When starting a business in California, it’s crucial that you consider not only your immediate business goals but also the long-term advantages and disadvantages of the entity type you choose. Among these considerations are the financial, legal, and tax implications of the entity type in question.
Consider this page your quick reference guide to California business entities. Also understand that these facts merely scratch the surface. To learn more about the potential benefits and pitfalls of each option, we invite you to reach out and schedule an in-depth consultation with one of our attorneys.
In California, corporations are considered legal entities that exist separately from their owners. This benefits you as an owner for three key reasons:
- It limits your personal liability regarding the company
- You can collect additional capital by selling stocks or bonds
- The company can continue even in the event that you leave the company (or pass away)
Of course, every business entity has its own tax considerations. Although the corporation entity type can limit your liability, you should know that taxes are levied on both the corporation and the company’s shareholders. Additionally, corporations can fall prey to double taxation — meaning that after paying federal and state taxes on its profits, the corporation is taxed again as dividends are paid to shareholders.
Even within the corporation category, there are a number of entity types to choose from depending on the unique needs and goals of your business. We at Marc A. Bronstein A Professional Law Corporation can help you determine whether any of the following options is right for you: general stock corporation, close corporation, professional corporation, S corporation, C corporation, or non-profit corporation.