California Entity Structures
If you are trying to decide which entity structure to set up, we’ve provided the following simple list and detailed overview of your different entity choices in California.
California allows several corporation types.
Regular or General Stock Corporation
Most corporations are typically regular or general stock corporations. That is they are owned by stock holders, intend to make a profit and are recognized as a legal person.
A close corporation is similar to a regular corporation, except it is intended to and puts limits on the number and type of its shareholders. So, a close corporation could not go public, but it has the added benefit of not having to comply with as many formalities as a regular corporation.
A California professional corporation is one that provides professional service which may only be lawfully rendered only if licensed for that service. Its shareholders, directors, and officers must also be licensed to provide that same service. Professional corporations can include medical, dental, chiropractic, and others as described in California Corporations Code Sections 13400-13410.
Non-Profit Corporation – Mutual Benefit
A California non-profit corporation which is organized for other than religious, charitable, civic league or social welfare purposes and planning to obtain tax exempt status under provisions other than Sections 23701d, 23701f, 501(c)(4) or not planning to be tax exempt at all is a nonprofit MUTUAL BENEFIT corporation.
Non-Profit Corporation – Public Benefit
A California non-profit corporation organized for charitable purposes and which plans to obtain state tax exempt status under Section 23701d of the Revenue and Taxation Code and/or federal tax exempt status under Section 501(c)(3) of the Internal Revenue Code or organized to act as a civic league or a social welfare organization and which plans to obtain state tax exempt status under Section 23701f of the Revenue and Taxation Code and/or federal tax exempt status under Section 501(c)(4) of the Internal Revenue Code is a nonprofit PUBLIC BENEFIT corporation.
Non-Profit Corporation – Religious
A California non-profit corporation organized to operate a church or to be otherwise structured for primarily religious purposes is a nonprofit RELIGIOUS corporation.
A California non-profit corporation is organized to manage a common interest development association in California.
Limited Liability Company
This is currently the most commonly filed entity in California because of it is flexibility and simplicity. However, California LLCs have different tax requirements in California than corporations. So do your homework first.
A low-profit limited liability company or L3C is not currently not available in California and only exist as of 4/13 in : IL, KS, LS, MA, MI, NC, ND, RI, UT, VT & WY.
A California Limited Partnership or LP is formed by general partner(s) who also have limited partners, who are limited in their role in the partnership and their liability, usually by their investment.
A California General Partnership or GP is formed where all the partners are responsible form management and liability of the partnership.
Limited Liability Partnerships
A California Limited Liability Partnership or LLP is generally set up to engage in only one of the following businesses: The practice of Architecture, The practice of Law, The practice of Engineering, The practice of Public Accountancy, or the practice of Land Surveying.
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