Business Formation

The start of a new business is an exciting time that naturally raises many questions. What sort of business should you start? Should you incorporate? How can you protect your business and your personal assets? How will you handle expansion? What about taxes? Bowen Law Firm works with you to answer your questions so that you can focus on your business.

You may have seen the advertisements from various "online legal document services" stating that they can create original documents for your new business or will for as little as $99. I advise clients to avoid these services for a variety of reasons. I note that one of these sites stated that a lawyer may be necessary to sell a business, but not to incorporate a business. I think this sort of advice is irresponsible, although of course the website also says that it does not offer "legal advice" and only assists in document preparation at the client's direction.

When you hire an attorney, you are really hiring a counselor who can advise you on what terms should be included in your articles of incorporation and bylaws. A knowledgeable attorney can tell you what assumptions the courts will make if you choose to use the State's form documents instead of creating your own. Really, you're paying for peace of mind.

Bowen Law Firm will work with you to choose a business structure that works and ensure that it reflects your goals and needs. We work with our clients to form businesses that will last, rather than just drafting the same old form documents that everyone else uses.

Choosing your business structure will depend on many factors, but here are some key considerations as you begin the process.

California Corporation

The primary benefit of forming a California corporation is to protect personal assets from business liabilities. Without the protection provided by a corporation, creditors and other claimants can seek to recover against your personal assets. If you are operating as a sole proprietor or as a partner in a business your personal assets are vulnerable.

Incorporating is also an important step in businesses that want to find outside investors or ensure that they survive beyond the lifetime of the primary shareholder.

While forming a California corporation is fairly straightforward, it will require more formalized governance, bookkeeping, and is taxed as a separate entity.

Limited Liability Company

The limited liability company is very popular in California. Formation of a limited liability company is quick and relatively inexpensive.

A limited liability company is similar to a corporation because it provides you with a shield from personal liability, yet, unlike a corporation, an LLC does not require as much formal documentation and is easier to organize around a single shareholder.

A limited liability company also shares the tax advantage found in a partnership, earnings are passed through to the shareholder and the income taxes can be completed on a personal tax return. This is much more flexible than the formal taxation of a corporation.

Limited Liability Partnership

The Limited Liability Partnership ("LLP") is similar to the limited liability company ("LLC") in many ways, but there are some significant differences. In California, LLPs are only available for accountants and lawyers. Generally, they are chosen by professionals to handle professional liability issues.