Sole proprietor, LLC or S corporation: the tax side, with California's numbers
In one paragraph
A sole proprietor pays income tax plus 15.3% self-employment tax on the profit and has no state entity fees. A California LLC pays an $800 annual tax from its first year plus a fee that starts at $900 once California income passes $250,000, and at CSLB it carries a $100,000 bond and a $1,000,000 policy. An S corporation pays California 1.5% of net income with an $800 minimum, waived in the first year, and lets you split pay between salary and distributions. Here is how the three compare for a one-to-three-person electrical contractor, with the state's own numbers.
The rule
Every California LLC owes an $800 annual tax, first due by the 15th day of the 4th month after it files with the Secretary of State, plus a fee of $900 once total California income reaches $250,000 (FTB). Every corporation owes the $800 minimum franchise tax, except in its first taxable year for corporations formed on or after January 1, 2020; an S corporation also pays 1.5% of its California net income (FTB). Corporations file a Statement of Information within 90 days and yearly; LLCs within 90 days and every two years (Corp. Code 1502, 17702.09).
Why it matters
The $800 a year is real money in year one, the LLC fee climbs with revenue whether or not you made a profit, and the CSLB costs of an LLC dwarf the tax difference for a small shop. Choosing on a friend's advice instead of the arithmetic is how a new contractor ends up paying two sets of bonds and a payroll service to save less than they spend.