Why You Should Take Business Incorporation Seriously When Starting Up

Congratulations on making “the leap”! As proud owners of a small family-owned and family-operated venture, we understand the unique joys and challenges associated with starting your own venture. Additionally, as tax professionals, Whyte & Associates, Inc. also appreciates that what you do when starting up at the outset can have considerable ramifications for the “life” of your business. 

Incorporating your Startup 

There are several structures to choose from, and we can go over these options during your visit to our Rancho Cucamonga office serving the Ontario, California area. The most common types include sole proprietorships, Limited Partnerships and Limited Liability Partnerships (LPs and LLPs), Limited Liability Companies (LLCs), and Corporations (C Corp, S Corp, Nonprofit Corp). Those additional letters tacked on to the back of official documents considerably impact daily operational realities and the potential realization of longer-term objectives and goals. 

Depending on how you incorporate, you may be on the hook personally for any liabilities incurred due to lawsuits or other legal action taken against your business. The same thinking applies to any tax liabilities levied against the organization. Furthermore, how the business is structured can even be used to advance the perception of your “brand.” 

Here are a few of the ins and outs associated with various structures: 

• Sole proprietorships are what your business is registered as automatically. You don’t have to do anything else. While the lack of paperwork is attractive, your assets and liabilities are at risk as the business and personal worlds are essentially one and the same. Furthermore, it can be challenging to raise capital due to the perception that sole proprietors are comparative small fries
• LPs and LLPs are similar. But with LPs, all but one partner has limited liability, and with LLPs, all partners have limited liability. Depending on the structure, partners may also have limited control. It can be an appropriate option for the likes of professional service firms with multiple owners, such as real estate developers, lawyers, and engineers
• LLCs treat members as “self-employed” for tax purposes, and P&L passes through personal income without corporate taxes being levied. This structure also affords personal protection from legal risks and can be a suitable option for those in higher-risk sectors and industries
• C Corps are entities in the eyes of the law that are separate from their owners. Corporations profit, are taxed and may be held responsible for credit and legal actions and debts. It is the most bulletproof structure against potentially devastating risks to your family’s wealth and provides a favorable path to capital-raising via stock. There are numerous “flavors” of corporations, from the S Corp and B Corp (for “benefit,” social and environmental good), to the Closed Corp and nonprofit

We look forward to setting your startup up for success and providing more information about your options. 

Call Steve Whyte E.A. or Luis Rodriguez E.A. and the Whyte & Associates, Inc. team in Rancho Cucamonga, CA, today at (909) 575-0080 to schedule your appointment.

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