Limited Liability Company Benefits for California Businesses

Limited Liability Company Benefits for California Businesses

Forming a new business can be a daunting task. On the road to living your California dream, you inevitably find yourself in the midst of contracts with partners, potential lawsuits, tax laws and concerns, and appearing legitimate to your customers.

That's when your friends and colleagues begin to tell you that you should incorporate, but how to go about doing that is different for every type of business and its needs.

What Type of Corporation Should You Choose?

If you are a sole proprietor or in a partnership in California, the best type of corporation to form is an LLC, or Limited Liability Company. An LLC allows for more flexibility and freedom, as a general sole proprietorship or partnership would allow, while also giving you the protection of a corporation.

What sort of protections do you get from forming an LLC?

When you enter into a business partnership or become a sole proprietor in California, there are many legal issues that may arise that could put your personal assets in jeopardy. For example, if you sell a customized stamp that is suddenly found to have toxic ink, you could be sued. However, it's not just your business that will suffer, but your personal assets, such as your house, your cars, your personal bank accounts, and more. A lawsuit like this could ruin you.

However, when you file for incorporation, your business becomes its own entity. If your LLC is sued, it is only your business assets that are affected; your personal assets are protected and untouched by the lawsuit. Also, if you take out any loans against the business or go into debt, the LLC absorbs all of the financial losses, and your personal assets will not be affected if you file for bankruptcy.

What About Taxes?

Many owners of large corporations are generally taxed double. First, they are taxed as a business, and then they are taxed as individuals. However, an LLC does not get taxed as an entity. You will retain the simple benefits of being taxed as an individual, just as a freelancer would.

As a sole proprietor or partnership with few employees, California LLC registration is the best way to go for your business.

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