For LA locals looking to legally establish a corporation, there is a vast array of questions and intricacies to consider. Even before filing papers and taking the relevant steps to legally register a company, understanding the fundamentals of corporate law can leave many overwhelmed. In this article, we’ll cover all the common questions regarding the concept of a corporation, how to legally set one up and how to ensure corporate compliance.

What is a Corporation?

A corporation is legally recognized entity which operates under the jurisdiction of a state government. This definition may vary slightly from one jurisdiction to another, and changes in the law affecting businesses may change the definition of a corporation as well. Generally, though, a corporation is a business with a separate legal identity from its owners and stakeholders. This is in contrast to other legal business structures such as limited liability companies (LLCs) and sole proprietorship which remain inseparable from their owners/operators. Furthermore, a corporation distinguishes itself from other business entities by having perpetual existence and a distinct ability to acquire, hold, and transfer its assets.

What Are the Benefits of a Corporation?

There are several advantages to considering a corporate legal structure when setting up a business. Firstly, a corporation in LA affords a business protection from business debts and losses incurred by its members—this legal protection is referred to as limited liability. This structure eliminates the possibility of personal liability of the members of the corporation for the company’s debts and other obligations. It also ensures that the business’s assets are not used to satisfy personal claims against the parties running the company.

Furthermore, corporations are generally able to raise capital through the sale of stock and, as such, can attract outside investors. This effectively broadens the revenue stream of the company, enabling it to hire more people, pursue bigger projects, and launch new business lines much quicker than businesses with a different legal structure.

In addition, most corporations can benefit from tax advantages associated with having a separate legal identity. For example, many LA corporations are eligible to deduct certain expenses incurred during the course of operating the business from their taxable income. This means that the corporation generally pays significantly lower taxes than it would if it didn’t have a corporate legal structure.

How Do You Set Up a Corporation in LA?

The process of setting up a corporation is slightly different depending on how the business plans to carry out its business model. For instance, if you’re setting up a retail business you’ll likely need to pay for a business license, certain permits, and probably zoning approval should the business require special licensing.

Beyond managing local government requirements, the process generally follows the same pattern in each state. First, the business must select a corporate name, as well as an address at which the company will physically and legally exist. Secondly, a statement of purpose must be drafted—this document outlines the reasons the company is in existence and how the day-to-day operations will be conducted.

Finally, the business must file the relevant paperwork, as specified by the Corporation Code of the state in which the company is formed. Once the papers have all been sent off, the company should have an official federal tax ID number which unlocks its ability to seek loans, contracts, and pursue other business opportunities.

From there, setting up a stand-alone corporation requires some form of taxation registration depending on the state in which you are doing business, and filing business taxes and payroll taxes.

How Important Is Corporate Compliance?

When running a business, it’s essential to abide by the rules set out by the laws of the state in which you are operating. This involves filing annual corporate reports and meeting other regulatory requirements. Failing to follow the rules of corporate compliance could attract fines, penalties, and may even lead to criminal charges.

As such, it’s paramount that you understand the laws of your state. This could mean reading the Code of Civil Procedure, as well as the B and C Division of the Corporations Code of the state you’re in. It is also highly recommended that you consult with an experienced corporate lawyer and understand the human resource and payroll tax laws of the state beforehand.

Wrapping up

When setting up a corporation in Los Angeles, or any other part of the United States, it’s essential that you gain a sound understanding of the corporate laws and regulations imposed in the given jurisdiction. By taking the necessary steps to ensure your corporate compliance with state laws, you’ll be able to create a legally sound business and protect yourself and other business stakeholders from potential legal issues in the future.

Topics:

Corporation,

Corporate Law,

Corporate Compliance