California law allows a business to incorporate and be identified as its own legal entity. After incorporation, buying and selling property, agreeing 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 particular guidelines.
Benefits of Incorporation in California
Certain advantages inure to a business in California that has incorporated over one that has not. First, a corporation's liabilities can never go beyond the amount invested in the business by the owners. 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 issues. Furthermore, a business that has not incorporated puts the unnecessary burden on creditors in the Perris area to evaluate the credit worthiness of individual owners rather than that of the business, making loans more difficult. Lastly, the ownership of a corporation is divided into an abundance of equal portions or "shares" of stock. Without this mechanism, transferring ownership of a business would be impractical.
Costs of Incorporation
Incorporation can be costly. First, a modest filing fee might be charged in California for any business that wants to incorporate. Also, a corporation is taxed 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 might avoid this disadvantage with proper planning and assistance from a local Perris lawyer.