Corporate Formation Lawyers in San Diego
San Diego Area Corporation Formation Lawyers
These days, everybody knows that there are many benefits to making your business a corporation, but you still need to make sure that: (1) those advantages outweigh the disadvantages in your own circumstances, and (2) you know what you’re doing when it comes to following the legal requirements for establishing a corporate business. An experienced San Diego corporate formation attorney can help you make sure of both.
Corporations come in several forms, each with its own set of rules, advantages and disadvantages. All three of the forms discussed below offer limitation of an owner’s legal liability to the owner’s interest in the business. Barring unusual circumstances, a creditor can’t reach an owner’s personal assets. Which is best for you will depend on your tax concerns, plans for narrow or broad ownership, and many other factors.
C corporations are the kind that most people think of when they say corporations. The vast majority of large and medium corporations are this type, which has no limit on the number of shareholders.
Profits, however, are subject first to the corporate income tax, then, if the after-tax profit is distributed to shareholders, the shareholders pay personal income tax on the distributed amounts. This “double taxation” causes considerable consternation among shareholders.
The ability to issue unlimited numbers of shares to an unlimited number of shareholders makes this form very useful for attracting investment and using shares to reward employees. It also has the advantage of allowing owners to retire or move on while remaining involved with the company through stock ownership.
The recordkeeping and reporting requirements for C corporations are extensive, and the cost of creating includes the cost of issuing stock, creating and filing articles of incorporation, creating bylaws, and a variety of other activity. There are also requirements for regular board meetings, shareholder meetings, and minutes from those meetings.
These are also known as closely held corporations. They limit the number of shareholders to 100. This form is mostly used by small and some medium sized corporations, although there are a few large S corporations.
Their profits are not subject to corporate taxes, so owners avoid the double taxation problem. The limitations on ownership mean that these corporations will not be able to attract the kinds of equity investment that C corporations can. On the other hand, ownership is less subject to being diluted by expansion of the pool of stock.
Limited Liability Companies (LLCs)
LLCs are the newest form of corporation. While an LLC is technically not a corporation because no stock is issued, it is a relatively popular combination of traits of corporations and partnerships. LLCs have fewer formal requirements than C corporations, and are not limited in the number of members, unlike S corporations.
The treatment of profits (and losses) is similar to partnerships. Both profits and salaries are self-employment income and may be subjected to self-employment taxes. This can also lead to partnership disputes.
San Diego Business Attorneys Help with Forming Your Corporation in Southern California
It’s possible to incorporate a business without legal help, but usually not wise. As with every legal process, there are technical requirements and consequences for violating those requirements. For example, if your corporation will be conducting a business that must be licensed, don’t expect the incorporation documents to take care of the licensing—that needs to be obtained separately.
At the Boyd Law Firm in San Diego, we not only know the technical requirements, we can help you fully explore which business form is right for your specific business, in light of the specific concerns that you have about taxes, liability, recurring filing requirements, and many other issues. Then there’s the question of which state you should choose for your corporate home. If it’s your first taste of being a corporate officer, we can help you keep your personal life and business separate from your corporate life and business.
Contact Boyd Law today and talk to one of our experienced business attorneys about your company’s future.