Business Entity Formation Attorney

Rokita Law, P.C. helps founders in Los Angeles and Orange County choose a business structure and set it up so it holds. Amanda Rokita works with clients at the earliest stage, often before a name is picked, and stays through the filings, the governing documents, and the first year of compliance obligations.

Entity selection looks like a paperwork question. It is not. It determines who can be sued personally, how your income gets taxed, whose name appears in public records, who has authority to bind the company, and what happens when an owner wants out. Those consequences follow the business for as long as it exists, and several of them are expensive to reverse.

Business Formation Law Services We Offer

• Entity selection and the tax analysis behind it
• Formation filings with the California Secretary of State, including Articles of Incorporation, Articles of Organization, Certificate of Limited Partnership, and Statement of Partnership Authority
• Operating agreements, bylaws, shareholder agreements, and partnership agreements
• Founder equity terms, vesting, and intellectual property assignment
• EIN registration and initial tax elections
• Registered agent service and ongoing Statement of Information compliance
• Multi-entity structures, holding companies, and conversions from one entity type to another

Four Questions That Decide the Structure

Before comparing entity types, we work through four things about your specific business.

How much personal exposure can you accept? A structure that leaves you personally liable is fine for a freelancer with no employees and no premises. It is reckless for a business with staff, vehicles, inventory, or a lease.

Where do you want profits taxed? Pass-through treatment moves income to your personal return once. Corporate treatment taxes it at the entity, then again on distribution. Neither is automatically better, and the right answer depends on how much you plan to reinvest versus take out.

Who is coming in later? Venture investors expect preferred stock and a Delaware or California corporation. Family members joining a real estate holding almost never do. Build for the capital you actually expect.

How much of this needs to stay private? California puts different names in the public record depending on the entity you pick. Some founders care about this a great deal, and it is worth raising before the filing goes in rather than after.

Business Entity Types in California

Sole Proprietorship

One individual runs the business with no entity between them and it. Nothing gets filed with the Secretary of State. You may still need a local business license and a fictitious business name statement if you operate under anything other than your own name.

Liability is unlimited and personal. A judgment against the business reaches your bank accounts, your car, and potentially your home. There is no anonymity, because the business runs under your name or under a DBA that lists your name in county records. Income and losses go on your personal return.

We rarely recommend staying a sole proprietor once a business has employees, physical premises, or meaningful contracts. In most of those cases a single-member LLC provides the same tax simplicity with an actual liability shield.

Limited Liability Company (LLC)

An LLC has one or more Members and is not a corporation. Members are generally not personally liable for company debts. Income passes through to Members without a layer of entity-level income tax, though California still charges the $800 annual tax plus a fee tied to gross receipts once revenue crosses $250,000.

Management sits with all Members or with designated Managers, whichever the operating agreement specifies. On the privacy question, Member names are not automatically public, but Manager names are reported on the Statement of Information and become part of the public record.

Two California-specific points matter. The state requires an operating agreement for every LLC, including single-member companies. And an LLC cannot be used to render professional services, which pushes most licensed practitioners toward a professional corporation.

Corporations

A corporation is owned by shareholders who are generally not liable for corporate obligations by reason of their ownership. Shareholders elect directors, who set policy and appoint officers, who run the business day to day. Shareholder names stay off the public filings. Officer and director names do not.

C Corporation

The default tax treatment for a corporation. Net income is taxed at the corporate level, and shareholders are taxed again on dividends they receive. That double layer is the price of a structure institutional investors understand.

C corporations make sense when profits will be retained and reinvested rather than distributed, when stock options are part of the compensation plan, or when a priced funding round is realistic. Founders should also look at qualified small business stock treatment under Section 1202, which can matter enormously on an exit and requires the C corporation form to begin with.

S Corporation

Not a separate entity. It is a tax election made by filing Form 2553, available to a corporation or an eligible LLC. Income, losses, and credits pass through to owners rather than being taxed at the corporate level.

The eligibility rules are strict. No more than 100 shareholders. Shareholders must be individuals who are U.S. citizens or residents, or certain qualifying trusts and estates. Only one class of stock. Owner-operators drawing distributions also need to pay themselves reasonable compensation, and California still imposes a franchise tax on S corporations at the entity level, so the federal savings do not carry over cleanly.

Close Corporation

A corporation whose shareholders modify the usual formalities by agreement. They can waive mandatory board meetings, spread decision-making across all shareholders, and structure governance around how a small group actually works. No more than 35 shareholders of record.

This fits a handful of owners who want corporate status without the meeting-and-minutes overhead. It fits poorly when outside investment is coming, because the shareholders’ agreement that makes it flexible also makes it unfamiliar to investors.

Professional Corporation

Required for most licensed professions California will not permit to operate as an LLC, including physicians, dentists, chiropractors, nurses, psychologists, architects, and accountants. Ownership is restricted to licensed members of the same profession, and officer positions carry licensing requirements as well.

A professional corporation limits liability for the ordinary business obligations of the practice. It does not shield a practitioner from personal liability for their own malpractice.

Partnerships

Two or more individuals or entities carrying on a business as co-owners. California recognizes three forms, and the liability difference between them is significant.

General Partnership

Forms automatically when two or more people run a business together for profit, with or without a filing. Partners are jointly and severally liable for all partnership debts, which means a creditor can pursue any one partner for the entire amount, including obligations another partner created without consulting anyone.

The partnership itself pays no federal income tax and no California franchise tax. Income and losses are reported on the partnership return, then allocated to partners who report their share personally. General partners’ names become public if a Statement of Partnership Authority or a fictitious business name statement is recorded.

Most general partnerships would be better served as an LLC. We generally recommend converting.

Limited Partnership

Has at least one general partner and at least one limited partner. General partners manage the business and carry unlimited personal liability. Limited partners contribute capital, stay out of management, and are not personally liable beyond their investment.

Common in real estate ventures and investment funds, where a sponsor manages and passive investors fund. General partner names appear on the Certificate of Limited Partnership filed with the Secretary of State and are public. Taxation is pass-through unless the partnership elects corporate treatment.

Limited Liability Partnership (LLP)

Available in California only to specific licensed professions. Lawyers and accountants have permanent authority. Architects, engineers, and land surveyors are authorized under a provision the Legislature extended in 2024, now running through January 1, 2034. Some competing sites still list a 2026 cutoff, which is out of date.

Partners are shielded from partnership debts and from the malpractice of other partners, provided the statutory insurance and security requirements are satisfied. The LLP is managed by its partners and treated as a partnership for federal and California tax purposes. Partner names are public record.

Forming the Entity

Once the structure is settled, formation runs on three tracks that need to happen together.

State filing. Articles of Organization for an LLC, Articles of Incorporation for a corporation, Certificate of Limited Partnership for an LP, or the applicable partnership filing. We confirm name availability, designate an agent for service of process, and file the initial Statement of Information within the 90-day window.

Governing documents. This is where formation services stop and legal work starts. The operating agreement, bylaws, shareholder agreement, or partnership agreement decides how profits are split, who has authority to sign, what a departing owner is owed, how a deadlock breaks, and what happens on death or divorce. A template that has never seen your business will not answer those questions correctly.

Federal and state registrations. EIN, tax elections including any S corporation filing, seller’s permit if you sell tangible goods, employer payroll registration once wages cross the threshold, local business licenses, professional licensing, and any applicable beneficial ownership reporting.

After Formation

Liability protection is not permanent. It depends on continuing to treat the entity as separate from yourself. That means separate bank accounts, signing contracts in the entity’s name, keeping minutes or written consents, adequate capitalization, and filing on time.

We give clients a written compliance calendar covering the annual franchise tax, the Statement of Information cycle, which is every two years for LLCs and every year for corporations, and the internal governance items that keep the entity intact. Missing filings pushes an entity into suspended status, and a suspended entity cannot sue, defend a lawsuit, or enforce its own contracts until it is revived.

Frequently Asked Questions

LLC or corporation for a new California business?

Usually an LLC for an owner-operated business that wants flexibility and pass-through taxation. Usually a corporation if you plan to raise venture capital, grant equity to employees, or eventually sell. The right answer depends on your ownership, growth plans, and tax picture, not on a general rule.

Can I form an LLC for my licensed practice?

Generally no. California prohibits LLCs from rendering professional services. Most licensed professionals form a professional corporation. Lawyers, accountants, architects, engineers, and land surveyors also have the LLP option.

Does every California business owe the $800 franchise tax?

Most LLCs, corporations, LPs, and LLPs owe at least $800 per year regardless of income. A first-year waiver existed for entities formed between 2021 and 2023, but it has expired. Entities formed now owe the tax in year one.

Whose name becomes public when I form a company?

It depends on the entity. Corporate shareholders stay private while officers and directors do not. LLC Members stay private unless they serve as Managers. General partners in a limited partnership are public. Sole proprietors have no privacy at all.

Can I change my entity type later?

Yes, through statutory conversion, which preserves contracts, licenses, and bank accounts in most cases rather than requiring you to dissolve and restart. The tax consequences need to be analyzed first, because some conversions are tax-free and some trigger recognition of gain.

Do I need an attorney if I already filed my own Articles?

Filing is the easy part. The operating agreement or bylaws, the ownership terms between founders, and the compliance calendar are what determine whether the entity actually protects you. Those can all be handled after the fact.

Serving Founders in Los Angeles and Orange County

Rokita Law, P.C. advises new and growing businesses from its Beverly Hills office, serving Los Angeles County, and its Newport Beach office, serving Orange County.

If you are starting a business, adding a partner, or converting a structure you already have, call Rokita Law, P.C. at (888) 765-4825 or schedule a consultation online.