Starting A Business In California
Starting
a business in California is a bit of a challenge. This
should not keep you from doing it, but you need to be
aware that getting through the red tape requires
patience.
Entity Options
When starting a business in California, your
first step is to figure out what type of entity is best
for your particular business. The two issues that
really need to be addressed in this evaluation are
liability risks and taxes. Risk refers to the
possibility of being sued or held personally liable for
business debts such as vendor obligations. Taxes refer
to positioning your business in such a manner as to
minimize the tax implications.
This evaluation is critical to your business
because you want to get off on the right foot. The most
popular options for moving forward include the sole
proprietorship, a general partnership, an S-Corporation
or a limited liability company. Generally, the sole
proprietorship and general partnership are very unwise
choices when starting a business in California. Why?
Well, you are personally liable for all debts of the
business should it get sued or fail. This means you
could lose your savings, home, cars and so on. It is a
huge risk to take on and one that few are willing to
do.
This tends to leave one with a choice
between the S-Corporation and the limited liability
company. When set up correctly, both of these entities
create a shield of protection between your personal
assets and the liabilities of the business. For
example, assume your business is sued and loses to the
tune of $500,000. The suing party would be limited to
recovering against the assets of your business entity,
and would be unable to come after you personally.
So, which entity do you choose? The
answer is almost entirely dependent on the specific
type of business you are going to start, the long term
outlook for said business, the risk of lawsuits as well
as other factors that are applicable to the specific
niche you are in. It is critical that the right
decision be made at the outset because once the entity
is formed, it is often difficult to change over to
another version without incurring significant costs and
taxes.
If you are considering starting a business
in California, feel free to contact me at 619-637-
6043. I offer a one hour consultation in which you
can get all your questions answered without needing to
commit to retaining an attorney.
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The above discussion is intended to be a general commentary on legal issues. Each situation is different and this article is not intended as legal advice for your specific situation. Further, nothing in this article is intended to create an attorney-client relationship. If you have additional questions, please contact me.
