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Should You Form An LLC For Your California Business?

By: Rich Chappo If you are thinking of starting a business in California, it makes sense to protect yourself with a business entity. With over 100,000 lawyers in the state, it may be the smartest move you ever make.

To the surprise of many, the LLC has not been around for all that long. The first one was created in the late 1970s in Wyoming of all places.

California is not known as a business friendly state. This proved to be true with the limited liability company as well. It took the state nearly 15 years before it started allowing them after they first appeared in other states.

An LLC is unique because it combines the best of other entities while also avoiding the worst. For many small businesses, this makes it an excellent choice of entity.

Liability should be a big concern for any business owner. If you use an LLC entity, however, you are protected from personal liability for any business debts. At the same time, you do not have to deal with the paperwork of a corporation.

No business owner wants to be double taxed as can often happen with a corporation. The LLC resolves this by borrowing the tax classification of a partnership, to wit, finances are passed through to the owners.

One might wonder why he or she should select an LLC over a partnership. The answer is liability. A partnership provides no protection to the owners, while an LLC does.

At this point, you might think the LLC is the obvious choice if you are going to start a business. It often is, but there are a few exceptions. Here are two that come to mind.

Many businesses are started with the idea of going public. If this is your goal, an LLC is a bad choice. Simply put, you cannot take it public. The LLC does not have shares, so there is nothing to trade!

Taxes are a complicated subject as well. Although you can choose to have your limited liability company taxed like a partnership, this is only true if there are two or more owners. Single owners get taxed like the self-employed, which offers no tax benefits.

Another danger with the LLC is the lack of formality. This can be a good thing, but it can also lead to laziness and sloppiness by owners. You must practice good business administration to avoid this problem.

All and all, the LLC is a very good choice for many smaller businesses. In a state like California, you get the liability protection of a corporation with the tax ease of a partnership.

Article Source: http://www.lifeweightloss.com

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