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some point, most entrepreneurs and small business owners consider establishing
a business entity, such as a corporation, partnership or limited liability
company (LLC). What really are the benefits? What are the drawbacks?
And is it worth the trouble?
The answer depends on your unique circumstances. We can help you select
the best type of business entity to meet your goals, prepare the documentation
to establish the entity and define the relationships among management,
investors, and others, prepare maintenance and compliance documentation
as your business grows, and provide succession planning to help you
turn over the business to succeeding generations or buyers.
To learn about the pros and cons of different types of business entities, click here.
To learn about our services for entity formation, click
To learn about our services for entity maintenance and compliance, click
To learn about our succession planning services,
To learn about our business acquisition and sale services, click
Business Entity Is Right for You?
may have been told by your CPA that you should incorporate, or perhaps
you are interested in incorporating because some of your competitors
have done so. But is a corporation really the right type of entity for
you? The choice of business entity depends on legal, income tax and
operational considerations. We can help you plan for and structure the
type of entity that best meets your needs.
You may have heard that by forming a business entity you can reduce
your taxes or limit your liability, but misperceptions
are common in this area. While you may realize some modest income tax
savings and succeed in limiting your personal liability to some extent,
often the greatest benefits from forming a business entity are continuity
of management and control, and increased access to capital.
of Management and Control.
Because an entity is its own "person," it can continue its
existence and activities regardless of what happens to you. For example,
if you should become incapacitated or die, a formal system of organization
will provide for the smooth transfer of control to a successor. Business
activities will continue uninterrupted, without loss of income or other
Access to Capital.
Having sufficient capital available to your business often makes the
difference between success and failure. Setting up an entity for your
business provides security for investors in the form of limited liability,
some assurance that the business can carry on if something happens to
you, and an improved ability to define relationships to maximize the
goals of all and avoid disputes. It also provides the possibility of
some protection to you to limit your personal liability in the event
of a business failure.
Attorneys in our office collectively have over twenty-five years of
experience assisting entrepreneurs as well as established businesses
in setting up entities, negotiating and closing capital-raising transactions,
and providing general business formation advice.
Types of entities:
A corporation is a legal "person," distinct from
the owners. Just like a real person, it has assets, liabilities
and certain rights.
A partnership means shared ownership among two or more
A Limited Liability Company (LLC) falls in between a partnership
and a corporation; its members are protected from personal liability
for business debts and claims.
We can discuss with you the pros and cons of each type of entity in
terms of liability, tax savings, operational and capital-raising considerations,
to identify the best solution for your business. Please contact us to
schedule a free consultation.
Much Can I Really Limit My Liability?
You may have heard that as a business owner/operator, if you incorporate,
your personal assets will not be at risk for liabilities stemming from
the business. For instance, you may have been told that you will not
be personally liable for judgments, negligence and lawsuits against
the business. Unfortunately, it is not necessarily so.
Incorporating can limit your personal liability as owner/operator for
your employees actions or liability that occurs irrespective of
an individuals negligence. Incorporating also will generally limit
your investors personal liability for business debts. However,
you remain liable for your own actions. For example, if you, as the
business owner, commit a negligent act, both you and the company may
be liable. Similarly, if an employee is negligent, both the employee
and the company may be liable. However, you as the owner would not necessarily
be personally liable for the employees negligent act, thus providing
a measure of protection for your personal assets. As your company grows
and you hire more employees, this sort or protection will become more
and more important. Thats where incorporation becomes more important
as you take your business to the next level of success.
Much Can I Lower My Taxes?
You may have been told that incorporating will drastically lower your
taxes. But, a corporation is not a tax shelter. You may realize modest
income tax savings by being able to take additional deductions, realizing
some income as profits rather than compensation (subject to FICA or
self-employment taxes), and through benefits planning, such as retirement
accounts. By and large, however, your decision whether or not to incorporate
or form another entity should be driven by factors other than taxes.
Many disagreements between business partners, principals or corporate
officers and directors are the result of poor planning in the initial
formation of the business entity. We can help you establish your business
entity with well-considered relationships among the principals and solid
documentation to prevent disputes later on.
The agreements we draft to form your entity generally try to cover all
bases, including withdrawal or death of a partner, principal or shareholder.
We can assist you in planning ahead and developing tight, concise arrangements
that will lay a solid foundation for success and prevent disputes as
your business grows. Documentation may include:
Corporate shareholder agreements, articles of incorporation
LLC articles of organization and operating agreements
Partnership agreements and certificates of partnership
Employment agreements (important for legal and tax reasons)
Corporate minutes of organizational meetings of the board
of directors and shareholders
Please contact us for
Maintenance and Compliance
Now that you have formed your business entity, how are you going to
find the time for the paperwork involved in maintenance and compliance?
As your business grows, you can count on our diligent help with maintenance
and compliance documentation so that you can focus on growing your business,
rather than maintaining it. We can guide and support you with practical
advice, solutions and solid documentation that minimizes risk and optimizes
your chances for success.
Succession Planning for Closely-held and Family Businesses
Youve poured your heart and soul into your business and it may
well be the largest asset in your portfolio. But if you were to become
incapacitated or die suddenly, your entire investment of time, resources
and passion could be lost if you have not planned for succession. Even
if youve just formed your business, its never too early
to plan for succession.
We provide full business succession planning services to prepare for
the transfer of a business to other family members, succeeding generations
or other parties. Proper planning will minimize estate taxes and provide
for a smooth transition in ownership and control. Please contact us
for assistance with the following:
Planning for a successor you can groom to take over the business
Coordinating the transition
Preparing purchase and sale agreements
Handling purchase and sale transactions
Acquisition and Sale Services
Are you interested in acquiring or investing in a new business? Alternatively,
do you own a business which you are considering selling?
Attorneys in our office collectively bring over twenty-five years of
experience in representing both buyers and sellers in merger, acquisitions
and sale transactions. The decisions you will make in how you effect
a purchase or sale of your business will have major ramifications. For
an entrepreneur considering purchase of an existing business, the liabilities
you take on, and your ability to obtain recourse from the seller, will
make a significant difference in the amount of return you will realize
from the business. We can assist you in structuring a purchase transaction
to maximize tax advantages, minimize liabilities, and optimize your
chances for success after closing.
For sellers of a business, beyond just agreeing on a sales price, the
manner in which you structure the sale and the terms of the transaction
can make a world of difference in the amount you actually realize for
your hard years of effort and risk. We can advise you in how to structure
a sale to maximize the amount you will actually realize while minimizing
your ongoing risks and liabilities, and we can help you negotiate the
transaction and draft agreements to help you get to a swift closing
on the most advantageous terms.
Mortensen Law Office
Tax, Trust & Probate Attorneys, P.C.
22807 Lyons Avenue
Newhall, California 91321
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