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.

Business Legal Structure - Comparison


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.

 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)
100 (Corporation)
100S (S Corporation)
 Due Dates
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

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The Governor’s Office of Business and Economic Development (GO-Biz) was created by Governor Edmund G. Brown Jr. to serve as California’s single point of contact for economic development and job creation efforts.  GO-Biz partnered with the State's Information Technology Leadership Academy 22 to create this website.

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