The experienced Los Angeles business entity formation attorneys at Simantob Law Group assist clients with all the steps involved in forming a business entity in California. If you are in the process of opening a new business in California or simply in the conception process, it is beneficial to consult a business entity formation attorney in California who can guide you.
Trying to determine which type of business entity is best for your business can be complicated without the guidance of a seasoned business formation attorney who can explain tax and the implications of each business structure.
Our business entity formation attorneys routinely advise clients on business entity selection and related tax issues in relation to:
Once the entity type is determined, our Los Angeles business entity formation attorneys assist clients with entity formation:
In a sole proprietorship an individual conducts business personally (with no co-owners) and without the use of an entity. No registration is required with any governmental agency, except filings to obtain a business license and a fictitious business name also known as a DBA (“doing business as”). In a sole proprietorship, the owner has unlimited personal liability for the debts and obligations of the business. The owner has no anonymity as the business will be operated under his or her name or a DBA in which the owner’s name is public record.
For prevention of personal liability for the debts and obligations of the business, we counsel clients on alternatives to sole proprietorships, namely forming a corporation (S or C) or a limited liability company (single member LLC).
A limited liability company (LLCs) is a non-corporate business entity with one or more owners, namely Members. The Members generally do not have personal liability for the debts and obligations of the limited liability company. An LLC eliminates the double taxation of a C corporation as tax is levied only at a single level. An LLC has the tax attributes of a partnership and is not subject to federal or California income tax.
The names of members of an LLC are not a matter of public record unless the Members serve as Managers of the entity (the names of the Managers of an LLC are public record). The management of an LLC is vested in one or more Managers or all LLC Members. LLCs may not be formed to render professional services.
A corporation is an entity in which the owners, namely shareholders, are generally not liable for the corporation’s debt and obligations by reason of their status as shareholders. The names of shareholders of an entity are not public record but names of officers and directors of the corporation are public record. The directors of a corporation appointed by its shareholders address corporate governance and set policy for the corporation. The officers of a corporation elected by the board of directors of a corporation manage the day-to-day affairs of a corporation.
The net income of a C corporation is taxed twice: (i) the net income of a C corporation is taxable by the federal and state governments at corporate tax rates; and (ii) upon distribution of dividends to its shareholders, the shareholders report the dividends received as income and pay federal and state income taxes on the dividend.
To avoid the double taxation of a C Corporation, shareholders of a corporation may elect for the corporation to be taxed under IRC subchapter S (“S corporation” or “S corp.”), An S corporation’s net income, losses, and tax credits are for California and federal tax purposes “passed through” to the corporation’s shareholders, without being taxed at the corporate level.
An S Corporation needs to meet certain requirements. An S Corporation cannot have more than 100 shareholders. Its shareholders must be individuals who are United States citizens or legal US residents or must be a certain type of trust or estate. In addition, an S Corporation must have only one class of stock.
Statutory close corporations are corporations in which corporate statuary procedural formalities are modified through a shareholders’ agreement. In a statutory close corporation, shareholders may design their own corporate governance regime, including a waiver of mandatory meetings of the board of directors and provide for general participation by most or all shareholders in decision making. A close corporation may not have more than 35 shareholders of record.
Professional corporations limit ownership to certain licensed professionals, including but not limited to attorneys, accountants, architects, dentists, nurses, chiropractors and psychologists.
In California, the association of two or more individuals or entities can be serve the basis for a general partnership, a limited partnership or a limited liability partnership.
A general partnership is an association of two or more individuals, corporations, business trusts, estates, trusts, partnerships, limited partnerships, LLCs, associations, joint ventures as co-owners of a business. The general partners are personally liable, jointly and severally, for all debts and obligations of the partnership. The names of general partners are of public record if a statement of partnership authority or a fictitious business name application is recorded. General partnerships are managed by the partners. A general partnership is not subject to federal income tax or to California income or franchise tax. The partnership’s net income and losses are reported on the partnership’s tax return. Thereafter, the percentage of income and loss allocated to each partner is reported on each individual partner’s personal income tax return.
A limited partnership is a partnership formed by two or more persons or entities which has (a) one or more general partners and (b) one or more limited partners.
General partners engage actively in the management and control of the partnership business and have unlimited joint and several personal liability for the partnership’s debts and obligations. Limited partners do not participate in management and control of the partnership and are not personally liable for the partnership’s debts and obligations.
The names of general partners are a matter of public record as they appear on the certificate of limited partnership filed with the California Secretary of State. A limited partnership, like a general partnership, is not subject to federal or state income tax at the entity level (unless it elects to be taxed as a corporation).
Individuals, partnerships, limited partnerships, trusts, estates, associations, corporations, LLCs, or other entities may form a limited partnership.
Limited Liability Partnerships (LLPs) are authorized in California for architects, engineers, surveyors, lawyers and accountants. After January 1, 2026 the authority to form LLPs is solely for lawyers and accountants.
Provided the statutory requirements are met, partners of an LLP are not liable for the debts and obligations of an LLP. The names of partners of an LLP are a matter of public record and the LLP is managed by its partners. An LLP is treated as a partnership for federal and California income tax purposes.
If you are considering forming a business entity in the State of California, contact Simantob Law Group today at (310) 281-0041 to speak to one of our seasoned business entity formation attorneys who can assist you with your business entity formation needs in California.