Los Angeles business formation comes down to the following choices:: 1) Sole Proprietorship; 2) Corporation; 3) Limited Liability Company; 4) Limited Partnership; 5) General Partnership; 6) Limited Liability Partnership.

Sole Proprietorship
The sole proprietor enjoys complete control over his/her business. While this type of business owner receives all the profits, he/she also has sole responsibility for all debts and liabilities. Fictitious Business Name Statement may be filed with the County Clerk or County Recorder where the principal place of business is located. Other city or county registration may be required. Income tax returns combine business income and personal income. The biggest disadvantage to a sole proprietorship is the unlimited liability for business debts held by the individual business person. In addition, income tax rate may be higher than the corporate form of business organization.

Corporation

The corporate form is the most permanent form of business. It continues for the life of its charter regardless of what happens to the original organizer or stockholders. The corporation is owned by stockholders in proportion to the number of shares owned by each stockholder. A corporation can be a one person operation with only one stockholder holding all of the stock and being the only officer.
When incorporating, it is possible to qualify the corporation as a small business or 
"S- Corporation" versus a "C-Corporation" or regular corporation. For federal income tax purposes, the S-Corporation is taxed the same as a partnership. The income of the S-Corporation passes directly to the stockholders who pay taxes on their shares without any federal income tax being paid by the corporation itself. The C-Corporation pays corporate income tax on its earnings while the stockholders only pay income tax if and when they receive dividends on their stock.

Limited Liability Company

A Limited Liability Company generally offers liability protection similar to that of a corporation but is taxed similar to a partnership. Limited Liability Companies may be managed by one or more managers or one or more members. An operating agreement governing its members and operation of the Limited Liability Company is an essential element of a viable and stable limited liability company.

General Partnership
The general partnership, which is the most common partnership used, must have two or more persons engaged in a business for profit. Except as otherwise provided by law, all partners are liable jointly and severally for all obligations of the partnership unless agreed by the claimant. The partners must claim their share of the profits or losses on their personal returns. Income is taxed only once. Compatibility of the partners is essential.

Limited Partnership
The limited partnership must include at least one or more general partners who participate in management decisions and who have personal responsibility for the partnership debts. There will also be one or more limited partners who do not participate in management and whose liability for partnership debts is limited to the amount they have contributed to the business. Income is taxed only once. The partners must claim their share of the profits or losses on their personal returns.

Limited Liability Partnership
A Limited Liability Partnership is a partnership that engages in certain types of professional services including the practice of law and architecture. The types of professions allowed to be formed as limited liability partnerships may broaden over time. A limited Liability Partnership is required to maintain certain levels of insurance as required by law. Income is taxed only once.