Business Formation & Planning
Affiliated Business Consultants
Law Offices of Carl H. Starrett II
1941-C Friendship Drive
El Cajon, California 92020-1144
Call toll free within California:
Phone: (619) 448-2129
Fax: (619) 448-3036
Or contact us via email
Forming a Corporation or an LLC
Anyone who operates a business, alone or with others, may
incorporate or form a Limited Liability Company ("LLC").
Under the right circumstances, the owner of any size
business can benefit!
Reduces Personal Liability
Incorporating or forming and LLC helps separate your
personal identity from that of your business. Sole proprietors
and partners are subject to unlimited personal liability for
business debt or law suits against their company. Creditors
of the sole proprietorship or partnership can bring suit
against the owners of the business and can move to seize
the owners’ homes, cars, savings or other personal assets.
Once incorporated, the shareholders of a corporation or
members of an LLC have only the money they put into the
company to lose, and usually no more.
A corporate structure communicates permanence, credibility
and stature. Even if you are the only stockholder or employee,
your incorporated business may be perceived as a much
larger and more credible company. Seeing “,inc.” or “corp.” at
the end of your business name can send a powerful
message to your customers, suppliers, and other business
associates about your commitment to the ongoing success
of your venture.
Tax Advantages – Deductible Employee Benefits
Incorporating usually provides tax-deductible benefits for you
and your employees. Even if you are the only shareholder and
employee of your business, benefits such as health
insurance, life insurance, travel and entertainment expenses
may now be deductible. Best of all, corporations usually
provide an increased tax shelter for qualified pensions plans
or retirement plans (e.g. 401K’s).
Easier Access to Capital Funding
Capital can be more easily raised with a corporation through
the sale of stock. With sole proprietorships and partnerships,
investors are much harder to attract because of the personal
liability. Investors are more likely to purchase shares in a
corporation where there usually is a separation between
personal and business assets. Also, some banks prefer to
lend money to corporations.
An Enduring Structure
A corporation is the most enduring legal business structure.
Corporations may continue on regardless of what happens to
its individual directors, officers, managers or shareholders. If
a sole proprietor or partner dies, the business may
automatically end or it may become involved in various legal
entanglements. Corporations can have unlimited life,
extending beyond the illness or death of the owners.
Easier Transfer of Ownership
Ownership of a corporation may be transferred, without
substantially disrupting operations or the need for complex
legal documentation, through the sale of stock.
With a corporation’s centralized management, all decisions
are made by your board of directors. Your shareholders
cannot unilaterally bind your company by their acts simply
because of their investment. With partnerships, each
individual general partner may make binding agreements on
behalf of the business that may result in serious financial
difficulty to you or the partnership as a whole.
Corporation vs. LLC
Many clients ask which is better, a corporation or an LLC.
This is a complex issue and must be addressed on a case-
by-case basis with the your attorney and your tax consultant.
In California, some businesses such as contractors or
attorneys cannot do business as an LLC.
The purpose of this web site is to provide general information
on the law, which is subject to change. If you have a specific
legal problem, you should to consult a lawyer.
Call toll free within California:
PLEASE NOTE: You do not become a client
of the Law Offices of Carl H. Starrett II
unless you enter into a written agreement
signed by you and Carl H. Starrett II. The
agreement must also spell out the scope of
the work that is to be done. Simply sending
an inquiry by mail, fax, or email does not
establish an attorney-client relationship.