Limited Liability Company Business Formation

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Business Formation & Planning on Friday, November 20, 2015.

Starting a business can be an exciting prospect, but it also requires that many decisions be made prior to opening the doors. One of the first -- and most important -- business formation issues is deciding the type of entity under which the company will operate. Many small businesses in California choose to operate as limited liability companies.

The major benefits of a limited liability company are that this structure offers similar protections against liability as corporations, but it is taxed as a general partnership or sole proprietorship. The owners of an LLC are its members, while those who operate the business are called managers. The members of the LLC will need to determine whether it will be member-managed or manager-managed.

If the members of the company will also operate it, it will be member-managed. If the managers of the business are not its owners, then it is manager-managed. This distinction will be necessary for the Articles of Organization and the LLC's operating agreement. The Articles of Organization are filed with the California Secretary of State, and the operating agreement most often contains information specific to the ownership, management and operation of the business and is agreed to by all of its members.

Not every small business in California can be a limited liability company. Furthermore, there are certain requirements for the business formation documents and to keep the LLC in good standing with the state. It could be beneficial to work with an attorney on these matters to ensure that your business meets all of the legal requirements for an LLC and that the choice is a good fit for your company.


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