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. The office of the Secretary of State is the agency that receives applications for incorporation in California, and they must be completed in conformity with certain guidelines.

Benefits of Incorporation in California

An incorporated business enjoys certain benefits, the most important being a limit of liability for the shareholders. The most shareholders can lose is the amount they invest in the business. Without incorporation, the personal property of business owners is at stake should the company become unable to fulfill its debts. A corporation may also find it easier to finance itself through loans, allowing creditors in the Palm Springs area to evaluate their investment by assessing the corporation rather than the individual credit-worthiness of its owners. 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

These advantages come at a price. First, incorporation in California may require a filing fee. Second, a corporation pays taxes just like any other entity. Disbursements to the owners of the corporation are also taxed as individual income, so this means earnings may be taxed twice. But this double taxation can be avoided with proper planning and help from a local Palm Springs lawyer.