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 particular 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 satisfy its debts. Furthermore, a business that has not incorporated puts the unnecessary burden on creditors in the San Marino area to evaluate the credit worthiness of individual owners rather than that of the business, making loans more cumbersome. 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 can be costly. First, a modest filing fee may be charged in California for any business that wants to incorporate. Also, a corporation is taxed 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 San Marino lawyer.