Legal Question in Business Law in California

I can't imagine why you would want to incorporate a $7,000/year business. Perhaps you should ask him more why he recommends it and repost your question with more information.

If you have insurance that covers potential liability to others from what you do, that seems to me to take away the main reason for incorporating (shelter from liability). Not only would it cost you $$$ to form the corporation, there is an $800 a year minimum franchise tax.

Generally corporations are established to protect the personal assets of the business owner along with taking advantage of certain tax advantages and especially as they pertain to fringe benefits. However, with a $7,000/year business, establishing a corporation could be more of a expense and a hassle than it is worth, because running a corporation requires you to closely follow certain corporate formalities.

My colleague above is correct, you should speak with your manager and ask why he recommends you forming a corporation. If it turns out that the main reason for establishing a corp. is for liability protection, you should considering forming an LLC as one alternative, as they are generally less of a hassle to maintain and could be cheaper.

Disclaimer: This communication does not create an attorney-client relationship and such a relationship can only be formed through a signed written agreement. This communication is not legal advice and should not be solely relied upon in making your legal decisions. Any situation depends on many different facts and specific laws that require an in-depth legal consultation to evaluate the best solution for your needs.

Didn't you post this question before?

The other attorneys are right on point. Setting up a legal entity like a corporation or LLC if there's just $7,000 income a year doesn't make any sense - at least for now. Using a DBA, coupled with good insurance coverage is a smarter way to go. Consult with a good business attorney in your area for specific advice.

Kevin B. Murphy, B.S., M.B.A., J.D. - Mr. Franchise

Franchise Attorney

And don't get fooled by the "liability protection" angle from a corporation -- in this instance, it would provide you with ZERO liability protection. You are always liable for your own actions. It's the actions of others that a corporation protects the owners from. So, if you had an MMA club with other fighters, a corporate entity would protect you, the owner, from personal liability for the actions of your other fighters/employees.