We Can Help You Form Your Business
The decisions made during corporate formation can profoundly affect your business throughout its life cycle; a business formation attorney in Irvine, CA can help. The planning of dividing taxes, tax implications, and personal liability disbursement are crucial to the success of any business. We have significant experience creating corporate formations for companies all over California. Choosing the correct business entity for your venture can provide tax benefits and tax consequences. Each type of entity has its own distinct set of advantages. Law & Stein can help you decide which business formation direction will be best for you:
A C Corporation is taxed separately from its owners. This particular corporation can sue or be sued, own assets, and conduct business in its name. The owners of this corporation are typically shareholders with limited liability, meaning they will not be personally responsible for business debts and liabilities. However, the drawback is that C corporations are subject to double taxation. Profits will be taxed at the corporate level and again during distribution to shareholders as dividends.
S Corporations also provide liability protection to their shareholders. However, the corporation itself does not pay federal income taxes. The taxes are passed to the shareholders, who must report the business’s profits and losses on their independent tax returns. The pro is that these corporations avoid double taxation. However, the complicated obligations to the shareholders can be a drawback.
• Traditional partnerships (limited and general)
A traditional partnership requires two or more individuals to agree to share the profits and losses of a company. These business partnerships are easy to form and offer flexibility among partners to allocate the business’s finances. However, there is a risk of personal liability since the partners are fully responsible for the business debt.
• Joint ventures
Joint ventures are similar to traditional partnerships except for not involving ongoing business obligations. Ventures achieve a common goal, such as developing a new product. Joint ventures are beneficial for companies that are looking to expand operations. However, careful management is necessary to protect each party’s interests.
• Subsidiary formation
A subsidiary formation is when a parent company creates a new business. Creating a subsidiary limits the parent company’s liability for the subsidiary’s debts. However, the drawback is that it requires a significant financial investment from the parent company during its formation.
• Professional Corporation (PC)
This business structure is for professionals who provide services that require a state license. Professional corporations offer their owners personal liability protection while allowing them to operate as licensed professionals. However, it does not protect the owners from individual malpractice.
• Limited Liability Company (LLC)
An LLC provides personal liability protection for its owner or owners. Moreover, an LLC offers the flexibility and tax benefits of a partnership or sole proprietorship. However, they usually cost more to start up and maintain.
• Limited Liability Partnership (LLP)
A limited liability partnership (LLP) combines traditional partnerships with those of a limited liability company. In an LLP, partners are only personally liable for their actions and those of who they supervise directly. LLPs offer tax flexibility but carry specific public disclosure requirements.
See our blog posts on business & corporate law:
Starting on January 1, 2024, the Corporate Transparency Act (CTA) will require certain business entities to file a report detailing the ownership of their entity. Lawmakers designed this new law to combat money laundering, tax fraud, and other illegal acts. For this reason, if you have an entity as part of your existing estate plan,…