When you first have a business idea or consider entering an established business, you might not be thinking about its formal legal entity. However, the decision to form a limited liability company (LLC), a corporation, or a form of partnership will directly affect your business.
As you establish your business, a Sacramento business formation lawyer could guide you to the right legal entity for your preferences and needs. Legal entities have different features and requirements that you may need a business attorney’s help to understand and consider before choosing the best entity for your business.
If you begin a business entirely on your own, without any legal framing, your business is a sole proprietorship: you and your business are essentially one, with taxation and other liabilities held against you individually. Creating a legal entity can protect you from those liabilities and allow more than one person to become involved in ownership and management.
Technically, you can informally create a legal entity as a partnership. With an agreement to go into business with another person—even via a verbal agreement and a handshake, rather than a written document—you form a partnership under state law with default rules. However, you may instead want customized arrangements detailing how you and your partner will interact with the business and each other.
For example, a general partnership sees all partners as equals in profits, losses, and ownership shares unless modified by a partnership agreement or converted into a limited partnership by filing with the California Secretary of State. A business can also be formed as an LLC with its owners as members—separate from the management of the business—or as a corporation with full separation of ownership and a board of directors.
On the issue of taxation, a corporation’s shareholders are typically taxed twice, once on the corporate revenue and again when distributing dividends to each shareholder as their income. Other entities, such as an LLC or partnership, can elect to be taxed only once, when distributions go to the members or owners.
Deciding which entity is best for the formation of your new business—based on characteristics such as sources of capital, ownership, and anticipated sector—is where a Sacramento attorney could provide assistance.
Setting up a legal business entity requires filing a registration form with the government. Submitting this initial document begins the process of forming the business and is necessary, but it is only the first step.
You should also have an agreement between the shareholders, members, or partners to specify how the business will be governed. For example, a partnership agreement (or an operating agreement for an LLC) can define the interest percentage held by each owner and outline procedures for making major decisions (such as selling the business).
Once the necessary parties agree to these initial governing documents, you will also need to trademark your business’s name, make contracts with managers and key employees, and find commercial real estate before you begin work.
An attorney could help your Sacramento business with each of these formation tasks so your company can begin work, take on clients and customers, and produce revenue as smoothly as possible. Rather than running into stumbling blocks when getting your business off the ground, an attorney may be able to anticipate issues and solve them preemptively.
Starting a business properly may help you avoid potential issues and create momentum as your business develops, so working with a Sacramento business formation lawyer may prove valuable from the outset. To ensure your new business achieves the best outcome, contact the Business & Real Estate Law Firm PC for assistance developing a business formation plan.
Business & Real Estate Law Firm PC.
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Business & Real Estate Law Firm PC
1104 Corporate Way,
(916) 205-0320
