Business Formation Lawyers in Los Angeles
Selecting the Right Entity for Your Business
So, you are starting your own business. The first of many decisions you need to make is what type of business entity is best for you.
Each type of business entity has its advantages and disadvantages. Two factors to consider are liability protection and taxes. Let the Los Angeles business law firm of Bradley & Gmelich help you sort through these and other factors decisions.
Types of Entities for Business Formation in Los Angeles
Here are the options available for Los Angeles business formation:
Sole proprietorships
A sole proprietorship is a one-person business that is inseparable from its owner. As a result, the owner reports business income and losses on his or her personal income tax return and is personally liable for the debts and obligations of the business.
General partnerships
The partners in a general partnership share equal rights and responsibilities, and any one partner can bind all the partners to a legal obligation. Each partner is personally responsible for all of the partnership’s debts and obligations.
The partnership profits are not taxed to the partnership but instead pass through the partners, who report the income and losses on their individual tax returns.
Limited partnerships
The general partner controls the day-to-day operations and is personally liable for the partnership’s debts. Limited partners have minimal control, and their personal liability is limited to the amount of their investment. Both the general partner and the limited partners benefit from the partnership’s profits.
Limited liability partnerships (LLPs)
An LLP keeps the tax advantages of the general partnership but it offers some personal liability protection. The partners are not personally responsible for the other partners’ wrongful acts or for the partnership’s debts or obligations.
Corporations
A corporation is an independent legal and tax entity that is separate from the people who own, control, and manage it. As a result, the corporation itself pays taxes on corporate profits. A corporation limits its owners’ personal liability for business-related debts and judgments.
Limited liability companies (LLCs)
An LLC combines the personal liability protection of a corporation and the pass-through tax structure of a sole proprietorship or partnership. Because only LLC assets are used to pay off the LLC’s debts, the owners of the LLC stand to lose only the money that they have invested in the LLC.
Contact Bradley & Gmelich to get help with Los Angeles business formation.
