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DONNER & DONNER - 1
Attorneys at Law |
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Established: 1993 |
Choosing the type of business
entity under which your business will operate is crucial!
We can help you form your
business including helping you decide what type/kind of entity
you want to form: Corporation (S, C, statutory close
corporation), Partnership, Limited Liability Company, etc.
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HAVE YOU CHOSEN THE RIGHT TYPE OF BUSINESS TO PROTECT YOUR
ASSETS?
As small business owners are well
aware, we live in a time where anyone who feels that they
have been wronged files a lawsuit. Now, more than ever, it
is important that small businesses examine their options to
determine the correct type of business entity in
which to operate. Choosing the right type of business type
can save your home and other personal assets being at risk
if you are named in a business-related lawsuit.
Sole
proprietorship
Most individual owners of small
businesses operate what is called a sole proprietorship. For
example: George, a printer, opens George’s Print Shop. This
is the cheapest way to operate with no special state filing
requirements to start the business. The major problem with
operating as a sole proprietorship is, of course, the
personal vulnerability of the owner’s assets.
Running as a sole proprietorship means that
George, the owner, is personally liable for any and
all debts and claims made against George’s Print
Shop. Personal liability is something to be steadfastly
avoided if possible. It is better to do avoid the potential
for personal liability before any lawsuits have been filed
against a business.
Partnership
A partnership is where two or more
people operate a business in concert with a common goal,
e.g. George and Fred, open George and Fred’s Print Shop. The
partnership differs from the sole proprietorship in that
there is more than one person that owns and is responsible
for the business.
There are tax advantages to using a
partnership in that income and losses of the partnership are
generally passed through to the partners' tax returns
directly. However, a partnership carries the same potential
for personal liability of each partner as a sole
proprietorship, i.e., personal assets are at risk.
An additional potential problem is that each
partner can bind the partnership and other partner(s) to
contracts. Thus, a partnership carries the risk that your
partner can put your personal assets at risk. If the
print shop fails, both George and Fred’s personal assets are
at risk for creditors to use to satisfy debts owed by George
and Fred’s Print Shop. It is very important before
entering into a partnership that you know AND trust your
partner(s).
Limited
partnership
Another type of partnership is called
a “limited partnership”. A limited partnership has at least
one “general partner” with full personal liability for all
partnership debts. However, the limited partnership also
has “limited partners” who have liability and participation
in the business limited to their investment in the
partnership.
Corporation
A Corporation is a separate entity
such as George and Fred’s Print Shop, Inc. Use of a
corporation limits the liability of all of the owners
(stockholders) of the corporation. Provided the corporation
is set up correctly and initially has adequate
capitalization and maintains the separateness of the
corporate entity there is no personal liability for the
stockholders.
Formation of a corporation is not
nearly as simple as with a partnership. There are specific
filings that must be made with the State and certain
corporate formalities that must be maintained in order to
preserve the corporate status and limited liability.
Additionally, a corporation is more expensive since yearly
fees and taxes must be paid.
The major advantage to the corporate
entity is, of course, its limited liability. With a limited
partnership, only the general partner would still be liable
for the damages to the injured party. In a corporation,
generally only the corporation is liable, not the officers,
directors or shareholders.
Limited
Liability Company (LLC)
An
LLC is a hybrid type of entity that has characteristics of
both partnerships and corporations. An LLC has the “pass
through” income and loss treatment of partnerships. However,
an LLC also has liability limitations of corporations. An
LLC can have fewer formal requirements such as regular
meetings. However, the LLC, like the corporation has to pay
yearly fees and taxes to the State making it more expensive
than a partnership or sole proprietorship.
The LLC and small closely held corporations
are typically two entities that have similar characteristics
that should seriously be considered by the small business
owner. Knowing what type of entity to choose to do business
under is a very important decision for the small business
owner. Most small businesses should consult with an attorney
before making the decision on how to operate. However,
speaking with an attorney to discuss the available options
is very important
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DONNER & DONNER
- Legal Warriors
®
Attorneys at Law
910 Hampshire Road, Suite R
Westlake Village ,
California 91361
Tel: (805) 494-6557
Fax: (805)
409-8677 *
E-mail:
donner@lawyer.com
Websites:
www.donnerlaw.com
-
www.legalwarriors.com
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* We do not accept
unsolicited fax advertisements |
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The DONNER &
DONNER Legal Warriors®
team's primary practice specializes in all of the California Law
area and are certified by the California State Bar, the United
States District Court, Southern District, United States Court of
Appeal, 9th Circuit, and United States Tax.
Our attorneys are primary California Law Practice
lawyers and our live help system provides no guarantee of outcome of any case or
of every question to be answered in a chat session without further investigation
of Law regarding different jurisdictions of law that we might not be familiar
with or need time to evaluate. Some questions, we may not be able to answer as
we are limited to practicing law in California only at this time. There is no
guarantee of winning any case if we represent you.
Our Live help attorney
service can help you get answers to questions primarily for California Law.
California state legal questions are and answers are for opinion purposes
only and do not constitute an exact outcome of/or of law in California
area of practice only. In most case's , we can assure you that we still may be
able to help you instantly and answer most legal question or will suggest an
alternative way for our users to get advise out of our reach or control (due to
our practice areas or location of practicing law) . Our Live help attorney
service can possibly help you get most answers to questions you have (due to our
limited area to practice law in CA. only) outside of California for states in
the U.S.A. United States of America will have different laws that may not be
equivalent to California Law, in we practice in that field and specialize. Our
Practice area regions include: Los
Angeles County, Orange County, San Bernardino County, San Diego County, Santa
Barbara County, San Francisco bay area County, California, Riverside, Ventura
County, other California cities include we will represent in local court:
Irvine, Ontario, West Covina, Northern California, Costa Mesa, Cerritos, El
Monte, Palm Springs, Pasadena, San Dimas, Pomona, Alhambra, Bakersfield,
Victorville, Santa Ana, Tustin, Mission Viejo, Universal city, Redlands, Newport
beach, Hollywood, Claremont, Inland Empire, Arcadia, Anaheim, Indio, Fontana,
Upland, Westminster, Bellflower, Hemet, San Jose, Escondido, Palmdale,
Lancaster, Barstow, Temecula, Montclair, Santa Monica, Culver city, Diamond bar,
El Cajon, Glendora, Loma Linda , Long Beach, Moreno Valley, Van Nuys, Valencia,
Indio, Hemet, Palm Desert, Temecula, Chino, Claremont, Escondido, Carson,
Hollywood, Universal city, Lancaster, Banning, Loma Linda, Glendale, Hermosa
beach, Puente Hills, City of Industry, Sacramento, Northridge. We give no
guarantee of accuracy of legal advise outside California and will give only
opinions in those states outside California.
Our California legal
attorney's practice law also include the following areas in Orange
County, Los Angeles County, Agoura Hills, Alhambra, Arcadia, Artesia, Azusa, Bel
Air, Bell Canyon Bellflower, Belmont Shore - Long Beach, Beverly Glen, Beverly
Hills, Bradbury, Burbank, Calabasas, Century City, Westwood Cerritos. Cheviot
Hills, Rancho Park, Culver City, Downey, El Monte El Segundo, Encino Flintridge,
La Canada, Granada Hills, Hermosa, Beach, Hidden Hills, Hollywood La Canada
Flintridge, La Crescenta, Glendale , Ladera Heights, Lakewood, La Mirada
Lancaster Lomita Long Beach, Los Angeles Los Alamitos, Los Feliz , Malibu,
Malibu, Canyon, Manhattan Beach, Marina Del Rey, North Hollywood Northridge,
Norwalk Pacific Palisades, Palmdale, Pasadena Playa Del Rey, Pico Rivera,
Redondo Beach, Rolling Hills Rolling Hills Estates Rosemead Rossmoor, San
Gabriel, San Pedro Santa Clarita Santa Monica Sherman Oaks Sierra Madre. Signal
Hill, South Pasadena, Stevenson Ranch Studio City Tarzana Torrance Universal
City, Valencia, Valley Village, Venice, Walnut, Westchester West Hills, West
Hollywood, Westlake, Village. West Los Angeles, Westwood, Century City Whittier,
Corona, Woodland Hills, Thosand Oaks.
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