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Select the Right ENTITY for Your Business - DeeAnn Flores Chase

Select the Right ENTITY for Your Business - DeeAnn Flores Chase

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This Article is from Business Insider Magazine's second issue of 2009. These pages are exactly as they appear in the print publication. The Yudu version of the complete magazine is linked to our website at www.businessinsider.us.

EXCERPT: If you are thinking about starting a business, no doubt you have pondered the question, “Do I need to form a business entity?” The answer is a resounding, “Yes!”
Unfortunately, we live in a very litigious society. Statistics tell us that an estimated 50,000 lawsuits are filed daily in the U.S., with nearly 1.4 million filed in the State of California annually. You should take steps to protect your wealth before you ever get served with a lawsuit against your business. A business entity provides personal liability protection from the debts and obligations of the business because it has its own legal identity separate and apart from its officers, directors, shareholders, managers or members – even if the entity consists of only one person. If you are sued based upon an occurrence arising during your business operations, a properly formed and maintained business entity can limit exposure to a judgment solely to the assets of the business--and not your family.
It is imperative to form a business entity before you sign a lease, contract, franchise agreement, or otherwise start to do business. Once the entity is properly formed, every agreement must be signed in the name of your business entity. Forming a business entity before you start conducting business can not only provide personal liability protection, but can also allow your entity to develop corporate credit... (Load publication to read entire article)
This Article is from Business Insider Magazine's second issue of 2009. These pages are exactly as they appear in the print publication. The Yudu version of the complete magazine is linked to our website at www.businessinsider.us.

EXCERPT: If you are thinking about starting a business, no doubt you have pondered the question, “Do I need to form a business entity?” The answer is a resounding, “Yes!”
Unfortunately, we live in a very litigious society. Statistics tell us that an estimated 50,000 lawsuits are filed daily in the U.S., with nearly 1.4 million filed in the State of California annually. You should take steps to protect your wealth before you ever get served with a lawsuit against your business. A business entity provides personal liability protection from the debts and obligations of the business because it has its own legal identity separate and apart from its officers, directors, shareholders, managers or members – even if the entity consists of only one person. If you are sued based upon an occurrence arising during your business operations, a properly formed and maintained business entity can limit exposure to a judgment solely to the assets of the business--and not your family.
It is imperative to form a business entity before you sign a lease, contract, franchise agreement, or otherwise start to do business. Once the entity is properly formed, every agreement must be signed in the name of your business entity. Forming a business entity before you start conducting business can not only provide personal liability protection, but can also allow your entity to develop corporate credit... (Load publication to read entire article)

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Published by: Business Insider Magazine on Jul 22, 2009
Copyright:Traditional Copyright: All rights reserved

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01/07/2011

 
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 you are thinking about starting a busi-ness, no doubt you have pondered thequestion, “Do I need to orm a businessentity?” Te answer is a resounding, “Yes!”
 
Unortunately, we live in a very litigioussociety. Statistics tell us that an estimated50,000 lawsuits are led daily in the U.S.,with nearly 1.4 million led in the State o Caliornia annually. You should take steps to protect your wealthbeore you ever get served with a lawsuit against your business. Abusiness entity provides personal liability protection rom the debtsand obligations o the business because it has its own legal identityseparate and apart rom its ocers, directors, shareholders, manag-ers or members – even i the entity consists o only one person. I you are sued based upon an occurrence arising during your businessoperations, a properly ormed and maintained business entity canlimit exposure to a judgment solely to the assets o the business--and not your amily.It is imperative to orm a business entity
before
you sign a lease,contract, ranchise agreement, or otherwise start to do business.Once the entity is properly ormed, every agreement must be signedin the name o your business entity. Forming a business entity be-ore you start conducting business can not only provide personalliability protection, but can also allow your entity to develop cor-porate credit.Many business owners deer the ormation o a business entityuntil ater they have done business or some time. By that time,however, they have incurred start-up costs and debt that will unor-tunately be reected on the individual owner’s personal credit. Atthat point, it is not possible to simply “roll over” the individual debtto a “limited liability” company. And it is quite dicult to unravelthe business assets and obligations rom the personal ones. Waitingto orm the entity until ater you have been in business or a year ormore means that you must in essence “start over” when orming theentity at a later point.Now that we’ve established that it’s best to protect your personaland amily assets and build credit, the next step is to determinewhich type o business entity is right or you. Whether you are go-ing it alone or with another person, the choice o a proper businessentity should be made in close consultation with a business law at-
INCORPORATION INSIDER
torney and your tax advisor. Business entities include:
General Corporation (“C-Corp” or “S-Corp”)
: I properlyormed and maintained, a corporation provides protection rompersonal liability or the debts and obligations o the corporationor its ocers, directors and shareholders.“C” Corporation: A traditional “C” corporation involves the is-sue o double taxation.” Te corporation is taxed on its income atthe corporate level, and its shareholders are taxed on distributionso income in the orm o dividends on their personal income tax.In order to maintain a corporation, corporate ormalities must bemaintained, such as annual meetings and the keeping o minutes.A “C” corporation has some tax benets, such as deductibility o health insurance premiums.“S” Corporation: A corporation that has made an election to be an“S” corporation or ederal income tax purposes is treated as a soleproprietor or partnership or tax purposes, known as “pass throughtaxation; thereby, avoiding double taxation.” “S” corporations havemany limitations in their structure, such as limits on the number o shareholders, citizenship requirements or shareholders, and issu-ance o only one class o stock.
Limited Liability Company (LLC)
: As with a corporation, a lim-ited liability company (LLC) provides personal liability protectionor the debts and obligations o the business. LLCs also have “passthrough” taxation where the income and losses pass through to theindividual members’ tax returns. An LLC may elect to be taxed asa corporation. It can be managed by all o the members or can havecentralized management in one or more o the members, known as“managers.” I properly ormed, an LLC does not need to maintaincorporate ormalities, such as holding meetings and keeping min-utes.In Caliornia, an LLC may not render proessional services, whichinclude services lawully rendered only pursuant to a license, certi-cation or registration under the Business and Proessions Code,the Chiropractic Act, the Osteopathic Act or the Yacht and ShipBrokers Act. However, the Caliornia Attorney General has opinedthat such services do not include services rendered pursuant to anonproessional occupational license under the Business and Pro-
To Incorporate or Not to Incorporate? 
Protect Yourself and Your BusinessBy Selecting the Right “Entity”
By DeAnn Flores Chase, Attorney at Law

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