1. WHICH TYPE OF ENTITY SHOULD I FILE?
While giving legal advice is not permitted, we can point out the differences between the 2 most popular
entities filed in California, the corporation and Limited Liability Company.
If flexibility in management is important, an LLC may be the correct choice. An LLC is not subject to
the restrictions and formalities that a corporation must abide by, and the owners of an LLC can distribute
profits in any way they choose.
If you are looking to save on employment tax a corporation may be the better choice. With a corporation,
you pay the self-employment tax on money you receive as compensation for services, but not on profits that
automatically pass through to you as a shareholder.
2. WHAT IS THE DIFFERENCE BETWEEN AN LLC AND AN LP?
A limited partnership consists of at least one general partner and one limited partner. The general partner
is potentially liable for all the obligations of the partnership. The limited partner has limited liability.
Limited partners may jeopardize their limited liability status if they actively participate in the business
of the partnership. A limited liability company consists of one or more members, which may be individuals,
partnerships, limited partnerships, trusts, estates, associations, corporations, other limited liability
companies or other business entities. The members of a limited liability company are afforded limited liability
similar to shareholders of a corporation and have pass-through taxes comparable to a partnership.
3. WHAT ELSE DO I REALLY NEED?
Not much. Most other companies will try to sell you other stuff that most new corporations/LLC’s don’t really
need. The corporate kit? Well, yes it looks pretty, but you may never open it. Stock Certificates? You can
make them on your computer. The tax ID number? YES, you do need this, but you can get it yourself for free by
calling an 800 number, or filling out an online form at www.irs.gov.
4. WHY DO OTHER PEOPLE CHARGE SO MUCH?
There are two reasons. The first is that they are greedy. The second is that they are usually located somewhere
else, and have to pay someone in Sacramento to do the work. We are located in Sacramento and have been going
to the Secretary of State’s office 3 times a day since 1978.
5. DO I NEED AN ATTORNEY TO INCORPORATE?
An attorney is not required to form a corporation, however, if you are unsure of the proper procedures or if
you need advice about establishing or operating a corporation, you should contact private legal counsel.
6. WHAT IS AN AGENT FOR SERVICE?
An agent is an individual (director, officer or any other person, whether or not affiliated with the corporation)
who resides in California or another corporation designated by the corporation to accept service of process if the
corporation is sued in California. The agent must agree to accept service of process on behalf of the corporation
prior to designation. Every entity formed in California must have an agent for service (with a physical address
– no P.O. boxes) in California. Legalese can also act as your agent for service for an annual fee of $100.
7. HOW MANY SHARES SHOULD BE ISSUED?
Your articles of incorporation must include a statement of the total number of shares that the corporation will be
authorized to issue. Your Corporation will have 1,000 authorized shares with a par value of .01, unless you specify
otherwise. The number of shares can always be amended at a later date.
NOTE: Before shares of stock are sold or issued, the corporation must comply with the Corporate Securities Law
administered by the Department of Corporations. For information regarding permits to issue shares, please contact
that agency. Most smaller corporations never actually issue or use shares at all.
8. WHAT IS A CORPORATE SEAL?
The Secretary of State does not issue corporate seals. Corporate seals may be obtained from an office supply or
stationery company. You do not need one for anything.
9. ARE BYLAWS FILED WITH SECRETARY OF STATE?
Bylaws are not filed with the Secretary of State. Bylaws are kept at the corporation's principal executive office.
10. HOW WILL I KNOW WHEN MY CORPORATION/LLC HAS BEEN FORMED?
We will fax you a copy of the filed document when it is completed, and then send you 2 certified copies of it via
U.S. Mail. Next day priority FedEx is available upon request at an additional charge of $25.
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