Overview: An LLC offers flexibility, liability protection, and pass-through taxation. It’s a popular choice for small-to-medium sized businesses that want a balance of simplicity and protection.

Liability: Members enjoy limited liability protection, meaning personal assets are generally shielded from business debts and legal actions. This makes the LLC a safer option than sole proprietorships for protecting personal wealth.

Key Features: An LLC can have one or more owners (called members). Personal assets are protected from business liabilities. By default, an LLC has pass-through taxation, meaning profits and losses flow directly to members. In California, there is an annual franchise tax of $800. To form an LLC, you must file Articles of Organization (LLC-1) and a Statement of Information (LLC-12).

Tax & Self-Employment: By default, a single-member LLC is taxed like a sole proprietorship, so you pay self-employment tax (about 15.3%) on all business profits. Multi-member LLCs are taxed as partnerships, with members paying self-employment tax on their active share of earnings. LLCs can elect S Corporation taxation, which allows owners to pay themselves a reasonable salary subject to payroll taxes, while remaining profits may be taken as dividends not subject to self-employment tax, potentially reducing overall tax liability.

Tax Example: If your LLC earns $100,000 in profit, you’ll pay personal income tax on that amount based on your tax bracket, and you’ll generally owe self-employment tax on the profits unless you elect S Corp taxation. You will also owe the $800 California franchise tax.

Best For: Freelancers, consultants, contractors, small teams, or anyone wanting liability protection with flexibility.

Disclaimer: All LLCs and Corporations are required by law to maintain a registered agent with a physical address in the state of formation. This agent is responsible for receiving official documents and legal notices on behalf of your business. You may elect yourself as the registered agent if you have a physical address in the state and are available during business hours to receive these documents.

Overview: A C Corporation is a separate legal entity that provides strong liability protection to its shareholders. It allows businesses to raise capital by issuing stock and has a formal management structure with directors and officers. Unlike pass-through entities, a C Corporation is subject to corporate income tax, which can result in double taxation when profits are distributed as dividends.

Liability: Shareholders enjoy limited liability protection, meaning their personal assets are generally protected from business debts and lawsuits. This structure is ideal for companies seeking to separate ownership from management and attract outside investors.

Key Features: C Corporations must file Articles of Incorporation and adhere to corporate formalities such as holding annual meetings and maintaining corporate minutes. Profits are taxed at the corporate level, and dividends distributed to shareholders are taxed again at the individual level. In California, C Corporations are required to pay an annual franchise tax.

Tax Example: If a C Corporation earns $100,000 in profit, the corporation pays corporate income tax on that amount. If dividends are distributed, shareholders pay personal income tax on those dividends, resulting in double taxation.

Best For: Larger businesses planning to raise capital through investors or public offerings, or companies that benefit from a formal corporate structure and separation of ownership and management.

Disclaimer: All LLCs and Corporations are required by law to maintain a registered agent with a physical address in the state of formation. This agent is responsible for receiving official documents and legal notices on behalf of your business. You may elect yourself as the registered agent if you have a physical address in the state and are available during business hours to receive these documents.

Overview: An S Corporation is a tax status that allows profits to pass directly to shareholders, avoiding double taxation. It combines the liability protection of a Corporation with the tax benefits of pass-through taxation.

Liability: Like a C Corporation, an S Corporation provides limited liability protection to its shareholders, shielding personal assets from business debts and legal actions.

Key Features: An S Corporation can have up to 100 shareholders, all of whom must be U.S. persons. Shareholders pay themselves a reasonable salary subject to payroll taxes, and remaining profits can be distributed as dividends, which are not subject to self-employment tax, potentially reducing overall tax liability.

Tax Example: If your S Corporation earns $100,000 in profit, you might pay yourself a $50,000 salary subject to payroll taxes and distribute the remaining $50,000 as dividends. The corporation pays no corporate tax, and you pay personal income tax on the full amount, but you avoid self-employment tax on the dividend portion.

Best For: Owner-operated businesses with consistent profits looking to save on self-employment taxes while maintaining liability protection.

Disclaimer: All LLCs and Corporations are required by law to maintain a registered agent with a physical address in the state of formation. This agent is responsible for receiving official documents and legal notices on behalf of your business. You may elect yourself as the registered agent if you have a physical address in the state and are available during business hours to receive these documents.

Overview: A DBA is a registered name that a business uses which is different from its legal name. It’s not a business entity but a way to brand your sole proprietorship, LLC, or corporation.

Liability: A DBA is not a separate legal entity and does not provide liability protection. The liability depends on the underlying business structure (sole proprietorship, LLC, etc.).

Key Features: - Filed with the county in California - Required if using a different business name - Must be linked to a legal entity (Sole Prop, LLC, Corp) - Often requires publication in a local newspaper

Cost Example: Typical filing fee: $60–$100, plus newspaper publication costs if required (~$40–$150)

Best For: Anyone who wants to operate under a name other than their personal or entity name.

Overview: The simplest business type, automatically formed when you start operating under your own name without registering a formal entity.

Liability: There is no separation between the owner and the business, so the owner is personally liable for all business debts and legal obligations. Personal assets like your home and savings are at risk.

Key Features: - Owned by one individual - No liability protection (personal assets at risk) - No state registration required - Taxed as personal income - May still need a business license or DBA

Tax Example: If you earn $100,000: - You’ll pay income tax on the full amount - Subject to 15.3% self-employment tax (~$15,300) - No business-level tax, but no protection either

Best For: Freelancers, artists, and side hustlers starting small and looking for minimal costs and complexity.

Overview: An ITIN is a tax processing number issued by the IRS to individuals who are not eligible for a Social Security Number (SSN), but still need to comply with U.S. tax laws. It’s essential for many foreign nationals conducting business or earning income in the U.S.

Liability: An ITIN does not confer any liability protection; it is solely a tax processing number.

Who Needs an ITIN:

Foreign nationals forming a U.S. LLC or Corporation

Non-U.S. residents receiving income from U.S. sources

Spouses or dependents of U.S. citizens/residents

Foreign investors needing to file taxes or apply for an EIN

Key Features:

Issued using IRS Form W-7

Used to file U.S. tax returns and apply for EINs

Required to open U.S. business bank accounts in some cases

Does not provide work authorization or immigration status

Tax Consideration Example: If a foreign individual forms an LLC in California and earns $100,000:

An ITIN is required to file a U.S. tax return

The individual will be taxed as a non-resident, subject to federal and possibly State income tax (depending on nexus)

Income is reported under the ITIN instead of an SSN

Best For: International entrepreneurs, business owners, and investors who need to legally conduct business and pay taxes in the U.S.