Understanding the Corporate Facade
A corporation is a legal entity that exists separate from it’s owners. For legal purposes, a corporation is treated as though it were its own person (often call a “fictitious person or individual”). This means that legally speaking the fictitious person will be entering into contracts and holding property, not any of the actual owners. This provides the advantage that usually the fictitious person is liable for the debts of the business, not the actual people who own the business.
Taxes and Corporations
The main disadvantage of a corporation, however, is that a corporation, as a fictitious person, is taxed as though they were a separate person. That is, all profits are “double taxed:” first, when the corporation earns the profi,t and then second, when you the owner takes home your net profit. This usually means that the take home money of the owners is much less than it would be if they had formed a different entity such as a general partnership. However, there are many exceptions to these rules. For example, some corporations, such as “S corporations,” are not subject to double taxation. However, special entities like S corporations are subject to other specific operating and structural requirements.
Piercing the Corporate Facade
Corporate protections, however, are not indestructible. Specifically, the corporate facade may be legally pierced in certain scenarios. For example, failing to maintain the fictitious corporate persona separate from one’s personal life and assets can legally destroy the protections provided by forming a corporation. In order to take advantage of these potential benefits and navigate these various pitfalls it is important to have the assistance of an attorney.
Corporate Creation and Formation Services Provided by Jones and Devoy
The San Francisco Business Law Attorneys of Jones & Devoy can walk you through the steps necessary to create and maintain your own corporation so that you can take advantage of the protections built into the law. Specifically, our attorneys will assist in:
- Creation and Registration of the corporate name;
- Creation of a Board of Directors;
- Creation of the Articles of Incorporation;
- Implementation of the Operation Bylaws;
- Holding of the first Board meeting; and;
- Issue of stock;
- Registration with Federal. State and Local Authorities;
- On-going legal support to assure that you are able to take advantage of available legal protections.
Contact our San Francisco Bay Area offices today to schedule a free consultation so you can determine if the business solutions offered by a corporation are right for you.