This is not a substitute for legal or professional advice.
Types of Business Structure
Be sure to carefully compare the different types of structures before making your decision as there are advantages and disadvantages to each type, depending on your situation. The Business Entity Comparison Table can show you a simple comparison, or you can find more detailed information from the US Small Business Administration (SBA). You should also consider consulting an attorney for legal and tax advice.
Once you choose your business structure, you may register your business with the City. However, if you chose a corporation, or limited liability company (LLC) as your business structure you must register or incorporate with the CA Secretary of State first.
NOTE: Legal business entities (Corporations and LLC's) are required to pay an annual minimum tax of $800 to the California Franchise Tax Board no matter how much income they bring in.
A sole proprietorship is the most basic type of business to establish. You alone own the company and are responsible for its assets and liabilities.
In a general partnership, two or more people share ownership of a single business. The partners manage the business and are responsible for all debts and obligations of the business. The details of this agreement should be written out formally to define the roles of each partner, including what would happen if the business fails.
Limited Partnership (LP) and Limited Liability Partnership (LLP)
Limited Partnerships have both limited and general partners. The general partners own and operate the business, while the limited partners invest in the business but have limited liability and thus limited input in its management. Limited liability partnerships are similar to an LP, but in an LLP even the general partners have limited liability – eg. they are not responsible for the malpractice of the other partners.These business types are not usually used for retail or service businesses.
Limited Liability Company (LLC)
An LLC is a hybrid between a corporation and a partnership. Similar to a C-Corporation, business owners in an LLC are not responsible for the debt of the company – in other words, they have limited liability. However, unlike a corporation, the business does not file separate taxes. Instead, each partner (called members) includes their profits on their personal tax return.
A C-Corporation (C-Corp) is more complex than other business types and is generally suggested for larger, established companies with multiple employees. It is a separate entity from those who own it, meaning it can be taxed (or sued) independently from its owners. In a C-Corp, the owners are called shareholders. They elect a board of directors to oversee major policies and decisions, and appoint officers who carry out the daily operations of the business.
An S-Corporation (S-Corp) is similar to a C-Corporation except that the business is not taxed separately from the owners. S-Corps are also very similar to Limited Liability Companies (LLC’s) but with more limitations. The owners, called shareholders, avoid the double taxation of a C-Corp but the business is limited to 100 shareholders and has only one class of stock.
A B-Corporation (Benefit Corporation or B-Corp) is a new business form in the United States that both generates money for its shareholders and benefits society. Directors are required to consider the effect of decisions on shareholders as well as workers, the community, and the environment. Shareholders in a benefit corporation determine if the company has achieved a material positive impact, which the organization defines beforehand.
B-Corps can also become Certified B Corporations if they meet the requirements of the nonprofit organization B Lab.
This table provides an at-a-glance reference to how the most common business entity types — sole proprietorship, general partnership, C corporation, S corporation, and LLC — compare in a number of key characteristics.
B Lab provides a framework and certification for companies wishing to benefit society as well as their shareholders.
The San Francisco SBA offers workshops that cover a wide range of topics such as bookkeeping, business law basics, how to start a restaurant, using social media to market your business, etc. Click on the link and enter 94105 in the zip code to search for local workshops.
A nonprofit organization that provides small business classes and workshops to women and men throughout the Bay Area. They also have a business incubator and provide guidance on finance options. The Renaissance Entrepreneurship Center offers comprehensive small business training and support services for entrepreneurs at every stage of their business development, from start-up to sustainability and growth. Services include intensive training classes on business planning, skill building and industry specific workshops, financial education, access to capital, IDAs, one-on-one technical assistance, technology training, a women’s business center, fashion industry network, graduate services, and a small business incubator program.
SCORE can help further your success whether you are trying to start a business or grow an existing one. Our professionals bring years of real world experience to offer you free, confidential business counseling in person, over email, or web conference.
The Small Business and Self-Employed Tax Center (SB/SE) is an informational site that serves self-employed taxpayers and small businesses with assets under $10 million. They also offer webinars and workshops.
The Small Business Center on the fourth floor of the SF Library Main Branch strives to meet the needs of the entrepreneur by providing materials on how to plan, finance, organize, operate and market a small business. The Center also has demographic data on San Francisco.
Nolo, formerly known as Nolo Press, is a Bay Area publisher that produces do-it-yourself legal books and software that reduce the need for people to hire lawyers for simple legal matters.
The Lawyers’ Committee for Civil Rights provides legal services for entrepreneurs to low-income individuals (including women and people of color) who want to start or develop for-profit businesses, and certain for-profit businesses committed to community economic development.
This guide was created by the California Franchise Tax Board to help business owners file their corporation's first Form 100, 1002, or 100-ES. It will help you understand the basis of the tax, request forms and instructions, file tax returns correctly, and avoid unnecessary penalties and interest.