What to Consider When Choosing a Business Structure in California
Jun 21 2023 0

What to Consider When Choosing a Business Structure in California

For your business to be formally open and operating legally, to pay your taxes, to raise money, and to determine your personal level of liability, it needs to have a business structure. One of the very first decisions and one of the most critical a business owner has is what business structure will work for their goods or services and their business model. Due to the importance of choosing the right business structure, entrepreneurs should take the time to research each available model. 

Making all the right decisions is critical at the start of a new business venture. Of the many considerations that have to be taken into account is business structure. If you are an entrepreneur in the greater Los Angeles area and would like assistance to get everything in order and have questions regarding what business structure is best for your operations, the Los Angeles business attorney at the Leiva Law Firm can meet with you and help you get established.

What to Think About When Choosing the Right Business Structure

What to Consider When Choosing a Business Structure in CaliforniaThere are several types of business structures to choose from. When comparing and contrasting each model, these considerations should be at the forefront of your decision-making:

Personal Liability

Starting a business may be an exciting endeavor, but it also comes with plenty of risks and increased liability. This is because businesses are more vulnerable to having lawsuits filed against them than your average private citizen is. There are many rules, guidelines, and procedures to follow, and any misstep or miscalculation can get a business tangled up in a legal battle. As a result, figuring out the level of protection you want for personal assets like your home, for example, will be a part of determining which business structure is right for you. Some business structures have unlimited liability, others limited liability, and some have no personal liability.

Paying Taxes on Profits

The IRS taxes business profits because the IRS always gets its share. Therefore picking a business structure also means you have to think about how you want to be taxed. If you want your profits to go directly to you as they come in, then you would be looking at structures that are pass-through entities like a sole proprietorship, for instance. Maybe it is better that you have your profits taxed at the corporate level.  Maybe you are going to run a tax-exempt organization. 

Management Structure

Each business structure has a number of individuals that can be considered owners and then rules for management and oversight. An example would be comparing a sole proprietorship which is one owner and is typically an easier management structure than a C corporation, where there are many owners and a board of directors.

Administrative and Operational Complexity

Some business structures are far more complex with regulations and procedural requirements than others. Corporation business structures are some of the most intricate and expensive.

Speak with a Los Angeles Claim Denial Attorney Today

This list illustrates many, but not all, of the things that business owners should think about when they choose a business structure in California. For more information and for legal advice, please call the Leiva Law Firm to schedule a free consultation at (818) 519-4465.

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