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 particular 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. Without incorporation, the personal property of business owners is at stake should the company become unable to satisfy its debts. Furthermore, a business that has not incorporated puts the unnecessary burden on creditors in the Gridley area to evaluate the credit worthiness of individual owners rather than that of the business, making loans more cumbersome. Lastly, the ownership stake in a corporation can be apportioned into uniform slices, known as "shares" of stock. This makes it possible to sell ownership investments in more manageable slices.
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. The individual incomes of owners who are paid disbursements from the corporation's earnings are still taxed as well. This is called double taxation, but it can be avoided with proper planning and assistance from a local Gridley lawyer.