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
Certain benefits 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 satisfy the liabilities of the business. Also, creditors in the Rocklin area typically 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. 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 incomes of owners as individuals are also taxed of course, meaning that income to the corporation may be subject to double taxation. However, this disadvantage can be avoided with proper planning and help from a local Rocklin lawyer.