How to Form Your Own

The start of the 21st century marks an
exciting time for small business owners
and other entrepreneurs. With the
downsizing and privatizing of many of their
larger, publicly held corporate counterparts,
small businesses have an even more important
role to play in revitalizing and expanding the
U.S. economy and redefining the American
workplace. Coupled with the fact that smart,
hardworking small business owners often do
extremely well financially, the trend toward
small business formation continues to swell,
as more and more escapees from the corporate
treadmill step out on their own to form their
own business.
Fortunately, it’s not difficult to start a business
in California, but you do need to make key
decisions—one of which is to decide which
legal structure your business will assume.
One of the most popular choices is the small,
privately held corporation. In large part, this is
because the corporate form has a unique set of
characteristics that can’t be found all together in
any of the other business forms.
One of the corporation’s most appealing
characteristics is the limited liability protection
it provides to all business owners. The
shareholders of a corporation are not personally
liable for the debts or liabilities of the
business—their personal assets are not at risk to
satisfy business debts, losses, or legal liabilities,
including lawsuits.
Limited liability protection is a tried-and-true
feature of corporate law, well settled by years of
court decisions. And the rare instances when
a corporation may be denied limited liability
are also clearly established. It usually happens
when a small corporation owner commingles
corporate and personal funds or otherwise
blatantly disregards the fundamentals of doing
business as a corporation.
A corporation is also a separate tax entity
from its owners. In practice, this means you can
often use your corporation to shelter business
income instead of having to pay personal...