Business Formation AttorneyGlendale & Los Angeles
We form California LLCs and corporations and draft the operating agreements, bylaws and buy-sell terms that decide what happens when owners disagree.
Should a California business form an LLC or a corporation?
An LLC offers flexible management and pass-through taxation and suits most closely held operating businesses and real estate holding entities. A corporation suits companies planning outside investment, stock-based compensation, or an eventual sale of stock. Both must file with the California Secretary of State, pay the annual minimum franchise tax, and file a Statement of Information. The governing agreement matters more than the entity type.
At a glance
- Annual tax
- $800 minimum for LLCs and corporations, per the Franchise Tax Board
- First year
- New corporations skip the minimum tax; new LLCs pay $800
- Statement of Information
- Due within 90 days; LLCs every two years, corporations every year
- FinCEN BOI
- Companies formed in the United States are exempt from BOI reporting
Business formation is choosing and organizing the legal entity, most often an LLC under the California Revised Uniform Limited Liability Company Act (Corporations Code section 17701.01 and following) or a corporation, and drafting the agreements that govern owners. DiJulio Law Group forms and documents companies for founders in Glendale and Los Angeles.
Entity structure and founder agreements in California
The entity choice question gets most of the attention and decides the least. What determines whether a California business survives a founder dispute is the operating agreement or bylaws and shareholder agreement: how decisions are made, what happens on deadlock, how an owner exits, how the interest is valued, and whether departing owners can compete.
Businesses formed with template documents routinely discover the gaps at the worst possible moment. There is no buy-sell provision when one owner wants out. There is no deadlock mechanism when two 50% owners disagree. Capital contribution obligations are unstated when the company needs money. Each of those omissions turns a business disagreement into litigation that costs many multiples of proper documentation.
California also imposes ongoing obligations that catch new businesses out; the annual minimum franchise tax regardless of profitability, biennial or annual Statements of Information, local business tax registration, and industry licensing. The firm handles formation as part of the business and corporate practice, with attention to how the structure will hold up under stress rather than only at filing.
Formation decisions carry forward into every later stage of a company. Protecting brands and technology from the outset reduces the risk of intellectual property disputes, owners who later disagree often resolve it through business mediation, and companies that collect customer data should plan for data privacy obligations early. Founders bringing in team members from abroad may also need employment-based visa advice.
LLC, S corporation, or C corporation: which California entity fits?
Entity comparison
An LLC suits most closely held operating businesses and property holders because it offers liability protection with flexible management and tax treatment. A corporation suits companies planning outside investment or stock compensation. In California, LLCs and corporations both owe an $800 minimum annual tax, and a sole proprietorship is not a separate entity at all.
Figures come from the Franchise Tax Board LLC page (opens in a new tab) and corporations page (opens in a new tab). The first-year exemption for LLCs applied only to tax years beginning in 2021 through 2023, so an LLC formed today owes the $800 annual tax in its first year.
| Entity | Liability | Income tax | $800 minimum tax | Ongoing formalities |
|---|---|---|---|---|
| Sole proprietorship | No separate entity; the owner and the business are the same person | Owner reports business income on Form 540 (federal Schedule C) | Not an entity; income is reported by the owner | Local business tax registration and licensing |
| LLC | Company debts are not members' debts solely because of membership; alter ego rules still apply (Corp. Code § 17703.04) | Disregarded entity with one member or partnership with more, unless it elects corporate treatment; same classification for state and federal | $800 annual tax, first due by the 15th day of the 4th month after filing; plus a $900 to $11,790 fee once California income reaches $250,000 | Statement of Information within 90 days, then every two years (Corp. Code § 17702.09) |
| S corporation | Separate legal entity; shareholders are exposed mainly through alter ego (veil-piercing) claims | 1.5% California tax on net income, including first-year income | $800 minimum franchise tax, waived in a new corporation's first taxable year | Statement of Information within 90 days, then annually (Corp. Code § 1502); annual shareholder meeting (§ 600) |
| C corporation | Separate legal entity; shareholders are exposed mainly through alter ego (veil-piercing) claims | 8.84% California rate for corporations other than banks and financial institutions | $800 minimum franchise tax, waived in a new corporation's first taxable year | Same filings as an S corporation; annual report unless waived in the bylaws (§ 1501) |
What are the steps to form an LLC or corporation in California?
Formation checklist
Forming a California entity takes a Secretary of State filing, an initial Statement of Information within 90 days, a federal EIN, a signed operating agreement or bylaws, and a calendar for the $800 annual tax. Companies formed in the United States no longer file beneficial ownership reports with FinCEN.
Read FinCEN's current beneficial ownership information page (opens in a new tab) before relying on the exemption for a company with foreign owners or a foreign parent.
California business formation checklist
- File articles of organization (LLC) or articles of incorporation with the California Secretary of State.
- File the initial Statement of Information within 90 days, then every two years for an LLC or every year for a corporation (Corp. Code §§ 17702.09, 1502).
- Obtain an EIN from the IRS before opening bank accounts or hiring.
- Sign an operating agreement, or bylaws and a shareholder agreement, covering control, capital, distributions, deadlock and exit.
- Calendar the $800 annual tax: an LLC pays its first-year tax by the 15th day of the 4th month after filing; a new corporation is exempt from the minimum franchise tax in its first taxable year.
- Check FinCEN beneficial ownership status: under FinCEN's final rule (updated August 11, 2026), U.S. companies are exempt; only foreign companies registered to do business in a state report.
- Register for local business tax and any industry license in Glendale, Los Angeles, or wherever the business operates.
What should a buy-sell agreement cover for co-owners?
Buy-sell agreement
A buy-sell agreement should define the events that trigger a buyout, how the interest is valued, how the purchase is funded and paid, and what restrictions bind a departing owner. Without one, the default is litigation: dissolution proceedings in which the other owners may buy out the moving party at a value a court fixes.
Triggering events
Death, disability, retirement, divorce, termination of employment, deadlock, or a voluntary decision to sell.
Valuation method
Agreed formula, periodic agreed value, or independent appraisal, with a fixed valuation date and discount rules.
Funding and payment
Insurance, installment notes with security, or company redemption, matched to what the business can afford.
Departing owner restrictions
Business and Professions Code section 16601 allows an owner who sells all of an ownership interest to agree not to compete in the area where the business was carried on.
Statutory fallback
Without a buy-sell, a dissolution suit lets the corporation or majority buy out at fair value (Corp. Code § 2000) or LLC members at fair market value (§ 17707.03).
Managing PartnerR. David DiJulioRead profile- Office
- 330 North Brand Boulevard, Suite 1280, Glendale, California 91203
- Direct line
- (818) 502-1700 · rdd@dijuliolaw.com
- Courts
- Los Angeles County Superior Court, including the Glendale and Stanley Mosk courthouses.
- Focus
- Formation, contracts, governance, transactions, and litigation for closely held California companies.
Business formation services we provide
For founders, partners, families, and investors forming California entities.
Entity Selection & Filing
LLC, corporation, and partnership selection against tax, liability, investment, and exit objectives, and filing with the California Secretary of State.
Operating Agreements
Member rights, management structure, capital contributions and calls, distributions, transfer restrictions, and deadlock resolution for LLCs.
Shareholder Agreements
Bylaws, voting agreements, board composition, minority protections, and the restrictions on transfer that keep ownership where it belongs.
Buy-Sell Provisions
Triggering events, valuation methodology, payment terms, and funding; the provisions that determine whether an exit is orderly or litigated.
Founder & Equity Terms
Vesting, contribution of intellectual property, roles and removal, restrictive covenants within California's narrow limits, and confidentiality.
Real Estate Holding Entities
Structuring entities to hold California property, including tenant-in-common arrangements and the transfer and reassessment consequences.
Business formation problems that reach our Glendale office
Composite examples of the matters this practice handles. They illustrate common fact patterns and are not descriptions of specific client cases or predictions of any result.
The 50/50 Deadlock
Two founders own equally, the operating agreement is a template with no deadlock provision, and they now disagree about whether to sell. Absent a mechanism, the practical options narrow to negotiation or dissolution proceedings.
The Undocumented Contribution
One partner funded the buildout of a Glendale location personally, expecting an increased interest. Nothing was papered. Years later the ownership percentages on the tax returns do not match anyone's understanding.
The Silent Partner Who Wants Out
A passive investor demands a buyout at a valuation the operating owners consider unrealistic. Without an agreed valuation method, the parties are left arguing about appraisers rather than applying a formula.
First steps before you file with the Secretary of State
Agree the hard terms first
Who decides, how disputes break, how an owner exits, and how the interest is valued. Documents follow decisions; drafting cannot substitute for them.
Match the structure to the exit
The right entity for a business that will be sold differs from one that will pass to family or hold property indefinitely. Decide the destination before the vehicle.
Calendar the compliance
Statements of Information, franchise tax, local registration, and licensing all carry deadlines. Missing them can suspend the entity's ability to sue or defend.
When to involve a business formation attorney
- More than one person will own the business.
- Owners are contributing unequal amounts of capital, property, or work.
- Outside investment or a future sale is contemplated.
- The business will hold real estate or take on significant debt.
- An existing entity was formed with template documents and has since grown.
- An owner wants to exit and there is no buy-sell provision.
California formation statutes and Franchise Tax Board rules
- California Franchise Tax Board: Limited Liability Company (opens in a new tab)The $800 annual tax, the first-year payment deadline, the LLC fee schedule, and LLC tax classification rules.
- California Franchise Tax Board: Corporations (opens in a new tab)The $800 minimum franchise tax and the first-year exemption for newly incorporated or qualified corporations.
- California Corporations Code § 17702.09: LLC Statement of Information (opens in a new tab)Requires every California LLC to file a statement of information within 90 days after filing its articles of organization and biennially after that.
- FinCEN: Beneficial Ownership Information Reporting (opens in a new tab)Current federal guidance confirming that companies created in the United States are exempt from BOI reporting.
Business formation questions California founders ask
What founders and partners in Glendale and Los Angeles ask when forming a California business.
Should my California business be an LLC or a corporation?
Most closely held California operating businesses and real estate holding companies choose an LLC for its flexible management and tax treatment, while companies planning to raise outside investment, issue stock options, or eventually sell stock usually choose a corporation, and both pay California's $800 minimum annual tax and file periodic Statements of Information. The governing agreement matters more than the entity type.
Does a new California LLC have to pay the $800 tax in its first year?
Yes, a California LLC formed now generally owes the $800 annual tax for its first year, due by the 15th day of the 4th month after it files with the Secretary of State, because the first-year exemption the Franchise Tax Board describes applied only to tax years beginning in 2021 through 2023. Corporations are treated differently.
Do new California corporations pay the $800 minimum franchise tax?
Newly incorporated or qualified California corporations are not required to pay the $800 minimum franchise tax in their first taxable year, according to the Franchise Tax Board, but they still owe tax on income, at 1.5 percent of net income for an S corporation or 8.84 percent for most C corporations. The $800 minimum applies from the second year.
When is the first Statement of Information due?
A new California LLC or corporation must file its first Statement of Information with the Secretary of State within 90 days after filing its articles, and afterward an LLC files every two years under Corporations Code section 17702.09 while a corporation files every year under section 1502. Missing filings can lead to penalties and suspension.
Does my company still have to file a beneficial ownership report with FinCEN?
No, a company created in the United States no longer has to file a beneficial ownership information report, because FinCEN's current rule, as described on its website in an August 11, 2026 update, exempts all U.S.-created entities and their beneficial owners and limits reporting to foreign companies registered to do business in a state. Foreign-owned structures should still be checked.
Does a California LLC need an operating agreement?
Every multi-member California LLC should have a written operating agreement, because under Corporations Code section 17701.10 the operating agreement governs relations among members and the company, and where it is silent the statute's default rules apply, which rarely match what founders actually agreed about control, capital, distributions, and exit. Single-member LLCs benefit too.
Can LLC members be personally liable for company debts?
LLC members are generally not personally liable for the company's debts merely because they are members, but California Corporations Code section 17703.04 applies the same alter ego rules used for corporate shareholders, and members remain liable for their own tortious conduct and for any written guarantee they sign. Keeping finances separate protects the shield.
What happens if co-owners have no buy-sell agreement?
Without a buy-sell agreement, a departing or deadlocked owner's main leverage is a dissolution lawsuit, and the remaining owners can avoid dissolution only by buying the moving party's interest at a value fixed under Corporations Code section 2000 for corporations or section 17707.03 for LLCs, often after appraisal. A negotiated agreement is far cheaper.
Business formation help in Glendale and Los Angeles
Local business tax registration and permitting differ by city, and disputes are heard in the Los Angeles County courts.
Talk to a Business Attorney
The documents that matter are the ones nobody reads until there is a disagreement. Get them right while everyone still agrees.