Default Entity Structures
If you have not filed any documents with the Secretary of State, you are operating either as a sole proprietorship or a general partnership. If you operate the business as an individual and are the sole owner of your business, you are a sole proprietorship. If you own the business with other individuals, you are a general partnership.
Even though the above business structures do not require the filing of documents with the Secretary of State, businesses operating either business entity does require the payment of taxes on all profits gained by your business.
The biggest drawback drawback from operating as a sole proprietorship or general partnership results from the lack of protection of the personal assets of the owners. Each owner remains personally liable for the debts and obligations of the company.
If you have personal assets to protect or anticipate that you might have assets to protect in the future, you would be best served by forming an LLC or a corporation. However, it is possible to change from a sole proprietorship or a general partnership into an entity which offers greater protection of personal assets at some point in the future.
*This article is for informational purposes only. It is not guaranteed to be a complete or thorough analysis of the issues discussed herein. It in no way shall serve to create an attorney-client relationship. The reader is advised to check for changes to current law and to consult with a qualified attorney on any legal issue.
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