Starting or expanding a business?
Get help from our Temecula Business Lawyers! When starting up or expanding a business, one of the most important decisions to make is the choice as to the type of entity under which the business will operate. The specific type of business entity can affect operational decisions and might affect how the entity or equity owners are taxed.
Choosing the appropriate legal entity, such as a corporation or limited liability company, will help the equity owners minimize or avoid personal liability arising out of the business. This separation of an individual from the business may also affect credit and protect personal assets.
Both, Donald W. Hitzeman and Paul N. Evenson have experience in advising individuals as to properly creating a new business. Mr. Hitzeman has lectured on this subject on numerous occasions.
Mr. Hitzeman and Mr. Evenson work closely with clients to make certain that the selected entity will provide the best opportunity for legal success and protection of stakeholders.
Types of Business Entities
Determining the correct type of business entity for operating a business successfully and effectively requires careful evaluation. In California, there are several types of business entities to consider:
- - Sole Proprietorship: This form of business is normally not recommended. This type of business is created when there is a sole owner of a business, and the person operates the business as an extension of him or herself, usually using a fictitious business name.
- - Partnership: Similar to a sole proprietorship, this type of business form is not normally recommended. It is created when two or more persons or entities join together, in their own names, for the purpose of operating a business to make a profit. Usually the individuals contribute money, property, labor, or skill to the business and share in the profits and losses of the business. At times, when the partners are corporations or limited liability companies, they may join in a joint venture, which is in reality a partnership.
- - Corporations: This is generally one of the two forms of business under which we encourage our clients to operate. When properly formed and when the formalities are maintained, this form of business entity provides the greatest level of protection to the shareholders, officers and directors (which at times may all be the same individual). With proper planning, Corporations can provide not only asset protection, but can also provide a means of proper tax planning to help avoid paying unnecessary taxes.
- - Limited Liability Companies: This is the second form of business which we often advise clients to utilize in operating a business. While there are some concerns with using this form of business for operations, a Limited Liability Company will generally provide the Members (owners of the business interest) with a form of asset protection from creditors, and will avoid double income tax taxation. However, there are some problems with using an LLC, including the potential for additional taxes.
In order to help determine which is the proper form of business under which to operate, Hitzeman & Evenson, APC offers a prospective client an initial 30 minute consultation at no charge. During this meeting, you will meet with an attorney to discuss your legal needs. With nearly 15 years of combined experience in serving the Temecula Valley business community, we believe we can provide our clients with the business advice they need, with competence and integrity.