Choose a Business Structure
When starting a business, you must decide which legal structure (business entity) to establish. Your form of business determines your personal liability regarding investments into your business, the amount of paperwork you have to file, and the taxes you have to pay.
View the comparison business Legal Structure table below. For more in depth details of each legal structure including entity features, filing guidelines, and estimated tax and withholding requirements, visit the California Franchise Tax Board.
Business Structure Table
|Legal Structure||Sole Proprietorship||General Partnership||Limited Partnership||Limited Liability Partnership||C Corporation||S Corporation||Limited Liability Company|
|Who Owns?||"One" Individual|
(Note: A husband and wife can be classified as a sole proprietorship)
|General Partners; agreement between two or more parties|
(Note: A business conducted by registered domestic partners must be classified as a partnership)
|General and Limited Partners||In California the use of LLP is limited to specific professional practice types (ie: architects, engineers, land surveyors, lawyers & accountants)||Shareholders||Shareholders||Members
|Who Makes Management Decisions?||Sole Proprietor has full control of management and operations||Each partner, unless otherwise arranged||General Partner(s) only (not limited partners, unless they serve on the board)||All partners have the right to manage business directly||Managed by board of directors elected by shareholders||Managed by board of directors elected by shareholders||Ordinarily members; or managers if manager - managed LLC|
|Entity Formation Requirement||California Secretary of State NO state filing requirement||California Secretary of State filing is optional||California Secretary of State filing required||California Secretary of State filing required||California Secretary of State filing required||California Secretary of State filing required||California Secretary of State filing required|
|Liability of Business Debts||Sole Proprietor personally liable||Partners have unlimited liability||Each general partner has unlimited liability||Partners are not responsible for the debts of LLP||No personal liability of shareholders||No personal liability of shareholders||Liability of Members; limited to their financial investments|
|Duration of Entity Existence (if owner departs)||Dissolved if entity ceases doing business or upon death of sole proprietor||Dissolved automatically unless otherwise stated in partnership agreement||Dissolved automatically unless otherwise stated in partnership agreement||Dependent on requirements imposed by state of formation||No effect, unless corporation is solely owned||No effect, unless corporation is solely owned||Dependent on the requirements imposed by the State of formation|
|Taxation||Not a taxable entity, sole proprietor pays all taxes||Each partner pays tax on share of income and can deduct losses against other sources of income||Files taxes as separate entity, must meet certain criteria to avoid being taxed as a corporation||Files taxes as a separate entity, must meet certain criteria to avoid being taxed as a corporation||Taxed at the entity level, taxed at corporate rates and individual tax rates of shareholders||Income/loss passed through to shareholders||Can be taxed as a corporation Income/loss is passed through members|
|Franchise Tax||None||None||Annual Tax $800||Annual Tax $800||Minimum Franchise Tax $800||Minimum Franchise Tax $800||Minimum Tax $800|
|FTB Tax Forms||540||565||565||565||100||100S||568 (Single Member/Partnership)
100S (S Corporation)
(Note: When the due date falls on a weekend or holiday, the deadline to file and pay without penalty is extended to the next business day.)
|April 15||15th Day of the 4th Month||15th Day of the 4th Month||15th Day of the 4th Month||15th Day of the 3th Month||15th Day of the 3th Month||15th Day of the 4th Month|
The Governor’s Office of Business and Economic Development (GO-Biz) was created by Governor Edmund G. Brown Jr. to serve as the State of California's leader for job growth and economic development efforts. GO-Biz partnered with the State's Information Technology Leadership Academy 22 to create the California Business Portal.