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Understanding Types of Legal Entities in the Business Formation Process

During the business formation process, it is very important for entrepreneurs and other parties involved to understand the different types of legal entities and where their organization fits into our modern enterprise structure. The same can be said when a business is restructuring, particularly when it is growing in size and scope. San Diego business lawyers can help make all these matters clearer, help businesses structure themselves in the most advantageous ways and ensure compliance with all legal guidelines. Whether you are incorporating, creating an entity or forming/operating any sort of foreign-domestic business or partnership, legal counsel can help expedite and streamline the process, so you can rest assured your business is coming together as it should.

Types of Legal Entities

Before you can form or restructure your business properly, it is essential that you understand the different types of business structures, partnerships and corporate systems that you can form. After you've familiarized yourself with these entities, you can begin working with a local law firm, such as Allen Barron, Inc., to make the best choices for the formation of your business. Forming the right entity will ensure additional protection and the most beneficial and flexible liability and tax structures for you, your employees and your shareholders.

A corporation is considered to be a distinct legal entity, with liabilities and privileges that may be different from those of its members. There are different types of corporate structures into which your business might fit. One such structure is the limited liability corporation, which ensures that employees and shareholders will not be responsible for the debts of the corporation if it fails, although they might lose their jobs and investments. There is also a difference between S and C corporations, which mainly has to do with tax structures. S corporations pass corporate credit, deductions, income and losses to shareholders. Businesses choose this model because it may offer some federal tax benefits. On the other hand, C corporations are recognized as separate taxpaying entities. This may be a more beneficial structure for other companies.

If you don't form any sort of entity, on the other hand, you will be considered a sole proprietorship. This can make it very difficult to bring investors onboard and will leave the largest tax and liability burdens on your shoulders. If you are in the process of forming or restructuring a business, Janathan L. Allen, APC can help to form a solid business plan. Please give us a call at 866-631-3470 for a complimentary initial consultation for your business needs.

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