California law allows a business to incorporate and be identified as its own legal entity. As a separate entity from the owners, the business is then considered to be acting on its own when it buys and sells property, assents to contracts and exercises legal rights. A business looking to incorporate in California must file with the Secretary of State in accordance with established guidelines.
Benefits of Incorporation in California
There are distinct advantages to incorporating a business. Most importantly, liabilities the business accrues may be satisfied only by assets that the owners have specifically invested in it. With unincorporated businesses, personal property of owners can be liquidated in order to fulfill the liabilities of the business. Furthermore, banks in the Anaheim area prefer to evaluate the credit worthiness of a business as a whole rather than that of individual owners. This makes the process of receiving corporate loans simpler. Finally, a corporation's ownership stake is divided into equal slices or "shares" of stock, which make investments in the business much easier to transfer.
Costs of Incorporation
These benefits come at a price. First, incorporation in California may require a filing fee. Second, a corporation pays taxes just like any other entity. The incomes of owners as individuals are also taxed of course, meaning that income to the corporation might be subject to double taxation. However, this disadvantage can be avoided with proper planning and help from a local Anaheim lawyer.