Sole Owner, Corp, LLC, Partnership — Business Law

Sole owner

Simplest and cheapest to form. The owner and the business are the same legal entity. The owner is personally liable for all debts and lawsuits. License fees are lower, and you can use your own license number. If you are starting out, plan to subcontract everything, and have personal assets to protect, look at an LLC or corporation instead.

Corporation

A C or S corporation is a separate legal entity. The license is issued to the corporation, and an officer must serve as the Responsible Managing Officer. Corporations protect owners' personal assets, allow stock-based ownership, and can survive transfers of ownership without losing the license. Annual filings and corporate formalities are required to maintain liability protection.

Limited liability company

The LLC structure combines liability protection with pass-through taxation. California requires an LLC contractor to maintain a $100,000 employee/worker bond on top of the $15,000 contractor bond, and to carry at least $1,000,000 of liability insurance, with higher limits when there are more members. The qualifying individual is the Responsible Managing Manager, Member, or Officer.

Partnership

A general partnership is two or more people doing business together. Each general partner is personally and jointly liable for partnership debts. Limited partnerships separate general partners from limited partners, who are passive investors. Partnerships are uncommon in modern contracting because they offer no liability protection without an LLC or corporation wrapper.