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Incorporating - Your Choices
In making the decision, it is important that you understand some of the verbiage commonly, and incorrectly, used. You will be told this is all about incorporation, but it really means the choice between a corporation, LLC, and other entities. The truth of the matter is there are many different business forms you can choose from. A corporation is one of the oldest and most stable, but it is hardly the only one out there. Let's take a closer look at some of the more popular business entities. Most businesses are small businesses that live a risky life by not forming business entities at all. These are known as sole propretors. The risk with this approach lies in the lack of protection from personal liability for business debts. The second most popular choice is the partnership. This occurs when two or more people pursue a business venture together. Many people are in partnerships and don't even know it. As with the sole proprietorship, there is no liability protection in a partnership. For many businesses, flexibility and taxes are two big issues. They are also positive aspects of a partnership. There are no corporate formalities and taxes flow through to the partners so the entity does not have to pay taxes. The limited liability company is promoted as the greatest thing since sliced bread for small businesses. The benefits come in the form of flexibility, favorable tax designation as a partnership and protection from personal liability for business debts. The limited liability company was supposed to be the answer for small businesses. The flexibility and tax ease of a partnership with the ironclad liability protection of a corp. All this is true, but there are a lot of fees and taxes have been increased. Now we come to the corporate entity. The corporation has been around for hundreds of years. It provides owners with a liability shield, to wit, a shareholder only risks their investment in the shares of the corporation should things go poorly. All is not good when discussing the corporate entity. Before choosing a corporation, you need to recognize there are a ton of formal rules that must be followed. Most entities end up retaining a busines attorney, which costs money. The opportunities can be a bit overwhelming. If you want flexibility, the LLC would seem to be the best. Want absolute protection from lawsuits? The corporation would seem the answer. The best way to choose is to talk with a CPA and attorney. Article Directory: http://www.articledashboard.com If you need to incorporate in California, contact Richard A. Chapo at SanDiegoBusinessLawFirm.com. |
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