Fantasy demons and where to find them
Just to straighten the record, Tolkien's stories were monotheistic. Eru was the One God, the Creator. The first entities he created were the Ainur who were perhaps to be equated with angels. Morgoth was a fallen Ainur and Sauron was his servant, a Maia. Gandalf, Radagast and Saruman were also Maia, but because they were 'good', they were forbidden to use their full powers in Middle Earth, whereas Sauron willfully broke the rules and gathered power for himself. If he wasn't stopped, Saruman might have become another Sauron.
I don't recall any mention being made of the 'level' of the Balrog. From its description it may have been a demon, but how it compared with Gandalf in the hierarchy is open to question. However, it was significantly easier to defeat than Sauron or Saruman. Gandalf and the Balrog fell off the Bridge in Moria and only Gandalf returned. I don't think it was specified what happened to the Balrog. It may have been killed, buried, banished...
Likewise, there was no definite death for Sauron or Saruman. Saruman had his throat cut and died, but only after he had been stripped of his powers, and even then, his spirit rose immediately and then dissipated, just like Sauron. However, Sauron had dissipated before, when he was 'killed' by Elendil and Gil-Galad, but his spirit reformed and came back, firstly to Dol Guldur, then to Mordor. There is nothing to say that either Sauron or Saruman were finished forever.
Heh, I didn't know I knew that.
As for demons in general, most of what I've read suggests that they are immortal, they don't reproduce, they were created in the Beginning, and can only be banished back to the netherworld.