Choosing An LLC In California

If you are thinking of starting a business in California, it makes sense to protect yourself with a business entity. With over 100,000 lawyers in the state, it may be the smartest move you ever make.

To the surprise of many, the LLC has not been around for all that long. The first one was created in the late 1970s in Wyoming of all places.

California was extremely slow to do so, only allowing the entity in the early 90s. Once it became apparent the entity was very popular, the state government expanded its use.

So, what exactly is a limited liability company? It is a business entity thought up in a politician’s mind. The goal was to ease the burden on small businesses, and it does just that.

Liability should be a big concern for any business owner. If you use an LLC entity, however, you are protected from personal liability for any business debts. At the same time, you do not have to deal with the paperwork of a corporation.

Taxes are the second bane of all small businesses. To ease the burden, the entity was designed to be taxed like partnership, which avoided the double taxation problem found with corporations.

One might wonder why he or she should select an LLC over a partnership. The answer is liability. A partnership provides no protection to the owners, while an LLC does.

It may sound like the LLC is perfect for any situation. It is not. There are a couple of occasions when it can be a bad choice for your business.

Many businesses are started with the idea of going public. If this is your goal, an LLC is a bad choice. Simply put, you cannot take it public. The LLC does not have shares, so there is nothing to trade!

Another potential problem has to do with taxes for a certain type of LLC. Many states allow a single owner LLC. The IRS requires that such entities have the owner file as a sole-proprietor, which means there is no real tax advantage.

Another danger with the LLC is the lack of formality. This can be a good thing, but it can also lead to laziness and sloppiness by owners. You must practice good business administration to avoid this problem.

If you are doing business in California, you need protection. There are over a hundred thousand attorneys in the state! A California LLC is often the best defense you have.

Article Source: http://publisherscloninghouse.com

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