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Should you establish a privately held corporation?

On Behalf of | Apr 21, 2021 | Business Formation & Planning |

Prospective entrepreneurs in the state of California face a big decision concerning what type of entity to make their new business. This isn’t a decision that should be taken lightly because it will affect various aspects of your enterprise. For example, it will have tax implications. It pays to take the time to understand what your options are and which one would be the best to match the needs of your individual situation.

Types of business entities

Most people looking to start a business are familiar with the most commonly discussed type, a public corporation. In reality, though, public corporations only make up about 5% of all the businesses throughout America. Most businesses are privately held. These range from sole proprietorships and partnerships to LLCs. A business lawyer can assist you with determining the pros and cons of each type of business entity so you can decide which one is right for you.

How to create a privately held corporation?

For many new entrepreneurs, a privately held corporation is their best option. To establish one of these, you’ll need to get the appropriate forms from your Secretary of State’s office or their online website. Throughout this process, you’ll have to register a business name that you want to use and create bylaws for your corporation that outline various procedures, meeting schedules and roles of your board members.

During the formation process, you’ll need to draft a for-profit corporate article stating that all company shares are held privately and are not available to the public. You’ll have to name each one of the shareholders who will be included in your articles of incorporation and what percentage of the shares they own. Once you complete all this paperwork and pay the filing fees with the state, you’ll receive a setup confirmation.

Establishing a new business can be both an exhilarating and daunting experience simultaneously. One of the biggest decisions that you’ll make is what type of structure you want your business to have. When making this decision, it’s a good idea to speak to your lawyer about whether or not a privately held corporation is the right entity for your vision.