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Franchise Tax Board’s Guide to:
Forms of Ownership
For the new business owner, one of the first critical questions is deciding
which form of ownership will best meet their business needs. Selecting the
legal structure for your business should be well thought out and discussed
with a qualified professional (e.g., Attorney, C.P.A., etc.) that specializes
in the subject matter. In addition, as your business grows over time, you
will need to determine whether the current form of ownership still fits
your needs or whether a new form of ownership will achieve better results.
Although there are many forms of business to choose from, listed below are
the most common legal structures available for the business owner.
Sole Proprietorship 4.
Partnership 6.
Limited Liability Partnership 8.
Limited Liability Limited Partnership 9.
C Corporation 10.
S Corporation 12.
Limited Liability Company 14.
Series Limited Liability Company 16.
Personal Service Corporation 18.
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Franchise Tax Board’s Guide to:
Forms of Ownership
Key Features:
• The cost to start a sole proprietorship is inexpensive.
• A separate bank account should be established to run the operations.
• The owner of the sole proprietorship controls all facets of the business.
• The business and the owner are one. There is no separate legal entity and
thus no separate legal person.
• The sole proprietor is personally liable for all debts and actions of
the company.
• The life of the business continues to exist as long as the business owner is
alive. Once the owner dies, the sole proprietorship no longer exits.
• Purchasing insurance to cover the risks of running your business is
advisable. Consider consulting an insurance specialist on the matter.
Filing Guidelines:
• Report your business income and expenses on Federal Form Schedule C.
This form is included with your California personal income tax return
(CA Form 540).
• The return due date is normally April 15th for calendar year taxpayers.
• The tax r