademark registration gives you exclusive rights to use your mark in connection with your goods or services nationwide and gives you legal recourse if someone else attempts to infringe on your trademark rights. Without registration, your rights are generally limited to the geographic area in which you operate. This limitation can affect your ability to enforce your rights against third parties using similar marks in other regions.
A general counsel is an attorney or firm that serves as your ongoing legal advisor, handling contracts, compliance, employment questions, disputes, and strategic decisions as they come up. For growing companies that are not yet large enough to hire in-house legal staff, working with a firm on a general counsel basis provides consistent legal guidance without the overhead of a full-time hire. TONG LAW provides general counsel services to businesses across the Oakland and Sacramento areas.
At a minimum, a well-drafted business contract should clearly identify the parties, define the scope of work or exchange, establish payment terms, address what happens when things go wrong, include confidentiality protections where appropriate, and specify which state’s law governs the agreement. Vague language is the most common source of contract disputes and also the most preventable.
The path forward depends on what your existing agreement says and the outcome you’re looking for. Options typically include negotiated buyouts, mediation, arbitration, or litigation. In some cases, a court may order a forced dissolution of the business. The earlier you get legal counsel involved in a partnership dispute, the more options you typically have. Waiting until the relationship is completely broken limits your leverage and increases your costs.
Each structure has different implications for liability protection, taxation, and investor-readiness, which directly affect how your business operates and grows.
- An LLC offers flexible management and may be taxed on a pass-through basis, meaning profits and losses can be reported on the owners’ individual tax returns, subject to the entity’s tax classification.
- An S-Corp also provides pass-through taxation with some payroll tax advantages. However, it comes with restrictions on the number and type of shareholders.
- A C-Corp is preferred by venture capital investors and allows for multiple share classes and unlimited shareholders. It is subject to double taxation.
The right choice depends on your industry, growth plans, and who your future investors or partners might be. Taking the time to align your structure with these factors can prevent costly changes later.
Business transactions have a lot of moving parts and the details matter. An attorney typically handles:
- Drafting and reviewing purchase agreements, letters of intent, and asset transfer documents
- Conducting due diligence to uncover hidden liabilities like undisclosed debts, pending litigation, or IP issues
- Negotiating key deal terms including representations, warranties, and indemnification provisions
- Making sure the legal structure and tax structure align before anything is signed
- Managing a clean close with all required filings, transfers, and signatures in order
Getting counsel involved early in a deal almost always costs less than untangling problems after it closes.
Litigation does not have to be the first option. It is expensive, time-consuming, and potentially uncertain. Most business disputes are resolved through negotiation or alternative dispute resolution such as mediation or arbitration. That said, sometimes litigation is the right move, particularly when the other party is acting in bad faith, when the amount at stake justifies the cost, or when you need emergency relief such as a temporary restraining order. A business attorney can help you assess your position before you commit to a legal strategy
Compliance is the ongoing work of ensuring your business operates within the rules that apply to it. The main areas to stay on top of include:
- Business licenses and permits at the city, county, and state level
- California employment law requirements around wages, worker classification, and required notices
- Industry-specific regulations in sectors like healthcare, finance, or construction
- Corporate governance such as annual meetings, updated agreements, and proper record-keeping
Compliance is not a one-time checklist. It requires regular review as your business grows and as laws change.
The first step is a consultation. Vincent Tong works directly with clients, so you will speak with an experienced business attorney from the start.
TONG LAW serves clients throughout Oakland, Sacramento, and the San Francisco Bay Area.
Call (855) 866-4529 or visit tong-law.com to schedule your consultation.