California law allows a business to incorporate and be recognized as its own legal entity. After incorporation, buying and selling property, assenting to contracts and exercising legal rights are considered acts of the business itself and not its owners. In California, the process of incorporation is begun by filing with the Secretary of State in accordance with specific guidelines.
Benefits of Incorporation in California
There are distinct benefits to incorporating a business. Most importantly, liabilities the business accrues may be satisfied only by assets that the owners have specifically invested in it. Had the business instead remained a collection of the owners' personal assets, the personal property of the stakeholders could be liquidated to pay the liabilities of the business, if it runs into financial problems. A corporation also allows creditors in the Dana Point area to assess the credit worthiness of the business as a whole rather than that of its owners, allowing the business to receive loans more easily. Lastly, 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
Incorporation comes at a price. First, California may charge a filing fee to process applications for incorporation. Also, the corporation will pay taxes as its own entity. In other words, the profits a corporation makes are now taxed separately, while any disbursements to shareholders are taxed as individual income. This is called double taxation. However, a business may avoid this disadvantage with proper planning and assistance from a local Dana Point lawyer.