Legal Question in Business Law in California

Business Type (C, S, LLC or LLP)

I'm planning on starting an online busines and would like to know what's my best option, the business itself will have a total of 2 partners. My main concern is to limit our liability, it will be a service oriented site (like a search engine). Additionally, I'd like the pass-through treatment as far as tax is concerned and the income treatment to be ordinary, which will not require self employement tax. I'd also like to limit an excess cost. I was thinking of starting as a general partnership and then incorporating, but wanted to get the opinion of a professional. I'm a resident of CA but will consider corporating elsewhere if that's an option.


Asked on 10/01/04, 6:57 pm

5 Answers from Attorneys
Larry Rothman Larry Rothman & Associates

Re: Business Type (C, S, LLC or LLP)

A general partnership give you unlimited liability exposure. With just two partners, I suggest a LLP or LLC. A subchapter S corpoaration will offer you the same pass through tax advantage. As a beginning entity, it probably does not make any difference as to LLC, LLP, or subchapter S corporation as your initial income will be low. Please contact us if you have any more questions.

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Answered on 10/02/04, 4:37 pm
Jonas Grant Law Office of Jonas M. Grant, A.P.C.

Re: Business Type (C, S, LLC or LLP)

You are likely better of incorporating or forming an LLC in California, but an in-depth consultation, which is provided only to clients who have retained me, is required to determine this and the answers to the other questions you pose. I agree with the others, however, that a general partnership is unlikely to meet your stated goals.

When you are ready to proceed, please contact me through my website at www.incorporatecalifornia.com Through the end of the year, my flat fee rate for advising on and then forming the entity you describe is $749 (plus state fees) -- rates likely going up in 2005. Thank you.

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Answered on 10/04/04, 2:07 am
Terry A. Nelson Nelson & Lawless

Re: Business Type (C, S, LLC or LLP)

For liability concerns, a partnership is the worst thing you could do. An 'S' corporation offers pass through as you desire. You should have it done correctly by counsel to ensure you understand what you are getting into. You must also consult your tax man for his input on those issues before deciding what form to take.

You also need to consider copyright, trademark and other IP issues for Calif and other states, as well as domain identity protection.

Contact me if interested in getting help.

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Answered on 10/01/04, 7:22 pm
Christopher M. Brainard, Esq. C. M. Brainard & Associates - (310) 266-4115

Re: Business Type (C, S, LLC or LLP)

I help a number of start ups and small business owners. I can provide you the service you need. Contact me.

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Answered on 10/01/04, 7:23 pm
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: Business Type (C, S, LLC or LLP)

First, I would say get the views of your two "partners."

Next, I would advise against using a general partnership. The potential for unintended personal liability is far too great to outweigh the savings by not paying a franchise tax.

Your choice should be between an LLC and a corporation, and once you've incorporated, then you choose "S" status by making an election with the IRS.

The choice between an LLC and an S corp. is a close call and depends upon technicalities that go beyond the scope of a LawGuru question and answer.

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Answered on 10/01/04, 9:53 pm


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