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 StructureSole ProprietorshipGeneral PartnershipLimited PartnershipLimited Liability PartnershipC CorporationS CorporationLimited 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)ShareholdersShareholdersMembers
Who Makes Management Decisions?Sole Proprietor has full control of management and operations Each partner, unless otherwise arrangedGeneral Partner(s) only (not limited partners, unless they serve on the board)All partners have the right to manage business directlyManaged by board of directors elected by shareholdersManaged by board of directors elected by shareholdersOrdinarily members; or managers if manager - managed LLC
Entity Formation RequirementCalifornia Secretary of State NO state filing requirementCalifornia Secretary of State filing is optionalCalifornia 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 DebtsSole Proprietor personally liable Partners have unlimited liabilityEach general partner has unlimited liabilityPartners are not responsible for the debts of LLPNo personal liability of shareholdersNo personal liability of shareholdersLiability 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 agreementDependent on requirements imposed by state of formationNo effect, unless corporation is solely ownedNo effect, unless corporation is solely ownedDependent on the requirements imposed by the State of formation
TaxationNot a taxable entity, sole proprietor pays all taxesEach partner pays tax on share of income and can deduct losses against other sources of incomeFiles taxes as separate entity, must meet certain criteria to avoid being taxed as a corporationFiles taxes as a separate entity, must meet certain criteria to avoid being taxed as a corporationTaxed at the entity level, taxed at corporate rates and individual tax rates of shareholders Income/loss passed through to shareholdersCan be taxed as a corporation Income/loss is passed through members
Franchise Tax None
None
Annual Tax $800Annual Tax $800Minimum Franchise Tax $800 Minimum Franchise Tax $800 Minimum Tax $800
FTB Tax Forms
540
565 565 565 100100S568 (Single Member/Partnership)
100 (Corporation)
100S (S Corporation)
Due Dates
(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 Month15th Day of the 4th Month15th Day of the 4th Month15th Day of the 3th Month 15th Day of the 3th Month 15th Day of the 4th Month

About Us

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.