|Richard T. Williamson,
Attorney at Law
1945 Palo Verde Ave., #101
Long Beach, CA 90815
Corporation and LLC Formation
Why Should You Form a
Corporation or an LLC?
There are two main reasons why a person should
form a Corporation or an LLC: Asset Protection and Tax Planning.
Forming an entity to hold your investments or
your business forms a barrier or a bubble of sorts around that
investment or business. This means that if a liability
generating event happens inside of that entity then the
liability stays within the entity and your personal assets
outside the entity are shielded from the liability. For example:
You own an apartment building which is held in an LLC. If
someone falls down the stairs and decides to sue you, the only
assets that person can go after are the assets within the LLC in
which the apartment building is held. He or she will not be able
to attack your personal residence or other investments held
outside that LLC.
"Bubbling Off" your
investments or business can protect your personal assets in case
of a lawsuit.
In many cases, forming an entity to hold your
investments or business can be beneficial for you tax wise. For
example, by forming an S corporation, an independent contractor
could take some income as distributions from the corporation and
only a small portion as self-employment income thereby
significantly reducing one's amount of self-employment income
and alleviating a large tax burden. Each person's unique
situation requires careful consideration, and the best solution
for you can be achieved by discussing your plans not only with
your attorney, but also with your accountant.