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Choosing to start a new business can be an exciting prospect for those who are first trying their hand at entrepreneurship or well-seasoned professionals. However, regardless of your level of experience, it is always in your best interest to hire a business entity formation lawyer who can assist you with determining the proper legal structure for your new venture.
Business formation lawyers are essential to any new entity as they can help clients determine the best legal structure for their companies while ensuring future growth. Furthermore, business formation attorneys can also assist clients in protecting their personal assets should the start-up face any potential litigation.
If you are in the process of creating a new business entity or are considering your options, contact The Element Law Firm, PC, of Southern California, and schedule a consultation today.
What Different Types of Business Structures are Available in California?
There are several business structure options for those who wish to create a new California business. However, choosing the right structure is critical as the business’s success depends on several factors, such as if you are the only owner, there are multiple partnership agreements, or you need help with corporate formation.
Some common California business structures include:
- Sole proprietorships
- General partnerships
- Limited liability partnerships
- Limited liability companies
- S corporations
- C corporations
However, despite several business entity formations, the most common is typically a limited liability company (LLC). One of the most significant benefits of an LLC includes protection from personal liability and prevents the owner from being held liable for the company’s financial debts.
Additionally, a business formation attorney can provide legal advice to help you make an informed decision regarding business entities.
Why is it Essential to Hire a Business Formation Lawyer When Starting a New Business?
Although new business owners are not obligated to hire an attorney to help them start their new endeavor, it is always best to have legal representation. One of the most significant advantages of hiring a business formation lawyer is that they can thoroughly evaluate your case and determine what entity type will provide you with the most significant benefits.
The ultimate decision you make can directly affect your profit margin, taxes, as well as your personal liability.
For example, many individuals starting out are still determining if they wish to establish a sole proprietorship where they are the sole owner or have limited partnerships with others. A business formation lawyer can explain the differences, including that as a sole proprietor, you would assume all of the risks and liabilities associated with the company, including all business debts.
Some other legal service business formation lawyers can assist with include:
- Requesting an Employer Identification Number if the business entity hires employees.
- Drafting employment contracts, shareholder agreements, and operating agreements.
- Periodically review partnership agreements to ensure they remain relevant.
- Ensure the business structure remains compliant with all state and federal regulations.
If you want more information about how entity formation attorneys can assist you with your new start-up, contact the Element Law Firm, PC, to schedule a meeting with our experienced attorney, who can advise you of your legal options.
Which is Better, an S or a C Corporation in Terms of Tax Liability?
Although S and C corporations have many advantages, business owners looking for tax advantages often choose to establish an S corporation. For example, all business profits are subject to state and federal taxes in a C corporation business structure. Additionally, all dividends that are distributed to the corporation’s shareholders are taxed again, which must be reported on personal tax returns.
However, to avoid double taxation, it is better to elect to have an S corporation status and file taxes on Form 1120. All profits and losses in an S corporation are passed to the shareholders who pay the applicable taxes, which are reported on their personal tax returns.
However, it is essential to remember that there are specific legal procedures that must be followed for S and C corporations to remain compliant, a few of which include:
- Issuing stock
- Keeping minutes of meetings.
- Holding annual shareholder meetings.
- Filing annual reports with the state
If you want to discuss the advantages of creating a corporation, contact the Element Law Firm, PC, and ask to speak with a qualified legal representative who can provide more information.
Does Your Business Formation Lawyer Have the Experience It Takes to Help Me Choose the Right Structure for My New Business?
The Element Law Firm, PC, is dedicated to helping entrepreneurs with their legal needs. Our legal staff has extensive experience in all aspects of business law and business entity formation. When you come to us, we will sit down with you to discuss your business goals and the different business entities that may suit your personal needs.
We can also provide sound legal advice as you grow and build your business, including focusing on planning for the future and avoiding potential lawsuits from vendors, customers, employees, and partners.
One of the best steps a business can take to be proactive is to hire a law firm that can provide other essential legal services to help the business thrive. The Element Law Firm, PC, can meet all your business needs, from determining the best legal structure to helping you review policy guidelines and procedures.
Your business must have legal representation that understands your legal structure, goals, and your company’s overall culture.
Contact the Element Law Firm, PC, of Southern California at and ask how to schedule a consultation to discuss your case.