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. With unincorporated businesses, personal property of owners can be liquidated in order to fulfill the liabilities of the business. Also, creditors in the Riverside County area usually prefer to deal with corporations, since a loan is an investment more easily evaluated when the credit-worthiness of various owners is not an issue. Finally, 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
Along with a possible fee to apply for incorporation in California, there are other costs that corporations incur. The most important is that a corporation is taxed 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 may be avoided with proper planning and assistance from a local Riverside County lawyer.