Operating without legal structure exposes your personal assets. The right protection starts with the right documents.
A corporation or LLC creates a legal separation between your personal assets and business debts.
Banks require Articles, Bylaws, and a Banking Resolution to open accounts in the business name.
An S-Corporation can significantly reduce self-employment taxes. Requires IRS Form 2553 election.
Everything ready in 30 minutes. Bilingual PDF included.
An LLC is more flexible and simpler to manage. Our package includes a complete Operating Agreement with all California clauses.
Form my LLC — From $299California is the #1 economy in the United States and the fifth-largest in the world. With over 4.2 million small businesses registered, it is also one of the most heavily regulated states. Every LLC and corporation pays a minimum of $800 per year in Franchise Tax — a cost many Latino entrepreneurs do not anticipate when forming their company. Beyond that base cost, LLCs with gross income over $250,000 pay additional tiered fees, and corporations pay 8.84% on net income (C-Corp) or 1.5% (S-Corp).
Under Corporations Code §1500, corporations must maintain annual Corporate Minutes — and NOT doing so is the #1 cause of "alter ego liability," the doctrine under which a court can disregard the legal separation between you and your corporation, exposing your personal assets to business debts. For LLCs, the equivalent document is the Operating Agreement, which while not filed with the state, must exist under best legal practices.
AB5 (Labor Code §2775) fundamentally changed how California classifies workers. Under the "ABC Test," every worker is presumptively an EMPLOYEE unless the business proves all three criteria. Misclassification fines can exceed $25,000 per worker, not counting back taxes, unemployment insurance, and overtime. Having properly drafted written contracts is the first line of defense.
LLC (Limited Liability Company) is the most popular structure for small businesses in California. Simple to form ($299), tax-flexible (can elect to be taxed as sole prop, partnership, S-Corp or C-Corp), and offers personal liability protection. Ideal for freelancers, consultants, owners of investment properties, or any business with less than $80,000 in annual net profit. The only downside: as owner you pay 15.3% Self-Employment Tax on ALL profit.
S-Corporation makes sense when your business net profit exceeds $80,000-$100,000 per year. The S-Corp saves money because you only pay Self-Employment Tax on the "reasonable salary" you take as owner, not on additional distributions. For a business with $150,000 in net profit and a reasonable $70,000 salary, savings can be $10,000-$15,000 per year. However, S-Corps have restrictions: maximum 100 shareholders, all must be US citizens/residents, single class of stock.
C-Corporation is the classic structure for companies planning to receive professional investment (Angel/VC), offer stock options to employees, or eventually go public. It has "double taxation" (corporation pays on profits, shareholders pay on dividends), but allows unlimited scalability. Most tech startups use Delaware C-Corp; if your business is local and you do not plan to raise capital, a California LLC or S-Corp is generally a better option.
Initial formation: Articles of Organization (LLC) or Articles of Incorporation (Corp) filed with California Secretary of State, Operating Agreement (LLC) or Bylaws (Corp) internally, Statement of Information (LLC-12 every 2 years or SI-200 annual), and federal EIN from IRS. Our LLC package ($299) or S-Corp/C-Corp package ($399) includes all of these documents.
Operational: Banking Resolution to open commercial accounts ($99, included in formation packages), annual Corporate Minutes ($99/year to stay in compliance), Independent Contractor Agreements (AB5 compliant, $149) for freelancers and 1099 workers, Promissory Notes ($99) for loans between the company and partners or employees.
Defensive: Formal Demand Letter ($99) when a client does not pay or vendor breaches — 60-70% of disputes resolve with just a professional Demand Letter. Non-Disclosure Agreement (NDA) when sharing sensitive information with potential partners or contractors. Updated Operating Agreement when adding or removing partners.
Case 1 — Carlos, remodeling contractor in East LA: He worked as sole proprietor, earned $90,000/year, and a client sued him for $30,000 after a bathroom job. Without an LLC, Carlos risked his house and personal savings. Solution: we formed his LLC ($299), prepared contracts for future clients (Bill of Sale + Terms of Service), and added $1 million liability insurance. Total first-year cost: about $2,000 including insurance. Without the LLC, a successful lawsuit could have taken his house.
Case 2 — Maria, beauty salon owner in Whittier: She had 4 stylists working as "independent contractors" without written contracts. A fired stylist reported her to the Labor Commission and California reclassified all of them as employees — fines, back taxes, and wage arrears totaled $42,000. Subsequent solution: we converted the structure to LLC + S-Corp election, drafted formal employment contracts (not contractor), and added workers comp. Lesson: AB5 is real and expensive when you violate it.
Case 3 — José, avocado importer in Vernon: He started with an LLC ($299), grew to $500K in annual sales. Migrated to S-Corp election to save $18,000/year in Self-Employment Tax. When he reached $2M in sales and started hiring employees, he restructured to a C-Corp so he could offer stock options to the operations manager. Each structure served a different stage of the business.
Step 1 — Decide structure. Use our LLC vs S-Corp vs C-Corp guide above, or schedule a consultation with a Mar Vista Law attorney if you have doubts.
Step 2 — Choose a name. Search it in the California Secretary of State database (bizfileonline.sos.ca.gov) to confirm availability. For LLC, must include "LLC" or "L.L.C." or "Limited Liability Company." For corporation, "Inc." or "Corporation."
Step 3 — Designate Agent for Service of Process. Must be a person or company with a physical California address (not a P.O. Box). Can be yourself, another partner, or a commercial service. Our package provides guidance on how to choose.
Step 4 — Complete the online questionnaire. The wizard asks: business name, purpose, members/shareholders and percentages, manager/director designations, agent for service. Typical time: 20-30 minutes.
Step 5 — Payment + document generation. You receive by email: Articles, Operating Agreement/Bylaws, Banking Resolution, EIN instructions, first organizational minutes, and step-by-step guide.
Step 6 — Filing with the State. Articles are filed at bizfileonline.sos.ca.gov ($70 LLC, $100 Corp). Approval: 5-10 days standard, or 24-hour expedite for $350 additional. Once approved, you receive the official certificate with file number.
Step 7 — IRS EIN. Apply free at irs.gov (Form SS-4 online, immediate approval). You only need the state file number.
Step 8 — Commercial bank account. Bring: approved Articles, EIN, Banking Resolution, identification. Recommended banks for Latino businesses: Chase Business (bilingual branches), Wells Fargo Business, Bank of America Small Business.
Step 9 — Annual compliance. Pay $800 Franchise Tax (April 15 each year), file Statement of Information when due, maintain annual Corporate Minutes, file federal taxes (Form 1065 for multi-member LLC, Form 1120-S for S-Corp, Form 1120 for C-Corp).
LLCs formed after January 1, 2021 have the first $800 EXEMPT in year one (AB 85). However, you must pay it in year two even if you made no money. Corporations (S-Corp and C-Corp) do not have a first-year exemption.
Not legally. If you live in California or operate your business here, California requires you to register the LLC as a "Foreign LLC" — and charges the same Franchise Tax. Forming in another state only adds complexity and cost, with no real savings for local businesses.
Generally when your net profit (after expenses) exceeds $80,000-$100,000 per year. Below that, additional administrative costs (payroll processor, accountant for Form 1120-S) consume the tax savings. Your CPA can analyze the exact tipping point in your case.
In an audit, the Franchise Tax Board can fine you. In litigation, a plaintiff can argue "alter ego" and the court can disregard corporate protection, exposing your personal assets. This is the BIGGEST risk of not maintaining corporate formalities — and very easy to prevent ($99 per year with our Minutes package).
Possibly yes. The LLC is legal structure at the state level; the business license is at the local level (city/county). Los Angeles, San Diego, San Francisco, San José and most cities require a Business Tax Certificate. Regulated professions (doctors, attorneys, accountants, contractors, real estate agents) require additional professional licensing from the California Department of Consumer Affairs.
Yes. California allows "Single-Member LLC" (SMLLC). These are taxed by default as a "disregarded entity" (everything passes to your personal Schedule C), but you can elect to be taxed as an S-Corp if it suits you. Liability protection is the same as a multi-member LLC.
Yes. An LLC can directly hire employees (W-2) without changing legal structure. You need: register with the EDD (Employment Development Department) for state taxes, payroll service like Gusto or ADP, workers comp insurance, and possibly additional insurance. We recommend an accountant to set up payroll correctly.
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