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Welcome to this video on the Types of Business Organization or Business Ownership in California,

presented by StartingYourBusiness.com.

This video is a part of our series of videos on starting a business in California.

Choosing the way your business is legally organized and structured is a fundamental

step of starting a business and one to start thinking about early because it impacts the

process of naming the business, applying for licenses and permits, and how the business

is taxed.

The business organization is simply the legal framework of an entity that is engaged in

commercial activity.

There are four primary types of business organization that a small business owner will choose from

which include the sole proprietorship, partnership, corporation or LLC.

Each entity has its own set of pros and cons and each has some considerations that may

make one better than another for you and your business.

The considerations include the cost of forming the entity, liability protection, ability

to get investment, tax burden, administrative requirements and the complexity of formation.

It can be a little overwhelming and confusing to pick the perfect entity for your business,

but keep in mind, that the entity you choose today does not have to be a forever decision

as you can change to a different entity later on.

The first entity that we will cover is also the most simple, which is the sole proprietorship.

The sole proprietorship is basically an individual who decides to go into business for themselves.

There is no separate legal entity as the business is tied to an individual, making the business

and the individual the same legally.

Since there is no state filing for the sole proprietorship, a major pro for this entity

is that it is fast, easy and inexpensive to form.

There is no sharing ownership, which means there is no board of directors or shareholders

to be responsible to and the taxation is relatively simple as the profits or losses flow to the

owner's personal tax return.

While there are several upsides to the sole proprietorship there are several downsides

and the biggest is unlimited liability and here's why.

Since the business and the owner are considered the same legally, should the business get

sued, the owner's personal assets are potentially at risk.

The risk of being a sole proprietorship really goes up if the owner has significant personal

assets or has employees who could cause the business to get sued.

There is also limited access to capital.

This just means that unlike the partnership, corporation or LLC, there aren't other people

that you can have invest in the business.

Last, the sole proprietorship has a limited life, so if the owner passes away or decides

to get out of business, that business essentially ceases to exist.

This isn't a major concern for many businesses, but if there are contracts or licenses that

the business relies on, the sole proprietorship may not be the best choice.

Forming a sole proprietorship is pretty simple.

Since there is no official state filing, you can decide to go into business right away

as a sole proprietorship and be in business.

We will cover other details for starting a sole proprietorship in later videos and at

StartingYourBusiness.com that may have to be done like registering a business name and

applying for licenses and tax numbers.

The next entity is the partnership, which is a business owned by two or more individuals.

The partnership is very similar to the sole proprietorship in that there is no legal entity

and the owners have unlimited liability.

The good things about the partnership are that it is easy, fast and inexpensive to set

up with no filing or fees to set up with the state.

There are also more people involved which means there is more talent and funds to put

into the business.

Like the sole proprietorship there are significant downsides with the primary one being unlimited

liability, but this time, if one partner makes a bad business decision, every other partner's

personal assets are at risk, making the partnership riskier than the sole proprietorship.

Another partnership con includes sharing of control.

Since partnerships are usually informal and very little is in writing, disagreements can

occur that can be devastating to the business.

A partnership can also be difficult to get out of, should the remaining partner not be

willing to buy out the departing partner.

Just like the sole proprietorship there is no official filing for a partnership with

the state.

We will cover some of the other possible requirements that a new partnership may need to do in later

videos and at StartingYourBusiness.com.

The corporation is the third of the four business entities and is completely different from

the sole proprietorship or partnership because now we have a legal entity that is separate

from the owners.

While the corporation sounds like it is something for a large business, it is really just a

filing with the California Secretary of State.

Corporations can be owned by a single owner or multiple owners.

The corporation has several pros, especially now that it is a distinct legal entity and

the owner's personal assets are separate from the businesses assets.

While the corporation has this liability protection to protect the owners should the business

get sued, some people confuse liability protection for bankruptcy protection.

While it potentially could protect an owner from a vendor trying to get at assets in the

event of bankruptcy, if the business were to try and get a loan, the bank will typically

require any person owning 20 percent or more of the corporation to provide a personal guarantee

that the individual will pay the loan back.

Another pro is that the corporation has unlimited life which could be useful in situations where

there are key contracts or licenses held by the business as the business can essentially

live forever, provided the owners transfer stock and keep paying the state corporation

fee.

The corporation can also sell shares of the business and raise money to potential investors

instead of relying only on debt like a sole proprietorship or partnership.

There are a few downsides of the corporation which include the cost of formation and increased

administration.

The corporation costs between $100 to form in California in addition to a minimum annual

tax of $800.

In addition, there are a number of administrative duties such as an initial board of directors

meeting, shareholders meeting, taking minutes at the meeting, issuing stock certificates

and writing the bylaws.

There are three ways to form a corporation in California.

One, you can do it yourself.

On the California Secretary of State's website, you will fill out and file the Articles of

Incorporation.

Since there are a number of administrative duties that need to be done right, if you

plan to do it yourself, be sure to do your research before filing.

Second you can hire online companies that specialize with forming business entities.

Startingyourbusiness.com has a list of companies that provide this service.

What's nice with these services is that in addition to making sure all of the legalities

of forming the corporation are covered they also send alerts whenever reports are due,

so you have one less thing to try and remember.

The one-time fees for these services usually start around $50-$150 plus the state fees.

Last you can hire an attorney.

This is going to be the most personalized service, but also the costliest.

You will want to go this route if your assets are substantial or want to work one-on-one

with someone to form the corporation.

Expect to spend a minimum of $500-$1,000 for a simple corporation.

The last entity that we will talk about is the Limited Liability Company or LLC.

Just like the corporation, the LLC is a legal entity that is separate from its owners and

is a filing with the California Secretary of State's office.

LLCs can be owned by a single owner or multiple owners.

The LLC costs $80 to file the Articles of Organization with the Secretary of State,

plus the $800 annual tax.

The LLC shares all of the pros of the corporation like being a separate legal entity, unlimited

life, and raising investment capital, but with the LLC, you don't have to hold meetings,

take minutes, and so on, making the LLC much easier to run than the corporation.

There is one potential downside to the LLC which is that every state has its own set

of LLC laws so if you have a California LLC physically doing business in another state,

the LLC may not be the best entity for your business.

The same three ways to form a corporation in California can be used to form an LLC.

Check StartingYourBusiness.com/california a list with the links.

There is a lot to think about before deciding on the right legal entity that best fits your

personal situation and business needs.

At startingyourbusiness.com/california, we provide a free printable comparison guide

with the pros and cons of each entity to help you compare them all.

If you liked this video on the Types of Business Organization in California, please click to

like it and be sure to watch the others in the starting a business in California series.

The StartingYourBusiness.com website has a lot more information to help you in your entrepreneurial

journey and is a completely free resource for small businesses getting started.

Along with the information on the website, we have experienced business advisors ready

to talk with you to help navigate through this process.

There is no cost or catch to use this service either, so check us out at StartingYourBusiness.com

to help get your business started!

For more infomation >> Types of Business Organization in California - How to Start a Business in California - Duration: 9:41.

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California Tried to Seize Millions of This Inventor's Fortune. He Fought Back. And Won. - Duration: 7:07.

In the early 1990s, California tax authorities traveled to Las Vegas

in pursuit of businessman Gilbert Hyatt.

They staked out his home, dug through his trash

and hired a private eye to look into his past.

They were after a piece of his fortune.

Never make a deal with an extortionist.

They don't view themselves as public servants, they view themselves as bounty hunters.

It's a story of greed, harassment, anti-semitism and the abuse of power.

This isn't the first time the tax agency has strong-armed a citizen,

but what's so unusual about Gilbert Hyatt is that he fought back.

I've waited 20 years for this.

Gilbert Hyatt made his fortune as the patent holder of the microcomputer

a predecessor of the microprocessor.

Hyatt was a resident of Orange County California but in 1991 he packed up

and relocated to Las Vegas.

The following year he was contacted by the California Franchise Tax Board.

But I didn't realize that it was going to be trouble,

because I had moved, I had sold my house,

I had, I was living in an apartment and then I bought a house in Las Vegas,

and I was very well settled.

An agent of the Franchise Tax Board had read an article

about the potential billions of dollars in royalties pouring in

as electronics companies like Phillips and Sony started licensing Hyatt's technology.

He decided to investigate.

The tax agents concluded that his move was a sham

and that he owed them more than 13 million dollars in taxes, fees and interest penalties.

They would not agree that I became a Nevada resident until I moved into my house

which was essentially the absurd position that you have to buy a house and move into it

in order to change residence.

Which is not the law.

Some companies have already said goodbye to California-

254 companies of all sizes-

Many of them are simply moving out of California to-

-announced it will move it's national headquarters and thousands of jobs to the lone star state

California's marginal income tax rates are the nation's highest

which drives many wealthy residents to pack up and leave.

Hyatt says he moved to Las Vegas because Casino billionaire Sheldon Adelson

who had dreams of creating a silicon valley in sin city lured him there.

No matter the reason, California didn't want to let him go.

It's mostly the attitude of many of the bureaucrats in the Franchise Tax Board,

they don't view themselves as public servants

they view themselves as bounty hunters,

and going out and getting as much tax dollars as possible.

John Coupal is the head of the Howard Jarvis Taxpayers Association in California,

he says that California's tax agency is one of the most aggressive in the nation.

California is often desperate for revenue to cover it's out of control spending.

In 1993, when tax agents began auditing Hyatt,

California faced a budgeting deficit of 3.8 billion dollars, the largest in the nation.

The Franchise Tax Board itself faced huge cuts and even possible elimination.

There's many systemic problems with the inability to process tax returns quickly.

Their abusive investigatory tactics, Gill Hyatt was an example of this.

The agency can do whatever they want and they have the staff and the experience to do so,

they are judge, jury and executioner.

Shortly after the Tax Board opened it's audit an agent called Hyatt's lawyers

and advised him that most people just settle,

because wealthy or well known taxpayers

do not want to risk having their personal financial information made public.

The Franchise Tax Board believed that I was paranoid about my privacy

because I was a very private person, I worked very hard to keep my address private,

because I had my research lab there.

And therefore went out of their way to breach my privacy in order to intimidate me.

Hyatt declined to settle and appealed.

The tax agency hired a private eye to interview Hyatt's former California neighbors

22 of whom later testified that he did indeed move away after selling his house.

They also sent letters to his friends, former colleagues and even his Rabbi.

I was shocked by those letters that they were sending out for several reasons

first of all, you look at it and it looks like a criminal investigation,

second of all it tells all of my personal relationships,

businesses, entities, friends, my Rabbis

that I'm in trouble with the Franchise Tax Board,

and third of all it had my social security number on it

which is supposed to be private.

Two agents road tripped to Las Vegas, staked out Hyatts new house, rifled through his trash,

and even took what a whistleblower later described as a trophy photo of his home.

This same whistleblower testified that her colleague, an agent named Sheila Cox,

vowed to "get that Jew bastard."

I was horrified when I learned that she was a racist who had targeted me for my religion.

Hyatt ended up fighting a 25 year court battle spending more than 10 million dollars.

The state of California spent more than 25 million dollars in the fight,

according tot he tax agency spokesman.

It all came down to a hearing before the Board of Equalization this August.

Although he has a professional legal team, Hyatt decided to speak for himself.

I've waited 20 years for this.

The board ruled in Hyatt's favor,

though it did conclude that he continued to operate portions of his business out of California

during the disputed 6 month period.

For this, he was ordered to pay 1.9 million dollars

out of the approximately 55 million the tax agency claimed he owed

in taxes, interest and penalties.

And the board confirmed that he was indeed a Nevada resident during this time.

Hyatt also sued the Franchise Tax Board for fraud and harassment

and a Nevada jury awarded him a 388 million dollar judgement

that was ultimately reduced to 50 thousand dollars because of a statutory cap

on the amount state agencies can be held liable for their conduct.

Somebody has got to stand up against them.

Power will corrupt and as the cliche is, the power to tax is the power to destroy.

For more infomation >> California Tried to Seize Millions of This Inventor's Fortune. He Fought Back. And Won. - Duration: 7:07.

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Grassroots Bcn Warriors, la crew en Europa de Grassroots California - Duration: 14:03.

- Hi welcome again to UndergrowTv, we're at Edu's home, Grassroots Europe representative.

- And we're going to get into his family and explain you all news, as get into

- their variety because it's a great line of caps, but other things. Let's know them.

- Hi family Undergrow, i'm Edgar, Mapuche Sound, official Grassroots Europe dj. Hi i'm

- Harry aka as lighter customizer and i'm part of Grassroots Bcn Warriors. I'm Edu aka Blue eyes

- because i love extractions without solvents and i'm manager of Grassroots Bcn Warriors and

- Grassroots Europe representative. Let's get in Grassroots world... Everyone must have the same doubt.

- Edu tell us about Grassroots Bcn Warriors. Well we've been working as a team during more than 2 years...

- Everyone of us is recognised in cannabic world by our carreer and our work... And we wanted to

- an identity to all of it. Grassroots Bcn Warriors because we go to

- all the events, we're always the first arriving and the last leaving, we always try to pull up the party with

- Mapuche Sound, our official dj, artisan works by Lighter Customizer... Wood lighters...

- And Grassroots philosophy... Fun, good vibes, the best caps of the world... Mapuche tell us...

- Experiences as official dj... Great and intense travels with Grassroots... I know almost all peninsule,

- we've travelled all around the country promoting the brand in a lot of events... Thanks to Larry and Edu,

- always at the best clubs, the best events, cannabic cups... All cannabis sector. We've flight high

- like to Seville, where we were with UndergrowTv... Super cool. We've enjoyed a lot.

- Nice experience, family work with high efforts. Grassroots is a different thinking style...

- We're the best caps of the world but we do this with music, with art, with ganja... Always on action.

- My job in Grassroots is manage the infrastructure, make everything work, take care of the good vibes,

- and i do my own artisan customized lighters... I work with wood, i make blowtorches... I love

- the art and i love to motivate all artists... We're always opened to collaborate with all of them... We love to stay

- always in movement and when we aren't on the big events, we're at Bcn's clubs doing events...

- We love to collaborate with them, big and small... La calada, Originals, Nectar Boys,

- and a lot of clubs... Weed Flowers Guinardó... We love to stay there with Mapuche, the best sounds, the

- best smoke... Enjoying bcn's ambient. We take our philosphy and our good vibes everywhere we go.

- Any club who wants us there showing our caps and listening to Mapuche Sound, we're opened to contact,

- and the history is about enjoy, have a good time, show our products, listen to good music and smoke weed.

- Inside their great line of products, the main product are caps, but we're going to show a few others.

- Inside caps, we can see a few different work lines, like customized. We did UndergrowTv cap, and it's an

- unforgettable experience. All brands who want this kind of cap, only contact with them.

- There are a few different work lines in Grassroots. We started with caps and caps are our main product,

- but we've got all kind of products from pins, clothes, jackets... Inside Grassroots, we've got 3

- basic work lines. The first one is Grassroots, where we do our own style of designs.

- The second line is a collaboration line with other artists. Awesome designs

- by these artists to express it on the caps. The third line is customize with companies, like we did

- for All Hunters, an exclusive cap we'll introduce next week in Spannabis Madrid.

- Exclusive Seeds cap, and Limited Edition of Spannabis Madrid cap in exclusive

- introducing this cap in UndergrowTv. A cannabis cap with Madrid's skyline on the side,

- also the skyline in... Exclusive desing. We want to ramain that Spannabis Bcn cap sold out in 1 day,

- people tried to get their own... But as you know we don't repite sold out caps, but you have the chance to

- have a Spannabis cap so we'll be waiting for you in our stand in Madrid. Run.

- As we always say, customization is 100% free. We are the only brand that can say customization has no limit.

- It means that you choose form, materials, visor form,

- internal parts with the design you want, secret pocket... Caps are our star product but as you can see

- we make clothes too, collaborating with cannabic and not cannabic artists. Limited edition high quality

- clothes, all with a secret pocket too... This shirt is a collaboration with

- blower Borges... In collaboration with Chris Dyer, we've got this sweatshirt, with its secret pocket

- in this patch... Always with this philosophy... We need those secret spaces.

- We've got a big limited edition line of pins, we use to make between 150 and 200 unities of every pin,

- some of them collaborations with different artists... Other products are those silicion rugs for pipes, like an

- anti pipe slider, with exclusive designs... Customized pipes for Grassroots, in collaboration with different

- artists of glass blowing... In this case with american blower Pyrology Glass. Other rugs

- in collaboration with Chris... Following a crazy pattern philosophy all in limited edition pieces.

- Focusing in caps, i'm going to talk you about a peculiar detail, because i like trucker caps, with curvy visor,

- I don't like plains a lot and i see the most part of Grassroots are this kind, but ther is no problem

- because you can fold them for your own adapting it perfectly for everyone.

- They've made a new line directly focused on curvy visor. Well... A lot of people

- were Grassroots followers but they had not Grassroots caps, or if they had, they were more exposing it at home

- than wearing it. The main motive was the visor, because it was too big or too plain, and some people

- doesn't like it so we've done a new line called Daddy Hats... These kind of curved visor baseball caps.

- The same philosophy... Design in and out, secret pocket, and limited edition until 150 uds.

- I've seen a really special one Edu that i would like to know something more about it.

- Inside Grassroots mad, because Grassroots has a lot of crazy desings, we're starting to make really exclusive

- caps... I mean really worked caps, stitched everywhere, as you can see...

- Golden thread... Inside too... Secret pocket, internal design...

- I don't know if you can see this but the image of the visor changes... There are 2 images.

- It's like an hologram... Limited edition with 80€ prize,

- trully this quality deserves it. Collection caps... Pieces of art. We know that we've got exclusive products like this

- 80€ cap and not everyone can access to that, but we have 50,40 and 30€ caps too,

- 10€ pins... Everyone who want a Grassroots product, can get it. Grassroots is more than a caps brand

- It's a life style... This is a team... A crew. We love people's support

- being in this prize range... Everybody is able access to our products.

- We're always opened to make bussiness to grant people access to our product, and always with our

- peace love respect philosophy. Our web is www.grassrootscalifornia.com

- You can access to all Grassroots products there, you buy to USA so your order will arrive from USA,

- we had a shop in Bcn, a pop up store we started as a 3 months project but was more than 1 year opened,

- great experience. We are in all cannabic events, the next week we'll be at Spannabis Madrid, the

- next month we go to Menorca to cannabis cup, you can check our Grassroots Europe facebook and

- instagram and you can follow our movements there, or send a mail to edu@grassrootscalifornia.com

- to contact with me to ask for a cap, customization or any kind of doubts. A pleasure to be here with you

- the next stop is at Spannabis Madrid. Grassroots stand at 146. We'll be waiting for you... Fire.