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. With unincorporated businesses, personal property of owners can be liquidated in order to fulfill the liabilities of the business. A corporation also allows creditors in the Walnut Creek area to assess the credit worthiness of the business as a whole rather than that of its owners, allowing the business to acquire loans more easily. 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
Incorporation comes at a price. First, California might 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 may be avoided with proper planning and assistance from a local Walnut Creek lawyer.