Sacramento Corporate Formation Lawyers
Owning a business can be a liberating and proud experience, but it comes with its share of extra considerations and pitfalls. With enough success, a small operation, partnership, or other enterprise can evolve into a global corporation. Depending on the industry and nature of the business, different types of corporations are possible.
The legal obligations of starting a corporation vary by industry and location, and a skilled Sacramento corporate formation attorney will help navigate any uncertain territory. Legal counsel from a Sacramento business law attorney with experience in corporate formation law can ensure business owners understand the risks and potential benefits to creating a corporation.
Different Types of Corporations
As with any other business of any size, each type of corporation has certain advantages, drawbacks, and inherent risks. A skillful corporate formation attorney in Sacramento, CA can determine the business owner’s needs and what type of corporation would be the best option for him or her. The major forms a corporation can take include:
- C Corporations, which are the majority of medium to large corporations that exist today. They have no limit on the number of shareholders they are allowed to have but are subject to “double taxation.” The government essentially taxes them twice: once at the corporate level and again at the shareholder level. They are accountable for paying corporate income taxes on their profits, and any after-tax profit distributes to their shareholders. Those shareholders then pay personal income taxes on the amount received.
These corporations can also issue an unlimited numbers of shares. Thus, C Corporations often incentivize employees with stock options. This results in an unlimited number of shareholders having the ability to invest in the company. However, this flexibility comes with additional responsibilities in terms of reporting requirements, the administration of issuing stock, board and shareholder meetings, and shareholder correspondence.
- S Corporations, however, limit their number of shareholders to a maximum of 100 individuals or entities. The owners of S Corporations avoid double taxation because their profits are not subject to corporate income tax. The cap on the number of potential investors essentially limits investment potential, but it also restricts the likelihood of the stock price diving due to sudden fluctuations in the market.
- A Limited Liability Company, or LLC, is the third form a corporation can take. They are not exactly corporations since they do not issue stock, but they can have any number of investors. The government treats their profits and losses as income, and those amounts are subject to self-employment tax rates. However, since the investors essentially function as partners, this may eventually cause partnership disputes. For tax purposes, LLCs are non-corporate business organizations.
Risks of a Corporate Identity
Compliance is another major factor in maintaining a corporation. Adhering to industry regulations is a requirement of any business that wishes to remain in operation, but corporations also have a duty of care to shareholders. Compliance can extend from local business licenses, permits, and leases to compliance with government or oversight agencies in specialized industries, such as food or medical manufacturing and distribution.
No matter what type of corporation a business owner wants to form, he or she will undoubtedly require legal counsel at some point. Experienced Sacramento corporate formation attorneys that understand corporate formation laws and the requirements for forming a corporation are invaluable to business owners. Corporations are highly vulnerable to liability claims and need to have adequate liability protection and legal counsel on their side should they come under fire in a legal battle.
The Boyd Law Firm of Sacramento has extensive experience in corporate law, ranging from partnership and contract law to business litigation. We can help a corporation hit the ground running with expertly drafted contracts and legally sound by-laws. Boyd Law Sacramento business litigation attorneys have the experience and skill to keep corporations out of the courtroom whenever possible and battle vigorously for clients’ rights and their well-being if litigation is unavoidable.