Top 5 Things to Consider when Incorporating in Los Angeles
When establishing a business in Los Angeles, there are many factors to consider2 min read
When establishing a business in Los Angeles, there are many factors to consider. While incorporation yields a multitude of benefits, it is essential to be fully aware of the implications of incorporating before making the decision. In this article, we will provide an overview of the top 5 things to consider when incorporating in Los Angeles.
The structure of the business must be identified in order to determine the best incorporation option. Commonly, businesses opt for a C-corporation (C-Corp) or Limited Liability Corporation (LLC). Ultimately, the type of business and its goals will dictate which incorporation option is optimal. For example, growing companies with a potentiality for becoming public often opt for the C-Corp as it is more suited for large numbers of shareholders. Alternatively, companies that wish to remain small and closely-held often are more likely to opt for an LLC.
The importance of forming an operating agreement should not be underestimated. Beyond the formation of the corporate entity, an LLC should also form an operating agreement that dictates the apportionment of responsibilities and voting rights of the LLC members. It should be drafted by an experienced legal team to adhere to state laws and reflect the shared vision of the company. Further, an operating agreement will provide much needed documentation should any future disputes arise between the members of the LLC.
In addition to forming a corporation, a business must understand the formalities associated with its state of incorporation. After filing articles of incorporation and obtaining all the necessary licenses, a business must keep records of all business transactions for the purpose of filing taxes and reporting financial information. An experienced legal team can provide sound advice as to the best approach for record-keeping and filing taxes in order to ensure legal compliance.
It is also critical to consider the state franchise tax when incorporating a business. Generally, businesses in California are subject to the franchise tax based upon the total value of the corporate assets. However, certain entities and small businesses may be exempt from this tax. Consequently, it is paramount to understand the nuances of the state laws prior to finalizing the transition into a business entity.
Lastly, businesses should be aware of the strict laws regarding foreign corporations. In the wake of the new federal standards on foreign interference, it is important for a foreign company wishing to register a corporation in Los Angeles to be aware of the implications of registering as a foreign business on the state and local level. Handling paperwork correctly is the best way to ensure a smooth incorporation process.
Incorporation is an integral part of launching a business in Los Angeles. While there are many benefits of transitioning to a business entity, it is essential to consider all the legalities and implications associated with the incorporation process. The five most important things to consider when incorporating in Los Angeles are identifying the right business structure, forming an operating agreement, keeping records and filing taxes, understanding the state franchise tax, and meeting the foreign corporation regulations.
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