Infographic: How to Choose Between an LLC and a Corporation in California


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This infographic was submitted to us by eminutes, who provided this description:

Far too often, entrepreneurs are unaware that LLCs and corporations are very different. Although virtually the same from a liability protection standpoint, they are extremely different from a tax standpoint. A lawyer and a CPA can help you evaluate the pros and cons of corporations and LLCs, but in the meantime, the following are some basic guidelines:

•In our firm, we use LLCs as the entity of last resort, because of the extreme junk fees – called the “Gross Receipts fee” that apply to LLCs (but not to corporations) in California.

•In California, the initial $800 franchise tax is waived for corporations, but not for LLCs.

•Licensed professionals cannot operate through LLCs in California.

•LLCs are best where the company will own real estate.

•S-Corporations are best except where the corporation will have shareholders who are foreigners or other companies.

This would be a useful tool for small business owners in California, offering insight to whether it makes sense for you to stick with LLC or become a corporation. A simple “yes/no” answer with a little clarification goes a long way to helping make that decision.

However, inherent in the topic is the problem that there are no numbers, and therefore there is no visualizable data. That’s basically the cornerstone of a good infographic, so I can’t really grade this tool based on infographic standards.

As a tool I’d give it a B because it’s quick and concise, but not overbearing. The design and consistency in grammar could probably use some work, though–why is “answer the following questions” all lowercase, when it seems to be serving the purpose of a subtitle? At least “answer” should probably be capitalized.

Business owners have endless decisions to make, including how to manage finances, security, time and more. Something as critical as corporate minutes might be overlooked–don’t make that mistake! Keep up-to-date on all your responsibilities and use tools like these to help you make the right decisions.

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