If you start a company, it can be easy to simply begin conducting business as a sole proprietorship or partnership. This is because you do not have to file any paperwork with the state or take other formal action to start a business this way. However, with a simplified process also comes much fewer protections for business owners, and you should consider whether it is time to form a limited liability company (LLC).
Many business owners choose an LLC as their formal entity because it provides different benefits, including:
If you have a sole proprietorship or general partnership, owners are personally liable for the debts of the business. One of the main draws of an LLC is that it is a separate legal entity from the owners, so it protects you from such personal liability for business matters.
You will need to complete all the necessary paperwork and properly file it with the State of California. However, the formation process does not stop there. Even though the state does not require you to file an operating agreement, it is highly recommended to draft and sign one with the other owners. This can prevent or help to resolve disputes. Further, you want to discuss your tax options with a knowledgeable attorney so you can set up proper accounting.
At Primum Law Group, our San Francisco startup counsel lawyers help new business owners determine the right entity for their business and assist with the formation process. Call 415.293.8042 or contact us online to learn how our legal team can help your company.