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. Without incorporation, the personal property of business owners is at stake should the company become unable to fulfill its debts. Furthermore, banks in the San Dimas area prefer to evaluate the credit worthiness of a business as a whole rather than that of individual owners. This makes the process of obtaining corporate loans simpler. Lastly, a corporations charter requires that ownership be divided into stakes or "shares" of stock, all of equal size. This makes the process of transferring control much more practical.
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 San Dimas lawyer.