California Business Law Attorney
California is the fifth-largest economy in the world — and one of the most legally complex business environments in the United States. A California business contends with the highest state income tax in the country, an $800 annual minimum franchise tax on most entities, near-total unenforceability of employee non-competes, the most aggressive employment and wage-hour rules of any state, the California Consumer Privacy Act, AB 5 worker classification, and litigation exposure under PAGA, the Unfair Competition Law, and a dozen other statutory regimes. Our firm helps California entrepreneurs, established businesses, real estate operators, technology companies, and out-of-state companies expanding into California with the full lifecycle of business law work.
Southern California: (714) 464-5188 · Northern California: (707) 207-8005
Entity Formation in California
The first decision is what kind of entity to form. The right answer depends on tax treatment, liability protection, ownership structure, and exit plans. We routinely form:
Limited Liability Companies (LLCs)
California LLCs are governed by the California Revised Uniform Limited Liability Company Act (RULLCA), codified at Corporations Code §§ 17701.01 et seq. Articles of Organization are filed with the California Secretary of State; the filing fee is $70. Critically, every California LLC owes an $800 annual minimum franchise tax to the Franchise Tax Board — whether or not the LLC has any income or activity — plus a graduated LLC fee on California-source gross receipts above $250,000. The $800 minimum makes California a relatively expensive state to maintain entities, and it must be factored into entity-formation decisions.
Corporations
California corporations are formed under the California Corporations Code. C-Corporations remain the right choice for businesses planning to raise venture capital, issue multiple classes of stock, or pursue an eventual IPO — common goals in California’s technology and biotech sectors. S-Corporation election (made with IRS Form 2553) is often valuable for active service businesses with modest numbers of owners. California corporations also owe the $800 minimum franchise tax.
Partnerships
General partnerships, limited partnerships, limited liability partnerships (for licensed professionals), and joint ventures each have specific California rules. Limited partnerships and LLPs also owe the $800 minimum franchise tax.
The Reality of the $800 Annual Tax
California’s $800 minimum franchise tax has practical consequences for business structuring. Real estate investors with multiple properties cannot cost-effectively put each property in a separate California LLC the way Texas Series LLC investors can. Multi-entity structures that make sense in other states often need rethinking for California operations. We help clients model the tax cost of various entity structures before formation and avoid creating entities that will be financial drains over their lifetime.
Operating Agreements and Shareholder Agreements
The most important document in most California businesses is the operating agreement (LLCs) or shareholder agreement (corporations). RULLCA’s default rules cover only a fraction of what owners need to address. A well-drafted agreement covers:
- Management structure and decision-making authority.
- Allocations of profit, loss, and tax distributions.
- Capital contributions and capital call obligations.
- Transfer restrictions, rights of first refusal, drag-along, and tag-along provisions.
- Buy-sell triggers (death, disability, divorce, deadlock, retirement).
- Valuation methodology for buyout transactions.
- Confidentiality and customer non-solicit obligations (the only restrictive covenants generally enforceable in California).
- Indemnification and exculpation of managers and directors.
- Dispute resolution — arbitration, mediation, and forum selection (with attention to California’s public policy limits on out-of-state choice of law).
California Non-Compete Prohibition — Business & Professions Code § 16600
California is unique in that employee non-compete agreements are generally void under Business & Professions Code § 16600. The statute provides that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” California courts interpret this expansively. Even customer non-solicits aimed at preventing departing employees from soliciting former clients have been struck down (see Edwards v. Arthur Andersen LLP).
Recent legislation (Bus. & Prof. Code §§ 16600.1, 16600.5, effective 2024) has gone further, requiring California employers to notify current and former employees that any non-compete provisions in existing agreements are unenforceable, with statutory damages for noncompliance. This is one of the most consequential 2024 changes in California employment law for any employer with California-based workers.
Three narrow exceptions to § 16600 remain:
- Sale of business. A seller of business goodwill or substantially all assets of a business may agree not to compete with the buyer in a specified geographic area.
- Dissolution of partnership or LLC. Outgoing partners or members may agree not to compete in connection with the dissolution.
- Trade secret protection. Although non-competes are not enforceable, California Uniform Trade Secrets Act (Civil Code §§ 3426 et seq.) provides robust remedies for actual misappropriation of trade secrets.
For California employers, protecting confidential information requires a different toolkit: well-drafted NDAs, IP assignment agreements, trade secret protocols, exit interviews, and (where appropriate) trade secret litigation under CUTSA. We help California employers build that toolkit.
AB 5 and Independent Contractor Classification
Under AB 5 (codified at Labor Code § 2775) and the underlying Dynamex decision, California applies a strict three-part ABC test for classifying workers as independent contractors. To classify a worker as an independent contractor (rather than an employee) under most California wage and hour laws, the hiring entity must prove all three:
- A. The worker is free from the hiring entity’s control and direction in performing the work.
- B. The worker performs work outside the usual course of the hiring entity’s business.
- C. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature.
AB 2257 (2020) and subsequent amendments added numerous occupation-specific exceptions, but the default is the ABC test. Misclassification exposes the business to significant back-wages, penalties, payroll taxes, and PAGA claims. We help California businesses analyze classification risk and structure relationships to manage exposure.
PAGA — The Private Attorneys General Act
The Private Attorneys General Act (Labor Code §§ 2698 et seq.) permits a single aggrieved employee to sue an employer on behalf of all similarly situated current and former employees for civil penalties for Labor Code violations. PAGA has dramatically reshaped California employment litigation. Settlements regularly run into seven figures even for technical wage statement and meal-break violations. The June 2024 PAGA reform legislation modified some of the rules — particularly around standing, manageability, and the employer’s ability to cure violations — but PAGA remains one of the largest litigation exposures for any California employer. Compliance audits (wage statements, meal and rest breaks, final pay timing, expense reimbursement) are dramatically cheaper than defending a PAGA suit.
CCPA and CPRA Privacy Compliance
The California Consumer Privacy Act (CCPA), expanded by the California Privacy Rights Act (CPRA), gives California residents extensive rights regarding personal information collected by businesses meeting statutory thresholds. Covered businesses must provide privacy notices, honor consumer requests to access, delete, and correct personal information, allow opt-out of sale or sharing of personal information, and (for sensitive personal information) honor opt-out of certain uses. Enforcement comes from the California Privacy Protection Agency and from a limited private right of action for data breaches. We help businesses determine whether they are covered and build CCPA/CPRA compliance programs.
Contracts
We draft and review the contracts that move every business: master services agreements, statements of work, vendor agreements, software licenses, distribution agreements, employment documentation (with California-specific compliance), independent contractor agreements (subject to AB 5 analysis), NDAs, IP assignments, asset purchase agreements, and bills of sale.
Acquisitions and Sales
Buying or selling a business is the largest legal transaction most owners undertake. We represent buyers and sellers in:
- Letter of intent and term sheet negotiation.
- Asset purchase and stock or membership interest purchase agreements.
- Due diligence coordination, with California-specific attention to PAGA exposure, wage-and-hour audits, and classification risk.
- Reps and warranties, indemnification, escrow, and rep-and-warranty insurance.
- Earn-out and seller-financing structures.
- Sale-of-business non-competes under the § 16600(b) exception.
Foreign Entity Registration in California
If your business is formed in another state but doing business in California, you generally must register as a foreign entity with the California Secretary of State and pay the $800 annual minimum franchise tax. Operating in California without registration prevents your company from maintaining a lawsuit in California courts and exposes the company to penalties. Because we are licensed in California, Idaho, Texas, Washington, and North Carolina, we can handle both the home-state formation and the California foreign registration in a single engagement.
Business Disputes and Litigation
We represent businesses in commercial disputes — breach of contract, partnership and shareholder disputes, breach of fiduciary duty, trade secret claims under CUTSA, Unfair Competition Law (Bus. & Prof. Code § 17200) claims, business torts, fraud claims, and tortious interference — in California superior court, federal court, and arbitration. California’s anti-SLAPP statute (Code of Civil Procedure § 425.16) provides early-dismissal and fee-shifting protections for protected speech and petitioning activity; we evaluate and use it where appropriate.
Schedule a California Business Law Consultation
Southern California: (714) 464-5188
Northern California: (707) 207-8005
Our other offices:
Idaho (208) 696-2772 · Texas (469) 535-6260 · Washington (206) 279-4780 · North Carolina (919) 363-9945
See also: California (state hub) · Business Law (pillar)
Disclaimer: The information on this page is general legal information about California business law and is not legal advice. The California Corporations Code, RULLCA, AB 5, PAGA, and CCPA/CPRA rules change frequently. Always consult a California-licensed attorney about your specific situation. No attorney-client relationship is formed by visiting this page.
Schedule a Free Consultation in California
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California: (714) 464-5188
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Related Pages
- California multi-state practice hub — overview of all our California services.
- Business Law across five states — see how we coordinate business law matters across Idaho, California, Texas, Washington, and North Carolina.
- California Estate Planning
- California Real Estate