Requirements of a Properly Formed Business Entity

There are a number of options when it comes to choosing a business entity for a particular organization or business venture.  Business owners and entrepreneurs can greatly limit their personal liability by forming a business entity or reorganizing a business. Which entity is best suited to a particular owner, organization, or business venture will depend on evaluating which entity is most aligned with their business model and objectives. In California, entity options include a Corporation, a Limited Liability Company (LLC), a Limited Partnership (LP), a General Partnership (GP), and a Limited Liability Partnership (LLP).

Forming a Business Entity

Each business entity offers unique estate planning and tax benefits, as well as different levels of liability and asset protection. However, to take advantage of the protections that each entity offers, all of the statutory requirements must be strictly followed to ensure that the entity is duly and validly formed.

When forming a business entity the following entity-specific documents, among others, must be filed with the California Secretary of State.

  • Corporation: Articles of Incorporation
  • LLC:  Articles of Organization
  • LP: Certificate of Limited Partnership
  • GP:  Statement of Partnership Authority
  • LLP:  Application to Register a Limited Liability Partnership

In addition to these documents, each entity will usually need to elect or maintain an officer, director, member, or partner, as well as conduct an organizational meeting with documented “minutes” of the meeting. Failure to follow the statutory formation procedures could mean that, if sued, a court may find the owners personally accountable for the entity’s obligations and liabilities.

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