Forms of Business Organisation
Like other places in the US, foreign investors face no particular problems establishing companies in Los Angeles.
There is no federal company law in the US. Similarities in state legislation, however, make it possible to provide the following outline of requirements. Recent changes to corporate-governance laws apply only to publicly listed companies.
The usual requirements of a corporation in the US are:
No minimum for manufacturing companies, except for the funds needed to start operations and obtain credit. Most states requiring minimum paid-in capital specify US$1,000. Minimum capital requirements are in effect, however, for banking, insurance and related activities. The banking industry uses capital requirements set by the Bank of International Settlements in Basle, Switzerland; requirements for the insurance industry are established by the National Association of Insurance Commissioners, headquartered in Washington DC.
Most states require that subscribed capital be fully paid in before authorised shares are issued. There are no legal reserve requirements.
Founders & Shareholders
Traditionally a minimum of three; a growing number of states permit one (often corporate) incorporator. Some states have residence or citizenship requirements for founders; in practice, these do not present an obstacle since incorporators are needed only for organisational formalities.
Frequently, a minimum of three; many states now allow one. Generally, no restrictions on residence or citizenship apply. For publicly listed firms, the firm’s chief executive officer (CEO) and chief financial officer (CFO) must certify all financial reports filed with the Securities and Exchange Commission (SEC). A firm may not lend funds to any of its directors or executive officers unless such loans are made in the ordinary course of the firm’s lending business. Terms must be the same as those offered to the general public. The SEC may prohibit any person found guilty of fraud from serving as an officer or director of a firm. Directors may not purchase, sell or otherwise transfer securities under their individual retirement account plans. Changes in directors’ and executive officers’ share ownership must be filed with the SEC within two business days. Since July 2003 these filings must be made electronically and be available for public viewing on the company’s website.
No nationality or residence requirement. No stipulations that labour be represented on the board of directors or in management.
Financial data must be published by all companies the year they are established; thereafter, data are required only of those listed on national securities exchanges. Some states require annual filings (containing minimal information) by foreign corporations licensed to do business in the state. If a firm has 500 or more shareholders and more than US$1m in assets, it is subject to the reporting requirements of the Securities and Exchange Act of 1934 and to various state reporting requirements. (The Securities and Exchange Act and its amendments pertain primarily to publicly owned corporations, dictating corporate disclosures made in annual reports, insider-trading reports, balance sheets, income statements, proxy material and other public reporting.)
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