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By many measurements, the summer of 2019 has been a good summer for California and San Diego small businesses. The small business “optimism index” is up again. See report here. The optimism index has been charted by the National Federation of Independent Business (“NFIB”) for the last 46 years. High optimism leads to new startups, new hiring, expanded use of credit, higher wages, and a general expansion of business activity. Gallup recently released a poll echoing the NFIB. See Gallup’s report here.
Are you thinking of finally starting that business you have been thinking about? Are you finally going to “make the jump” from employee to owner? The first step is to incorporate. You have a few good options for forming a corporate entity here in California including a standard corporation, a limited liability company, a California professional corporation (for various types of licensed professionals) and others. An experienced San Diego corporate lawyer can help with advice and counsel on what corporate form would be the best fit for your situation.
Why incorporate? The advantages to incorporating are numerous including:
- Shielding family/personal assets from business-related creditors — if there is a slip-and-fall accident at work, you do not want the injured party suing you personally
- Establishing a business credit rating — allowing your business access to more credit and more cash flow
- Incorporation required for some types of business financing
- Better and more options with respect to how expenses are deducted for tax purposes — corporate entities have a greater ability to deduct various costs against revenues
- Pass-through taxing option for “S” Corp status
- Possibly reduce self-employment taxes
- Makes it possible to pass your business to your children when you are at the point of retirement
- Prestige — being a corporation has a certain cache
- Public relations — studies and anecdotal evidence suggests that customers are more impressed and more loyal to an incorporated business
- And more
What is the Process?
Your trusted San Diego corporate attorney can provide assistance in getting your corporate entity established. The proper forms must be filed with the California Secretary of State and the required fees paid. Next, the corporate entity must approve its bylaws or operating agreement and engage in various formalities. With a corporation, these include having the initial shareholders’ meeting and electing the board of directors. Stock must be issued and any required registrations or exemptions must be filed with the appropriate entities. Note that there are annual maintenance requirements for all California corporate entities including filings with the Secretary of State and also payment of corporate franchise taxes.
Contact San Diego Corporate Law Today
For more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard can be reached at (858) 483-9200 or via email. Mr. Leonard can assist with the formation of your business entity, financing through the sale of debt and equity securities, mergers and acquisitions, contract drafting and review including commercial leases, and establishment and licensing of trademarks, copyrights, and trade secrets. Mr. Leonard has been named “Best of the Bar” by the San Diego Business Journal for four years running. Like us on Facebook.