To Incorporate or not to Incorporate: California Business Entities

If you created a business in California it may be within your interest to file for incorporation through the Secretary of State.  Corporations provide a business with numerous benefits such as, the ability to attract investors, while at the same time safeguard the business’ owners from complications that may arise.

The creation of a corporation also allows for the establishment of clear power structure of shareholders, directors, and officers:  Shareholders are primary owners of the corporation and are usually not financially liable for any debts incurred by the corporation, directors insure that the shareholder’s assets are secure by planning long term goals for the corporation, as well as hire (and fire) officers who perform the day to day tasks for the corporation.

The State of California also allows you to file for incorporation as one of five different entities, listed below:

Corporation – An entirely separate taxable entity that is created apart from the owners which helps protect the owner from debts and legal liability that the corporation may incur.

Limited Liability Companies – Protects an owner’s assets from debts, while allowing allow profits to flow directly to the individual owners where they are taxed a part of their income.

General Partnership – Keeps liability on the owners, which are known as partners, but equally distributes any profits or debts to each partner of the business

Limited Partnership – A combination of general partners as well as one or more limited partners who are only liable for debts that are equal to their investment and do not run the business

Limited Liability Partnership – Each partner’s liability varies and each partner is not responsible for another’s misconduct.  In California only certain businesses can form these.