When you decide to start a business, you may be overwhelmed by the number of choices you must make. After selecting a name and the product or services you will manufacture or market, you must decide on the business’s structure. Will you be the only owner? Do you want to co-own your business with a friend or two? Or do you dream about your company trading on the NASDAQ with hundreds of employees?

Your vision matters. To discuss your goals for the future and learn about your options for company structures, speak with a California business formation lawyer at Sparks Law. Our skilled attorneys are here to help you achieve success and support you throughout the process of starting your company.

Checklist for New Business Owners

California businesses include sole proprietorships, general and limited partnerships, limited liability partnerships (LLPs), limited liability companies (LLCs), or corporations. Sole proprietorships are the simplest entity, owned by either one person or a married couple. The Secretary of State does not impose filing requirements on sole proprietors, although the county of operation expects them to apply for applicable permits. All profits are taxed on the owner’s individual return.

More sophisticated entities such as LLCs and corporations must file documents with the state and pay filing fees and yearly annual report fees. These structures are also required to:

  • Select a name for the business and ensure that another company in the state is not using it
  • Name a registered agent to accept official correspondence and service of lawsuits
  • File with the Department of State Articles of Incorporation or Articles of Organization if an LLC
  • Secure county and city licenses and permits, and check zoning laws
  • If the business hires employees, request an Employer Identification Number (EIN) from the IRS
  • Draft bylaws for corporations, operating agreements for LLCs, and partnership agreements for partnerships

Entrepreneurs should consult a local business attorney before forming a company because different entities are suitable for different needs. Owners should consider tax ramifications, personal liability, and potential for future growth. Our knowledgeable California attorneys can help formulate a concrete plan when starting a business and inform an entrepreneur on all their options.

General, Limited, and Limited Liability Partnerships in California

Two or more people who want to start a business can form a general partnership by filing charter documents with the Secretary of State. General partners are liable for business debts, and profits are allocated to the partners according to their share ownership to be reported on personal tax returns.

A limited partnership features general partners who manage the business and limited partners who are only investors unless they serve on the company’s Board of Directors. Limited partners are not responsible for company debt. A limited liability partnership in California is only available for specific professional practices such as physicians, architects, and lawyers.

All partnerships should adopt a written agreement to avoid future misunderstandings. A local business formation attorney could help draft these essential documents when forming a partnership.

Limited Liability Companies

Owners of limited liability companies (members) are not personally liable for company debts. Members found an LLC by making capital contributions in cash, property, or services.

LLCs with multiple members in California are encouraged to create a written operating agreement with an experienced business formation lawyer. This document sets forth ownership percentages, profit and loss distribution, duties, protocol for admitting new members, tax structure, and dissolution.

California Corporations

A corporation is the most complex structure and can trade on national stock exchanges. A corporation is run by a Board of Directors who answer to shareholders and managed by officers who report to the Board. Generally, management is not liable for corporate debt or lawsuits unless they acted in bad faith. Those considering forming a corporation should consult a nearby attorney at Sparks Law to learn more about the legal nuances and tax implications.

Call a California Business Formation Attorney to Launch Your Company

If you are starting a new business, congratulations! For potential entrepreneurs, there are many crucial decisions that will determine the success of the company. Let us inform you of your options and help you make the right choice.

At Sparks Law, our California business formation lawyers know the ins and outs of starting a business. We can help you avoid potential missteps, so call today to secure your business’s success.