Starting a new business in California can be an exciting time. Long held plans are about to ripen, and dreams are on the verge of becoming real. Nevertheless, many novice entrepreneurs fail to give careful thought to one of the most important decisions they will ever make: the legal form of their new entity.
Modern business formation law provides many alternatives for a new business: Subchapter S Corporation, Subchapter C Corporation, joint venture, limited partnership and limited liability corporation (LLC) are just a few of the choices. In addition to the proliferation of choices, most states, including California, make forming some entities, such as a Subchapter C Corporation or LLC, very easy.
These different business entities are not equal to one another. Management may be subject to rigid statutory requirements for a C Corporation or may be very flexible and informal for a partnership. Most persons who start a business want to protect their personal assets from contractual and third party liability. And, most importantly, everyone wants to minimize state and federal income taxes.
Choosing the form of a new entity requires sorting through the alternatives and comparing them to the nature of the new business and the goals of its owners. A general partnership may be the best choice for two friends starting a construction business, but a more formal C Corporation may suit a larger business or a re-organized business.
In all cases, the best solution is to consult an experienced attorney, such as John R. Lobherr. Mr. Lobherr has advised and provided organizational legal services to a large number of new and old business in Orange County and elsewhere in Southern California. A consultation with Mr. Lobherr will yield knowledgeable and authoritative advice on which business form best fits the new business and its owners.
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