Daily Law Group
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Forming the right business entity for your startup

Choosing the right legal structure when forming your California business is critical. It impacts the documentation required, how much you pay in taxes, your ability to raise money and your liability. At Daily Law Group, we often provide expertise to clients who need help with the business structuring and formation of their startup.

When choosing the type of business entity, there are three primary factors to consider: Record-keeping, liability and taxation. Here are four common business structures for new companies.

  • Corporation - This entity remains separate from those who establish it, can make a profit and handles the duties of the overall organization. The primary benefit is that the founders have no personal liability. The downside is the amount of documentation that is required.
  • Limited Liability Company - An LLC is easy to form and offers similar liability protection to a corporation. The primary advantage is that the owner or owners is/are shielded from personal liability while profits and losses are passed through to them without taxing the business.
  • Sole Proprietorship - An individual can own and operate this type of entity. The individual has complete control over all aspects of its operation. A top benefit is that it is easy to form, and no documentation needs to be filed with the Secretary of State’s office. The downside is that the individual is personally liable for the business’s financial obligations.
  • Limited Partnership - In this business entity, two or more people agree to share the profits and losses of the company. A perk of this type of organization is that the tax burden does not pass to the individuals. A drawback is that the founders are liable for any business losses.

 Forming the right business entity from the beginning can make a huge difference later on, saving you time and money in the long run. Visit our webpage for more information on this topic.

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