Creating an LLC or corporation can open up doors for you and your partners. But you must first decide where to establish your business. This choice influences and is influenced by the location(s) where your business operates, the structure of your business, and privacy. While many entrepreneurs default to their home state for incorporation, several options could be more beneficial. FORMING YOUR BUSINESS IN CALIFORNIA Forming your business entity in your home state is often the most straightforward and cost-effective approach when creating an LLC or corporation. If your business is physically located in California, generates income in your home state, and operates most or all business in your home state, you should start there. However, in cases where you conduct business across state lines and have real estate or other investments elsewhere, Choosing the Right Ground Exploring Locations for LLC and Corporation Establishment
you have opportunities to create your LLC or corporation in those other locations. CREATING AN LLC OR CORPORATION IN ANOTHER STATE Businesses that operate primarily in a different state than where the owner resides will generally find more benefits in forming the entity where they do business. Nevada and Wyoming offer relief from personal and corporate income taxes and franchise taxes, but those benefits are primarily related to residents of those states. Then there’s Delaware, renowned for its protective measures and privacy for LLCs, along with a flexible General Corporation Law for corporations. Your business circumstances, however, will dictate your best option. Understanding the various costs and benefits is essential before making a final decision. PIERCING AND REVERSE PIERCING OF THE CORPORATE VEIL AS A FACTOR A critical factor is the corporate veil piercing (or reverse piercing). Some states provide protections for owners of LLCs or corporations when faced with a lawsuit.
In the case of piercing, a business owner is exposed to personal liability when a lawsuit targets their business interests. Most states provide protections to multimember LLCs, but states like Florida and New Hampshire do not provide the same liability protections to single-member LLCs. Reverse piercing is far less common, but California is one of a handful of states that allows the courts to pursue the business interests of an individual owner who is unable to pay off debts incurred through litigation. Nevada and Wyoming have laws that eliminate or limit the ability of courts to reverse pierce. If you form a business in a state that protects against reverse piercing, California courts do not have jurisdiction to reach into business interests owned outside of the state.
MAKE THE RIGHT CHOICES AT FORMATION
At Dahl Law Group, we are committed to guiding you through these pivotal decisions, ensuring your business is positioned for success right from its inception. Contact our offices to get started.
The Dahl Law Group congratulates Associate Business Attorney Danielle Lawrence on her selection to the 2024 Northern California Rising Stars list. This honor is reserved for lawyers who exhibit excellence in their practice and only
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2.5% of attorneys in Northern California receive this distinction. Congratulations, Danielle!
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