BUSINESS FORMALIZATION
Perhaps it is time to incorporate yourself and submit to the state all the necessary paperwork so that your business is registered and in the event of a lawsuit, financial difficulty or some other problem in your business, you and your personal assets are protected from any financial liability.
For this, there are several legal ways in which you could convert your business and make it an entity independent of you:
- General
- Partnership
- Limited
- Partnership
- Limited Liability
- Company LLC
- C Corporation
- S Corporation
We will help you choose the most convenient one for you and we will do the entire registration process with the State of California and IRS, each year we will present your business’s tax preparation for you and we could additionally handle the accounting and payroll of your business (bookkeeping). and payroll).
what right for your business?
LLC Limited Liability Company
How it’s unique
- Better for max flexibility in how you manage and run your business; board of directors not required
- Unlimited owners (aka “members”) allowed
Protections & taxation
- You’re not personally on the hook for business liabilities
- Taxed once or twice; you’re free to choose which can help minimize taxes
Drawbacks to consider
- Ongoing filings and fees to stay in compliance
- LLCs can’t go public
- Not recognized globally; you may be taxed as a corporation in other countries
DBA Doing Business As
How it’s unique
- Better if you need an easy set-up
- Not an actual legal entity type
Protections & taxation
- You’re personally on the hook for business liabilities
- Taxed just once if your business is classified as a sole proprietorship or partnership—you pay on profits in your personal tax return
Drawbacks to consider
- No personal liability protection
Corporation S corp or C corp
How it’s unique
- Best if you plan to go public one day; can issue shares to founders, employees, and investors
- Unlimited owners (aka “shareholders”) allowed
- Owners may get preferred stock
- Recognized internationally
- Preferred by investors
Protections & taxation
- You’re not personally on the hook for business liabilities
- Taxed twice if it’s a C corporation—business pays at the corporate level, and shareholders pay on income received
- Avoids double taxation if it’s an S corporation
Drawbacks to consider
- Ongoing filings and fees to stay in compliance
- Less management flexibility; must have a board of directors
- More admin; strict rules about holding meetings and keeping records
Frequently asked questions
Both protect owners so they’re not personally on the hook for business liabilities or debts. But, key differences include how they’re owned (LLCs have one or more individual owners and corporations have shareholders) and maintained (corporations generally have more formal record-keeping and reporting requirements). Even though LLCs are considered easier to start and maintain, investors tend to prefer corporations.
The way you’re taxed. C corporation income is taxed twice—the business pays taxes on its net income, and then the shareholders also pay taxes on the profits they receive. With S corporation income, only the shareholders pay taxes on profits received. The Secretary of State requires articles of incorporation to form a corporation.
Personal liability protection. An LLC protects owners from being personally on the hook for business liabilities or debts. A sole proprietorship doesn’t.
LLCs, S corporations, and sole proprietorships are taxed once on profits received. C corporations are taxed twice; the business pays taxes at the corporate level, and shareholders pay taxes on income received.
LLCs and corporations. You don’t get personal liability protection with sole proprietorships or DBAs.
Want to skip the paperwork when you go into business for yourself? Do it as a sole proprietor or protect your personal assets with an LLC.
Get help running your business your way