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 certain guidelines.

Benefits of Incorporation in California

Benefits of incorporation are many. The primary benefit is that the liabilities of the business can only be satisfied by the assets specifically invested into the company by the owners. If the business had remained a personal asset of the owners, they could run the risk of losing their personal property to pay for the company's financial liabilities in case of default. A corporation might also find it easier to finance itself through loans, allowing creditors in the Tulare area to evaluate their investment by assessing the corporation rather than the individual credit-worthiness of its owners. 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 Tulare lawyer.