Which Business Entity is Right for You?

January 2, 2016

Being a brand new startup is exciting, but is not exempt from challenges. One of the very first things you have to decide right away is what type of business you will be. This decision alone will greatly impact any other business decision you make. It is absolutely critical that you work with a seasoned business attorney to help you navigate the complicated process of being a brand new business. The three key areas that California businesses should consider are: partnerships, corporations, and limited liability companies (LLCs). The following offers a brief explanation of each entity.

A partnership business is exactly what it sounds like. It is a business where there are at least two owners. Each owner has equal decision-making power and is involved in all aspects of the business functions. It is absolutely critical to discussion various aspects of the business including:

• Dispute resolution
• Division of money
• Decision making
• Changes in ownership

While it is not legally required to create a business agreement, it is certainly strongly suggested to do so. An experienced business attorney can help you create an agreement that will be binding in the event any unexpected issues arise in the future. The agreement will offer peace of mind and allow each partner the ability to work through issues more easily and efficiently.

Corporations are certainly more complex business entities that are generally used for larger businesses. Essentially, the way a corporation functions is that shareholders own the business, but are not legally responsible for the decisions or debts the business may endure. There are a number of factors included in a corporation that make it necessary to seek out the assistance from an attorney. Things to consider about a corporation are:

• Larger administrative fees
• A more complex process
• Complex tax and legal requirements

In many ways, a Limited Liability Company (LLC) is a mixture of a partnership and a corporation. The main difference is that an LLC is not taxed as a separate business entity in the way that a corporation is. Instead, individuals report income from the business on their own tax returns much in the same way as a partnership. However, one thing remains the same and that is that it is necessary to create an agreement of operation. Just as with the partnership, this protects the business from disputes or other issues that may arise due to lack of planning.

Are you interested in creating a business entity in California, but are not quite sure where to start? Located in downtown Sacramento, Kristina Reed has years of experience as a business attorney. Her "big picture" approach includes helping you bridge the gap between idea and reality. Kristina understands what it takes to make a business thrive and she is ready to hear from you. She looks at your business goals and helps you create a plan that is best for you. Contact her today to set up a consultation to get your California business operating!