If you are thinking about starting a business, the first thing you should do is decide the legal structure under which your business should operate. Many businesses are corporations, or entities that are registered with the state and provide certain legal protections to its designated officers. An experienced business entities lawyer can help you decide whether a corporation is the right classification for your new company.
What is a Corporation?
A corporation is an entity that has authority to act on its own. A corporation can enter contracts, negotiate agreements, hire employees, purchase property, and essentially act as an individual person. A corporation is comprised of a board of directors, appointed at the formation of the corporation, and its shareholders, or those that have equity and a vested interest in the performance of the corporation.
A corporation can grow its capital by investing or offering shares to new stockholders. Stockholders form the base of a corporation by investing in the productivity and future of the company, and allows the corporation vast growth opportunities. A corporation, in a way, legitimizes the actions of a company and rests on the support of the decisionmaking authority of the board of directors in addition to financial support of the shareholders.
Why Should I Form a Corporation?
You should form a corporation if you want to operate as an entity, enjoy legal protections and tax benefits, and operate with a board of directors in charge of making decisions on behalf of the entity. Additionally, a corporation is registered with the state, meaning you have protection in your brand name and can use that name to advertise, make purchases, and hold yourself out to the public under that name.
By forming a corporation, you can avoid being held personally liable for most day-to-day actions and decision-making on behalf of the entity. Though directors and officers have a duty to act in good faith as the head of a corporation, it is difficult (absent blatant negligence) to hold a director or officer personally liable for the actions of the entity. These legal protections are particularly desirable in high-risk companies (investments, trading) or those engaging in dangerous activities (construction), since liability may arise at some point. With that being said, legal issues can arise in any company, so it is important to consult with an attorney to determine what type of legal entity is right for you and your business.
Hire a Corporations Attorney
Starting a business requires many procedural steps before it can be legally recognized as an entity. Understanding the types of legal entities that you can choose for your company, as well as what the possible risks and benefits to each are, is critical in choosing the entity that is right for you and your business. Consult with The Turbo Advocate before making any decisions that may affect the liability and financial future of your company and you individually. Call 510-414-8117 today to speak with a Corporation attorney in California.