The Importance of Sound Business Formation

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b2ap3_thumbnail_shutterstock_130099715.jpg2018 is a year in which to either initiate or revisit the issues of business formation. The stock market is at an all-time high and new tax legislation has been passed. For individuals in business, it is essential to respond to the new legislation with thoughtful business entity selection and careful transaction negotiation, irrespective of government quagmires. This is the case whether you are the owner of a single member LLC or an executive in a traditional corporation. Whatever your personal business needs in planning for the effects of the new tax code, rely on the knowledge of an experienced Fremont business law attorney.

Limited Liability Corporations Are Forecasted to Receive Favorable Treatment

If you are currently receiving income as a traditional employee or freelancer in your capacity as an individual, it may be advantageous to consider registering a Limited Liability Corporation (LLC) with the California secretary of state. It is possible for even one person to register an LLC and receive business income through the entity.  In this scenario, the registrant / business owner is typically classified as a “single member” owner of the LLC.  Importantly, an LLC is afforded status as a “pass-through” entity with regard to the taxation of income. Income earned by a pass-through entity is not subject to taxation when the income is passed through from the business to the individual. This is different from income earned by a traditional corporation, which is taxed once on the way out from the business to its shareholders, and then again at the individual level. 

It is in the area of tax deductions where pass-through status often showcases its values. Income earned by a business may be offset by business investments and losses in the form of tax deductions. Thus, the figure passed-through from the business to the individual may be lower, with regard to taxation, than income that is earned by an employee and/or freelancer and never passed-through from the entity to the individual employee or freelancer.

Experience Navigating Entity Selection

As you can see from the business and legal specifics pertaining to LLCs, entity selection can be quite complex. As such, the knowledge of an experienced Fremont business law attorney is invaluable in both selecting the entity that is appropriate to your personal and business needs and planning for the tax-related consequences of new legislation. You can contact our firm by calling 510-791-2244 or by sending us a message via our website. 




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Willett Law Firm

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