Get yourself a lawyer. A good one can do this for surprisingly little money - a few hundred bucks. Using separate entities can make sense under certain circums

Get yourself a lawyer. A good one can do this for surprisingly little money - a few hundred bucks. Using separate entities can make sense under certain circumstances, but keep in mind that every one of them has its own paperwork, its own fees, and its own tax return. If $800 is a lot of money, I doubt very much that you want to do this. You can always split it up later. Also, you will not be able to avoid taxes by incorporating in another state. California is going to be a pain in the ass. Just the way it is. If you don't like that, move to Texas, or better yet, Wyoming. One thing to consider: if you have an LLC with one member (owner), you can have the IRS treat it as a "disregarded entity" which saves you a some work on tax day. You basically fold the business taxes into your personal taxes and file one return. You still must keep everything (bank accounts, etc) separate for the business - keep the books on the business just like normal. But for taxes, it's all the same and it makes life a little easier. Unfortunately, I don't think the states care, so you still have to deal with them. As for risk, that depends entirely on what you are doing. If you are selling gunpowder, it's a little different than peddling fart jokes. Nobody can answer that for you.