Jump To Navigation

Search Here:

San Diego Business Organizations Law Blog

Is an LLC a true hybrid between partnerships and corporations?

Although it may not be appropriate for all startups, a limited liability company has become a popular option in California. Certain industries, in particular, have embraced the LLC option, including real estate, joint ventures between corporations or with foreign partners, venture capital, petroleum production, as well as theatrical investors. Let’s take a closer look at this business formation choice.

Some might characterize an LLC as a hybrid between a partnership and a corporation. For example, an LLC does not have to be taxed twice, like a corporation. Instead, its owners can elect for the income from the LLC to be taxed like a partnership. In terms of liability, however, an LLC offers the protections more traditionally associated with a corporation. 

If a bad fit, can the wrong entity selection be a costly mistake?

For many, experience is one of the best teachers. Yet can a startup business afford the luxury of a trial-and-error approach? Chances are that funds are tight when starting a new business. For that reason, it is extremely important to select a legal structure, or business organizational type, that suits the needs of the owners and their unique business model.

Entity formation may also affect tax obligations, paperwork duties, fundraising parameters and the individual liability of owners. Let’s compare four common choices: sole proprietorship, partnership, corporation and limited liability company.

Do state officials recommend that start-ups seek legal advice?

Is it a good idea to consult with legal counsel when forming a small business? Our law firm focuses on business entities and formation needs, and we know that up-front legal advice can save time and money later on.

Notably, we’re not the only ones who share that opinion. The website of the California Secretary of State includes a section on business formation issues. That webpage recommends that business start-ups seek legal counsel before filing their formation documents. The webpage also notes that many filings are returned for corrections, sometimes for simple omissions or misstatements. 

What factors affect the health of a small California business?

According to a recent ranking, one of California’s metro areas may be the best in the country for small businesses. Admittedly, Silicon Valley has a national reputation for tech startups. However, it can also be expensive to do business there. Perhaps for that reason, the Riverside-San Bernardino area east of Lost Angeles emerged at the top of the list. San Jose also made the top 20.

What factors contribute to a favorable environment for small businesses? The ranking examined tax data, local costs, the skill level of the local workforce, average annual revenues and credit scores, as well as the median age of existing small businesses. 

Is corporate structure easier for interstate commerce?

In our last post, we questioned whether e-commerce might change the business organizational models for new startups. Today’s discussion highlights the challenges facing a new player in that arena.

Specifically, the business is PillPack, an online medication delivery service. The company originated in New Hampshire but is now available in 47 American states. California is the most recent state to allow consumers to order their products from the startup. Notably, availability may include both over-the-counter and prescription medications, as well as vitamins. 

Will e-commerce change business organizations?

As consumers and businesses increasingly conduct their commerce online, will new startups pursue new business organization structures? A recent article provides context.

The startup in this case is called OhmConnect, and its product is an app that may help consumers conserve energy and save on their utility bills. The startup claims that its customers might see a reduction in their bills by as much as $50 to $150 in a year. They’ve also received a notable endorsement: the “killer idea” app distinction at an energy data competition put on by the U.S. Department of Energy.

What Structure Is Best For A Foreigner Starting A U.S. Business?

Taking advantage of the investment and business opportunities that exist in the United States is a tempting prospect for many entrepreneurs and business owners from other countries. Making the most of any money that you put into the United States requires careful planning and thoughtful analysis of the most effective means for achieving your goals.

In many instances, starting a business in the United States may be the best answer to maximize and protect your investment. Dealing with the Internal Revenue Service as a foreign company has potential disadvantages such as delayed communications and a higher likelihood of drawing unnecessary attention to your business's activities in the United States. Advantages of establishing a subsidiary in the United States include the possibility that you may have some degree of control regarding the timing of tax payments among other issues.

Ownership classifications may change over the life of a business

Although the decision about which business entity to select may require months of planning, there may be additional business organization questions to answer down the road.

Take the case of established retail giant Hudson’s Bay Co., for example. The company, which owns stores likes Saks and Lord & Taylor, recently announced it was forming a real estate joint venture. 

Does business organization alter intellectual property ownership?

Even the lessons of experience may not be enough to immunize a new business against litigation. For that reason, a new venture should enlist the skills of a business organizations attorney to thoroughly document the potential liabilities of each owner.

Take the recent example of Sir Richard Branson, founder of the Virgin Group conglomerate. Branson recently launched a new venture, Virgin Cruises. He obtained financial support from a private equity firm and things seemed to be going according to plan. However, the new enterprise is now facing an intellectual property lawsuit from Norwegian Cruise Line’s former chief executive. 

San Diego startups are thriving, according to report

Although entrepreneurs in Silicon Valley may dominate California’s dot-com industry, a recent report indicates that San Diego is home to a thriving start-up community for high-tech companies. 

In the first six months of 2014, San Diego entrepreneurs founded 228 high-tech companies. In terms of venture capital, about $470 million was provided to finance local businesses. According to one commentator, that rate of growth has set a new record for the area. 

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

Subscribe to this blog's feed

Contact Information

Gallagher | Krich, APC
964 5th Avenue, Suite 202
San Diego, CA 92101
Phone: 858-777-2037
Fax: 858-435-4369
San Diego Law Office Map


FindLaw Network