Entity Formations
San Diego Business Entity Formation Attorneys
Choice of entity affects taxation, liability, governance flexibility, financing options, and exit strategy. The right structure depends on the business model, ownership profile, financing plans, and the realistic exit horizon. Khashayar Law Group advises California founders on entity selection, formation filings, and the governance documents that determine how the business actually operates.
California Entity Options
The most common California business entities include:
- Limited Liability Company (LLC) — flexible pass-through taxation, robust liability protection, simpler governance than a corporation. California's $800 annual minimum franchise tax applies.
- S Corporation — pass-through taxation with payroll-tax savings on distributions; restricted to 100 U.S.-citizen/resident shareholders and one class of stock.
- C Corporation — corporate-level taxation but the standard structure for venture-funded businesses and businesses targeting public markets. Required for QSBS treatment under IRC §1202.
- Limited Partnership (LP) — used for investment funds and real-estate holding structures.
- Professional Corporation / Professional LLC — required for certain licensed professions in California (law, medicine, accounting, architecture, dentistry).
- Sole proprietorship and general partnership — no liability protection; rarely advisable for active operating businesses.
Formation Engagements Beyond the Filing
Filing the formation document is the easiest step. The harder and more consequential work is the operating agreement, shareholder agreement, or bylaws, the equity issuance documents (founder stock, vesting, 83(b) elections), the IP-assignment paperwork from founders to the entity, and the foundational employment and contractor agreements. The firm provides full-service formation including all of the above.
How Khashayar Law Group Handles These Matters
Khashayar Law Group approaches every matter with the same trial-ready discipline that produced over $165 million in recoveries firm-wide. Daryoosh Khashayar has tried cases before juries, before judges, and before the California Court of Appeal, where he has secured multiple reversals of Superior Court rulings. He has litigated against major insurers including GEICO and Progressive, and against large corporations including Walmart and Costco.
ABOTA Membership and What It Means for Clients
Daryoosh Khashayar is a member of ABOTA — the American Board of Trial Advocates, an invitation-only organization for attorneys with exceptional verified civil jury trial experience and judicial recommendations. The firm has recovered more than $165 million for clients and prepares every matter — transactional or litigated — with the trial-readiness corporate counterparties respect.
Frequently Asked Questions
LLC or S-Corp — which is better for a California business?
It depends on the facts. LLCs offer governance flexibility and protect against personal liability. S-Corps can provide payroll-tax savings on distributions, but require shareholders to take a "reasonable salary" and restrict ownership. Many California businesses form as an LLC and then elect S-Corp tax treatment to combine the benefits.
Should I form a Delaware entity instead of a California one?
Sometimes. Delaware is preferred for venture-funded startups, businesses targeting an IPO, and businesses that anticipate significant litigation requiring Delaware's predictable corporate-law jurisprudence. A Delaware entity operating in California must register as a foreign entity in California and pay California's franchise tax, so the Delaware advantage is not free.
What is an 83(b) election and when should I file one?
An election under IRC §83(b) tells the IRS to tax restricted equity at the time of grant rather than at vesting. For founders with low-value stock at issuance, the 83(b) election typically saves significant tax. The election must be filed with the IRS within 30 days of the grant — there is no extension.
Do California LLCs need an operating agreement?
California Corporations Code §17701.10 expressly permits operating agreements. They are not technically required for single-member LLCs, but every California LLC should have one — without it, default Revised Uniform Limited Liability Company Act rules apply, which often produce unexpected outcomes.
What is California's $800 minimum franchise tax?
Every California LLC, LP, and corporation pays an $800 annual minimum franchise tax under Revenue & Taxation Code §17941 (LLCs) and §23153 (corporations). Newly formed entities are typically exempt from the minimum tax in the first year. The tax is owed even if the entity earns no income.
Talk to a San Diego Business Formation Attorney
Khashayar Law Group serves clients throughout San Diego and California. Consultations are free and confidential. Call (858) 509-1550 or visit our office at 1350 Columbia St., Suite 303, San Diego, CA 92101.
