Filing Fees:  $125.00

Annual Fees: 1.5% of income, Min. $800

Corporations come with higher annual fees and regulatory obligations than most other business entities, but also offer strong liability shields and the ability to issue stock to employees or investors. Corporations are generally best for small to medium size businesses that plan to expand and need the ability to offer shares in the company to attract capital or other resources. Corporations can also be useful for merging other business entities.

Certain licensed professionals such as lawyers, accountants, architects, and most healthcare professionals are required to form a California Professional Corporation rather than a general Corporation.

Limited Liability Company

Filing Fees:  $90.00

Annual Fees: Min. $800, add'l if income > $250,000

The Limited Liability Company is probably the most popular business entity for most businesses due to its flexibility in formation and membership and its minimal regulatory requirements. It provides a legally distinct entity for holding business assets while also insulating the individual owners from liabilities. However, adding others to the LLC -- as owners or investors -- can be more difficult than in corporations. LLCs are generally best for sole proprietorships or small businesses looking to grow without adding additional ownership members or multiple rounds of investment.

General Partnership

Filing Fees:  None (usually)

Annual Fees:  None

General Partnerships are often created by accident. If two or more individuals engage in a venture for profit, by default they are considered to be in a general partnership under California Law. Both partners share equally in all profits and all liabilities of the business unless a written partnership agreement states otherwise. Because they afford no liability protection, General Partnerships are generally not recommended unless the business is not authorized to form a Limited Liability Company, such as law firms, medical practices, and certain other licensed professionals. A $70.00 fee may apply if the partners need to limit the authority of any other partner to enter into contracts.

Limited Partnership

Filing Fee:  $70.00

Annual Fees:  None

Limited Partnerships are less common organizations formed between two or more people, where at least one partner serves as the general partner and is responsible for managing the business while one or more limited partners act as passive partners with no management responsibility. Limited Partnerships are useful if a party wants to act as an investor or 'silent' partner without any involvement in management. However, if limited partners later participate in some of the business management, they may lose their status as limited partners and face liability as if they were general partners. Generally, Limited Partnerships are not recommended.

Limited Liability Partnership

Filing Fee:  $70.00

Annual Fees:  $800.00

Limited Liability Partnerships are restricted to accountants, lawyers, and architects.  They provide limited liability protection to all partners. Unlike a limited partnership, all partners may participate in management of the business without losing liability protection. LLPs are common among the professionals allowed to form them.