Organization and Entity Formation
Our law firm is committed to helping entrepreneurs develop an entity that best serves their needs. We provide unparalleled legal representation to nascent businesses.
Starting a new business has many advantages. Industry giants that seem to monopolize the market usually have humble beginnings. The decision to form a legal entity is the impetus responsible for their meteoric rise. Generally, a business organization facilitates the management and operation of any company and shields the owner from personal liability. While many businesses decide to keep small to control the quality of their products, others find they can provide a global service without sacrificing profits. The good news is that there is always a business model right for you. An experienced business attorney can provide invaluable advice on what type of entity best suits your needs and ensure that your business gets off to the right start.
Different types of business entities include:
- Sole Proprietorships
- Limited Liability Companies
- General and Limited Partnerships
Once you have a solid business plan and iron out the details of sales, marketing, advertising, and location, it is time to choose an entity type. Selecting from the available business structures will depend on various factors, such as tax advantages and exposure to liability. Other important considerations should include director and ownership concerns, personal and personnel needs, and the state and federal obligations relevant to the business type. Most businesses try to structure the payment of assets and liabilities to reduce their tax burden. As such, consulting a qualified lawyer and tax advisor is essential to understanding your legal and financial duties.
For example, in California, forming a corporation begins with filing articles of incorporation with the Secretary of State. A corporation is a separate legal entity that shields its owners from personal liability for the company’s financial obligations. With some exceptions, this protects the owner from financial debts and legal actions against the company. But taxes are levied on both the corporation and its shareholders. Generally, “C” Corps can avoid the double tax on dividends by paying year-end bonuses. “S” Corps may take advantage of “pass through” taxation. Two new entity types, “flexible purpose” and “benefit” corporations, allow investors and entrepreneurs to form an organization which fulfills both economic and social objectives.
A Limited Liability Company (LLC) affords similar liability protection, but is taxed differently than a corporation. Rather than delegating operations to a board of directors or an outside group, LLCs allow management, by one or more of its members, so that a small group of people invested in the company have control. LLCs are required to have an operating agreement that sets forth the arrangement by which members conduct business affairs. California law also requires that LLCs maintain the operating agreement in the office with their records in addition to filing articles of organization with the Secretary of State.
In a Limited Partnership (LP), liability for debts and obligations is limited according to each partner’s amount of control or participation in the business. A General Partnership (GP) requires two or more people engaged in a business for profit. Unlike LPs, general partners share “joint and several” liability for all obligations in any lawsuit against the business. Profits in a GP are taxed as personal income for the partners. A Limited Liability Partnership (LLP) is formed by professionals who engage in a practice that requires certification by the State of California. These include doctors, lawyers, accountants, engineers and others who provide a service or facility. Generally, California law requires that LLPs maintain a certain level of insurance.
If you require legal assistance forming a corporate entity, contact the experienced entity formation lawyers at the Law Offices of Salar Atrizadeh today. We are knowledgeable professionals dedicated to helping you structure and cultivate your business. Our firm is responsible for fostering the formation of some of the most successful businesses. We provide a comprehensive analysis of each client’s potential liabilities and tax burdens, so you can find a model that fits your need.