Introduction
You may get all the information you need in this article regarding LLCs in California. It goes over a California LLC’s formation requirements and maintenance obligations, plus how you can dissolve a company if required.
What is a California LLC?
An LLC is a company that offers personal liability protection for its owners. It’s also known as a limited liability company and can be structured to be taxed as either a corporation or partnership.
California LLCs are created by submitting organizational documents to the Secretary of State and paying the required fees. An initial filing fee. The main benefit of an LLC over other business structures is that it offers owners personal protection against legal liabilities.
This may sound like it makes sense only for small businesses, but even large corporations have used this structure because it minimizes their risk exposure.
Another advantage of having an LLC vs. other types of companies comes from tax considerations: unlike corporations which are subject to double taxation, partnerships pass their profits directly onto partners’ tax returns,
so there are fewer layers between profits earned by investors/owners and what they see themselves in terms of net earnings after deductions have been applied against those profits
Formation of an LLC in California
The development of results from the subsequent processes is an LLC in California:
- Get a Name. You can buy a name from the state or come up with your own, as long as it’s not already registered.
The California Secretary of State has a database of all names reserved for use by other businesses or individuals. If you want to reserve yours now, you’ll pay $25; later on, it will cost $50 plus $150 per year if you keep it.
- Get a Registered Agent for Service Process. Your registered agent is someone who can receive legal documents on behalf of your business if it’s sued.
If there’s no one available at all times during business hours which meets these qualifications and is willing to serve as your agent, then consider hiring an attorney or professional corporation service company instead;
these services charge less than most attorneys but generally provide better customer service than most firms do when handling corporate filings. File the Articles of Organization.
The Secretary of State requires this document before they’ll issue an EIN or certify tax returns filed under your LLC’s name;
however, some experts recommend filing even before making sure that everything else needed for the operation has been taken care of first just because doing so takes significantly less time than doing otherwise.
Make an Operating Agreement once all necessary paperwork has been completed and filed at least 30 days before applying for federal trademark registration protection.
Maintenance of a California LLC
If you are a resident of California, you will be required to file an Annual Statement of Information with the Department of State. This is a simple form, and it only requires basic information about the LLC, including:
- The registered agent’s name and address for your LLC
- The terms and addresses of each member or manager.
- The amount paid in total by all members/managers toward capital contributions, if any.
If you fail to file this document on time, you will be subject to a $50 late fee plus $10 per month up to $300 total.
Dissolution of a California LLC
The unanimous agreement of the members dissolves the LLC.
The LLC may be dissolved by judicial decree if:
- The LLC does not pay franchise tax for two consecutive years; or
- The LLC neglected to submit its yearly report. For two straight years unless a waiver has been granted; or
- If a manager or member commits fraud, dishonesty, incompetence, misappropriation of funds, or other crime against the entity and its interests.
Conclusion
If you’re thinking about creating a California LLC, it is crucial to understand the differences between this type of business entity and other corporations.
The process of formation and maintenance can be challenging, but with the right legal advice, you can set up your company in no time.