CA Start-Up Business Entities
While it might seem challenging to determine a start-up, the bigger obstacle becomes apparent when it’s time to choose a business form. The most obvious type of business entity for a single-person start-up tends to be a sole proprietorship.
It’s easy, requires hardly any paperwork, and most people understand how to make it work. However, other forms are possible for a start-up, and some make a lot more sense for how it comes together and how it will grow. What a business entity is and how it works can be explained by a small business lawyer in San Francisco like James Braden.
Again, this business form is the easiest and probably the most common beginning form most start-ups choose, especially if they consist of one owner. Sole proprietorships offer a simple business form combined with an individual’s taxes in the form of a Schedule C filing.
It also probably has the greatest amount of personal liability and financial risk. Because the sole proprietorship is the owner himself, it can attach and include the owner’s assets as well. As a result, extreme convenience isn’t necessarily the best business form for a start-up in the long run.
Limited Liability Corporation
Also known as an LLC, the limited liability corporation operates as a separate entity from the owners, but it’s a far easier form of incorporation to start. Many micro and small businesses choose an LLC form first to have a professional appearance but the flexibility of a small ownership operation. The LLC doesn’t have the full paperwork of a corporation, but it is still required to register with the Secretary of State.
Whether limited or general, a partnership allows for an equal or defined percentage of ownership between different business owners. Partners frequently use this business form with professional licenses, such as lawyers, engineers, and doctors.
It allows for a clear, legal agreement on how the business is split, controlled, and operated and how income is distributed between the partners. The partners enjoy the protection and the ability to sell their portion and separate when they no longer want to be part of the business.
While most start-ups aren’t ready for a formal corporation right from the start, it is possible to create one. Doing so establishes the start-up as its legal entity, which means it can also issue ownership stakes to other investors.
This form requires a Board of Directors, Articles of Incorporation, and registration with the CA Secretary of State. Again, because of the formalities, it’s not the best to begin with as a start-up, but it’s technically doable.
Starting Your Business with a San Francisco Business Law Firm
Because a business entity choice can legally bind a start-up to specific requirements and legal risks, it’s probably one of the most important decisions to make starting. Many think it’s a decision that can be delayed until the business grows bigger. Still, the reality is that using the wrong form can create all sorts of problems, from losing customers to running into regulatory issues.
With a business attorney’s help, however, a start-up can evaluate its options and choose the right form for now and how it will grow over the first few years. The guidance can also be invaluable for avoiding preventable business risks upfront versus finding out the hard way after the fact.
The Law Office of James Braden is the ideal San Francisco business law firm to work with as a start-up. Providing both business formation guidance as well as additional help in key factors like intellectual property.
James Braden can give a start-up a big advantage in getting off on the right foot from day one of operations. Don’t be a business failure statistic; call our office for an initial consultation and find out how James Braden and the team can help!