How to Form an LLC in California. Before proceeding to the technical step-by-step guide on how to start a small business in California, it is important to have a complete understanding of the two business structures allowed in California: LLC and Corporation. Should people open an LLC in California or create a corporation in California? Firstly, LLC stands for limited liability company, and, as the name implies, the owner(s) is partially protected from debts, bankruptcy and/or other legal obligations. If a person invests in an LLC, any liability will be limited only to the amount of the investment. In any case, interested parties do not need to use their personal wealth as collateral to cover the costs of the company. In addition, LLC offers both efficiency in taxation and flexibility in work. By definition, this is a "pass-through" company. This means that its profits and losses can be indicated in the individual tax return of the owner(s), and not the company. Therefore, it is easier to file a tax return, and the owner(s) can use it to balance their income statement. How to Form an LLC in California https://howtostartanllcincalifornia.com/ LLC members can personally participate in the operation or appoint someone (may not be a member) to resolve all issues. In a sense, an LLC has advantages from both a corporation and a partnership. Moreover, later LLC can be transformed into a corporation. One IBC strongly recommends this type of company to open a small business in California. Unlike LLC, the type of corporation allows you to place shares with the division of ownership of the firm, so One IBC recommends that clients create a corporation in California if they are looking for investors. It is taxed as a completely different person than its owner(s), which makes registration a bit more complicated, but it can help lower the overall tax bill for both parties. In addition, there are two types of corporations: C Corporation (C Corp) and S Corporation (S Corp). C Corp is the default structure, and S Corp is a structure with a special tax status. Their names are taken from the Tax Code: Subsection C and subsection S. S Corp is taxed in the same way as LLC, and has a limit of only one hundred shareholders. For comparison, the life span of a corporation is not limited, while an LLC must determine the specified duration in advance when opening a company in California. Corporations must also hold shareholder meetings with detailed records and reports every year. Any changes or actions in relation to the company's activities must be made after a vote of the Board of Directors.