San Diego Business Law – Important Considerations in Selecting a Business Entity

Welcome back to our San Diego Business Law blog series! In this week’s blog we are going to address some things you should consider when selecting the appropriate form for your new San Diego business. While there are a number of different issues you could focus your time and energy on, we suggest asking yourself three initial questions about your business:

1. What personal assets do I have?

2.  What type of business am I operating or do I intend to operate? Is it a high risk business?

3.   What is my anticipated revenue?

After answering these questions you should be able to narrow down your selection to a couple of the options available in California. So let’s dive in!

1. What personal assets do I have?

Not every business is meant to register as a business enitity.  One of the first questions that you should ask yourself in considering whether to register as a business entity is whether you have personal assets that might be exposed to attachment by a plaintiff or a creditor.  These include a house, investment property, investment accounts, bank accounts, stocks, etc.  If you have assets that are attachable, you want to consider forming a business entity.

2. What kind of business am I operating or do I intend to operate ?

What we mean by this question is, are you providing a service or selling a product? If you are providing professional services, you might not be able to form an LLC to provide those services in California. For instance, certain licensed individuals wishing to form a partnership that includes protection from personal liability may be able to form an LLP rather than an LLC.  This determination, however, is not always clear, but it is an important element and therefore one that you should discuss with your corporate attorney.  You also want to assess the risk factors of your product or service in determining the viability of forming a business entity.  It is important to identify the goals of your business early on, so that you can select a business form that is appropriate for your industry and long term plans.

3. What is my anticipated revenue?

The revenue of your business will be an important part of your assessment in determining whether to form a business entity.  As corporations are taxed differently than LLC’s, for example, the actual or intended profits and losses in your business are an important element in determining not only whether formation of a business entity is viable, but also in selecting the right type of entity.   In order to effectively answer this question we recommend that you draft a business plan and speak with your tax practitioner.

Ultimately, the selection of the appropriate business entity is a complicated process and I am happy to answer any questions you might have about your particular situation and the best fit for the legal needs of your San Diego business. Feel free to check back soon for the next episode in the San Diego Business Law series – Liability, Risk & Insurance. We will be addressing the issue of personal exposure in more depth!

California law requires that I inform you that this is an informational blog post only and is not intended to, nor does it provide legal advice. This blog post is for advertising purposes only and is an advertisement. Please consult an attorney prior to making any legal decisions. Ortega Business Law Firm, APC is generally licensed to practice law only in the State of California. The ability to access this blog post or its website in another jurisdiction does not constitute the practice of law outside of California or a representation that this office is licensed to practice in any other jurisdiction.

All information and material contained within this post is believed to be accurate. Nonetheless, it should not be considered legal advice on any particular topic. All fact patterns are potentially different and you should not act on information contained in the website without seeking advice from a legal professional specific to your particular situation.