There are a lot of decisions and details involved in starting a business in California. We strive to provide you with the resources and help you need to make an informed decision and to comply with the rules established by the various regulatory agencies.
California recognizes the following entity types:
○ Sole Proprietorship
○ Corporation with S election
○ Corporation without an S Election
○ Limited Liability Company (LLC)
○ General Partnership (GP)
○ Limited Partnership (LP)
○ Limited Liability Partnership (LLP)
Formation: A Sole Proprietorship doing business containing his/her surname does not need to be registered with the city, county or state however if the business does not contain the surname a fictitious business name statement must be registered with the city and/or county clerk. (Google “Fictitious Business Name” and the “county where the business is located” to find more information.)
Liability: The owner can be held personally liable because there is no separation from their personal assets or liabilities.
Taxation: A Sole Proprietorship pays 15.3% Social Security and Medicare tax on net income of which one half of the payment is deductible when calculating the individual federal and state tax returns.
Transferability of Interest: A Sole Proprietorship technically may not be transferred to another person but its assets can.
Maintenance and Fees: Fictious business name statement expires every five years from date filed with the county. Income and Expenses are shown on Schedule C along with net income or loss. Self employment tax are shown on Schedule SE. Both forms are filed with form 1040.
Corporation with S election
Corporation without an S Election
Taxation: A corporation without an S election pays corporate taxes and then the shareholders pay taxes again on any dividends that are distributed to them.
Liability Protection: It can limit the shareholders from personal liability if the corporation complies with certain legal requirements.
Limited Liability Company (LLC)
General Partnership (GP)