Monday, January 8, 2007

New Year, New Look at Your Business Entity

With a new year comes a good time to reevaluate your business entity (or lack thereof).

Business owners with an existing corporation should make sure that they have held and documented at least their annual meeting; if this hasn't been done for a while, this should be corrected as soon as possible. Ignorning this required corporate maintenance means you are failing to follow the corporate formalities and may be one step toward negating the limited liability of the corporation ("piercing the corporate veil").

Also for existing shareholders, members, officers, and directors of California corporations and limited liability companies (LLCs), required Secretary of State filings and Franchise Tax Board tax filings should be brought up to date if in arrears. If the business entity is no longer being used, and perhaps has been neglected as a result, to avoid further tax liability (which keeps accruing, whether the entity does business or not), it should be dissolved.

If a change from C corporation to S corporation tax status is being considered for a corporation, an accountant should be consulted.

For those without a current business entity, who are either starting up a new business venture, or still filing a Schedule C as a sole proprietor, it may make sense to think about the potential benefits of incorporating or forming an LLC (which, depending on the circumstances, may include limited liability, avoiding disputes with business partners, better image for clients, self-employment tax savings, and/or decreased tax audit exposure). For a free consultation by phone or email, or for assistance with the other legal issues discussed in this post, please click here.

No comments: