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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.

Partnership

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.

Corporation

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
Limited Liability Company

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.

Need Help?

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!

Client Reviews
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Kristina Reed handled the legal work of creating a corporation for my photography business in the state of California. She was extremely professional to work with and very prompt in her response times. She explained everything in language I could understand and helped me navigate the process smoothly from start to finish. I was very happy with her services and will definitely return to her for any future needs! Amy W.
★★★★★
As the co-owner of a small business, the process of selling assets was overwhelming. It was great to have [Kristina Reed's] advice throughout every step of a very demanding and hectic process. We were very pleased with [Kristina Reed's] class, focus and approachability. [Kristina Reed] always acted as a valued associate to the company and became a reliable advisor. Furthermore, we thank [Kristina Reed] for [her] calm encouragement when it was most needed would recommend [her] expertise unequivocally. Todd S.
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I reached out to Kristina to assist with drafting some contractual real estate paperwork, and was not disappointed. She provided a prompt response and was very helpful in accommodating my request. Her expertise ensured a thorough conclusion. I would gladly recommend Kristina to other individuals needing real estate expertise. Stephen R.
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I'm extremely impressed with my experience with Kristina Reed. I used her services to negotiate a commercial lease in Folsom. Our agent had actually recommended a few attorneys to us but we didn't feel comfortable with any of them. I was very impressed with Kristina on our first conversation. The landlord group was one of the hardest you can find to deal with. There were lots of going back and forth but Kristina's knowledge and experience made my life very easy. She was always quick to get back to us whenever we have questions. She pointed out issues on my lease that my previous lawyer totally missed. I recommend Kristina's services to everyone I know. My friend just used Kristina's services for his lease negotiation in Davis and he was very impressed as well. Devin B.