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What's the right entity choice for your small business?

Starting a business in California is a complex process, and there are many important decisions that you have to make in the beginning stages. One of these is determining which business entity is ideal for your situation. There are multiple factors that go into deciding the choice for you, and you may find it useful to seek help when making this decision.

The legal structure of your business will have an effect on your taxes and your personal liability in case your business closes. There are several things to consider, and it is very useful for prospective business owners to discuss the pros and cons of every choice with a knowledgeable professional.

The right entity for your business

There are several choices you can make regarding the most appropriate structure for your business. Some of these options for you include the following:

  • Partnership: A partnership is the most appropriate choice when two or more people have ownership of the small business. Each partner would be liable for business-related financial obligations, but partners will not be personally liable for taxes on profit.
  • Sole proprietorship: This is a very popular choice for small business owners. This gives you complete control as the owner, and you will be financially liable for all business obligations.
  • Limited liability company: This option allows you to enjoy the benefits of both a partnership and corporation. Owners of an LLC are not personally liable for business obligations.
  • Corporation: By choosing a corporation, this option will allow your business to remain separate from you. A corporation can be taxed, yet the establishing parties will remain free from personal liability.

What is the best choice for you? There is no one-size-fits-all answer to this question, and you know that your choice should allow your business to thrive while providing you financial security.

Things to think about

There are both benefits and implications to any choice that you make. You would be wise to consider which path will allow your unique business to prosper, as well as the tax consequences and your potential personal liability. There is much more to starting a business than simply selling products and making a profit.

The right business entity will lay the foundation for your continued and future success. The various legal steps you have to take during the formation stage of starting a small business are complex, but many small business owners find it beneficial to seek guidance before making important decisions.

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Law Office of Jeffrey B. Pape, P.C.
642 Pollasky Avenue
Suite 100
Clovis, CA 93612

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