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Why does it matter how a business is legally organized?

When it comes to starting a construction business, Californians are going to have a lot on their minds. Where should the headquarters be? What is your operating capital? If a question about the form of the business is not one of your first few questions, however, it may be best to stay home.

  • Why does it matter what kind of company you form?

It may matter a lot immediately but it will almost certainly matter more in the future. Some of the first concerns are how a company is managed and who owns it. Later, people may want to transfer or sell their interests. If the company is named in a lawsuit, it will certainly matter who may hold financial liability and how it is structured.

  • How are companies formed to shield owners from liability?

A corporation often protects its owners from personal liability while paying taxes as an organization and as the people who own it. A limited liability partnership or corporation offers similar protections with different tax structures and requirements for documentation by the government in Sacramento.

  • What forms of business are not as well protected legally?

Sole proprietorships and general partnerships in which one or more people are engaged in a business for profit will often split liability equally among its participants as individuals. Fewer filings with California's Department of State are required for these forms of business, however, which is often why people choose them.

  • Who can advise in matters of business formation?

A lawyer can always help with the best ways to form a new company or plan the process of putting one together. Legal representation is often the best friend of a new business.

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Irvine, CA 92612

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