Incorporating a Business in San Diego: Will I Avoid Or Lessen My Personal Liability?

incorporating a business in san diegoIf you own a business, or a partial share of a business, in San Diego you could be legally liable for the actions that the business takes. If the business gets into debt, you will personally be in debt and could be bankrupted right along with the company if it runs into debt troubles.  If the business is sued, your personal assets could also be at stake.  This is true for sole proprietorships as well as for certain other types of business structures including partnerships.

The risk of personal liability is a big disadvantage for many entrepreneurs who do not want to jeopardize their personal money or assets like their home in order to operate a business.  The personal possessions that the entrepreneur or business owner has could be at risk in the event of a lawsuit or a bankruptcy.

Fortunately, there is a way to run a business without having to worry about facing personal liability if the company does something wrong or faces debt problems.You can incorporate your business. There are, however, some things you need to think about before you decide that incorporating a business in San Diego makes sense for you.  Sepahi Law Group APC can explain the benefits and disadvantages of incorporating, as well as your different options for forming a corporation. Our attorneys will also help you throughout the process of incorporating your company.

Incorporating Your Business to Avoid Liability

When a business is incorporated, it is a separate legal entity from its owners.  The business could exist without individual owners, and each owner could sell his or her ownership stake in the company.

In order to avoid liability by incorporating, however, the business must have sufficient capital to operate. In other words, it must actually be a legitimate corporation and not simply a shell company with no money that was created for the sole purpose of avoiding liability.

The owners will also need to follow “corporate formalities,” which means they will actually need to treat the company as a corporation instead of as an extension of themselves. The owners will need to keep minutes, keep personal and business money separate, pay themselves a reasonable salary or make distributions, and purchase workers’ compensation and unemployment insurance.

Both an S-corporation and a C-corporation can provide protection from liability for business owners, but a C-corporation carries the risk of double taxation.  To create either an S-corp or a C-corp, the business owner(s) will also need to complete all required initial paperwork as well as subsequent required forms and requirements each year.

Sepahi Law Group APC can help you to determine if incorporation is right for you and can guide you through the process of officially starting your business as a new corporation.

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