Tag: limited liability company

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The Different Types of LLCs

Starting a business in California? You need to be sure that you select the right legal entity. Companies need the best foundation in order to thrive. A limited liability company (LLC) offers several potential advantages. Lynnette Ariathurai is a Fremont business formation attorney who has experience with the full range of LLCs. We can help you find the right one for your company. In this article, you will find an overview of the different types of LLCs in California.

What is a Limited Liability Company (LLC)?

The California Franchise Tax Board explains that an LLC is “a business entity that blends partnership and corporate structures.” It is a business structure that offers favorable liability protection while offering the tax flexibility and relative ease of formation of a partnership or sole proprietorship. In California, LLCs are created by filing Articles of Organization with the Secretary of State. The owners of an LLC are called members. A key advantage is that they are generally not personally liable for the company’s debts or legal obligations. Still, LLCs must comply with specific requirements in the state, including paying an annual franchise tax and filing regular reports.

An Overview of the Three Types of LLCs in California

Single-member LLCs

The most straightforward type of LLC in California is a single-member LLC. It only has one owner (member), but it still offers full personal liability protection while keeping management and tax filing relatively simple. It is a popular choice for solo entrepreneurs, consultants, or freelancers who want legal separation between personal and business assets. The member can elect to be taxed as a sole proprietorship (more common) or corporation (an option). To be clear, there is no need to divide decision-making. The single owner retains full control over daily operations of the business.

Single-member LLCs must still comply with California’s annual franchise tax and filing obligations.

Multi-member LLCs

Multiple parties can own and operate an LLC in California. A multi-member LLC is a company that has two or more owners. Multi-member LLCs offer a collaborative ownership structure with shared responsibilities. This may be the right entity for businesses with multiple partners. Each member has an ownership interest. The LLC will allocate profits, losses, and responsibilities according to an operating agreement. Multi-member LLCs should have a professionally drafted operating agreement. Most multi-member LLCs are taxed as a partnership. With that being said, corporate tax treatment is an option. It provides limited liability for all members. That means that personal assets are protected from business liabilities.

Manager-managed LLCs

Finally, in California, a manager-managed LLC is a type of LLC where the members (owners) designate one or more managers to handle day-to-day business operations. That manager may or may not actually be one of the members. The model is ideal when investors want limited involvement in management or when the business needs professional management. Members retain ownership rights but delegate operational control. That can help to streamline decision-making. Of course, non-manager members must put a great deal of trust into the people who oversee day-to-day business operations. Notably, California allows both member-managers and non-member managers.

Contact Our California Business Formation Lawyer for LLCs Today

Lynnette Ariathurai is a California business formation lawyer who provides solutions-focused guidance and support to clients. If you have any questions about the different types of LLCs, please do not hesitate to contact us today for a fully confidential consultation. With an office in Fremont, we provide business formation services throughout the Bay Area.

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When & Why to Create an LLC for Your Business

Are you preparing to start a business in the Bay Area? You may be considering forming a limited liability company (LLC). LLCs offer a number of advantages—but they are not the right option for every situation. Here, our Fremont business formation attorney highlights key things to know about when to create an LLC in California.

What is a Limited Liability Company (LLC)?

The California Franchise Tax Board explains that an LLC “blends partnership and corporate structures.” An LLC offers its owners—called “members” in California—personal liability protection. That means that they are generally not personally responsible for business debts and legal obligations. At the same time, an LLC allows for pass-through taxation. The profits and losses are reported on the members’ personal tax returns.

When to Create an LLC in California

An LLC is one of the most popular business entities in California. Deciding when to form an LLC always depends on the specific goals and risks associated with your business. Here are some of the most notable reasons why it might be the right choice to create an LLC:

You need liability protection: An LLC is a smart choice when you want to protect your personal assets from liability. If your business involves customers, clients, or contracts—or you have employees, equipment, or significant financial exposure—an LLC can shield your home, personal bank accounts, and other assets.
You want ownership clarity: Another good time to form an LLC is when you are entering into a business arrangement with another party. An LLC allows multiple owners to clearly define ownership shares, profit distribution, and decision-making authority. It can be all within an operating agreement.
You prefer a simplified start-up: In comparison to some other business entities that offer liability protection—most notably, traditional C-corporations—LLCs are faster and less expensive to set up. The simplified creation process is a significant advantage.

Examples of Businesses that Work Well as LLCs

Freelance Services and Consulting Services

Independent consultants, designers, or marketing professionals often choose LLCs to separate their personal assets from business risk all while retaining tax flexibility.

Real Estate Investment and Property Management

Real estate investors commonly use LLCs to hold properties and reduce personal liability for tenant issues or property-related claims.

Retail Businesses and E-commerce Businesses

Whether operating a local boutique or an online shop, retail businesses benefit from the liability shield of an LLC and its flexible tax options.

Every Situation is Different: Consult With a Business Formation Lawyer

An LLC may or may not be the right business structure for your specific situation. Every situation involves its own set of facts and circumstances. Your needs and your long-term objectives matter. A business formation lawyer with experience setting up LLCs can help.

Contact Our California Business Lawyer for LLCs Today

Lynnette Ariathurai is a California business formation attorney who has extensive experience helping clients form LLCs. If you have any questions about when to create an LLC, we are here to help. Contact us today for a fully confidential consultation. With an office in Fremont, we handle LLC formation throughout the Bay Area.

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Importance of Having an Attorney Advise During the Formation of an LLC

Making the decision to start up a new business is exciting. You can build something of real value to support yourself, your family, and your community. A limited liability company (LLC) is a flexible, cost effective legal structure for many different types of businesses. As forming any type of new business can be complicated, it is best to seek guidance from an experienced attorney who can help you put the right foundation in place. Here, our Fremont business formation lawyer highlights five considerations that should be addressed during the formation of a limited liability company (LLC).

1. Whether an LLC is the proper form (eligibility, needs, etc.)

A limited liability company is a popular way to set up a business. As explained by the California Secretary of State, an LLC “offers liability protection similar to that of a corporation, but is taxed differently.” It combines some of the core advantages of a corporation and a partnership. That being said, an LLC is not the right form for every type of business. Some companies are better served by a different legal structure. Further, certain types of businesses in California—such as a medical, dental, or nursing practice—cannot be set up as an LLC. An attorney will help you determine whether an LLC is the right form.

2. Selection of State for your limited liability company

When forming an LLC, you also need to decide where you are going to set it up. You may or may not want to make California the home state of your LLC. In some circumstances, setting up an LLC in a different jurisdiction—such as Delaware or Nevada—offers real advantages. In other cases, setting up an LLC outside of California adds complexity with no tangible benefit. A business formation lawyer can help you choose the right state.

3. The applicability of liability protection

One of the central advantages of an LLC is that it offers liability protection. Simply described, an LLC helps to ensure that the members will not be held personally liable for the debts incurred by the business. Of course, the liability protection associated with an LLC is situation-dependent. It may not, by itself, offer adequate liability protection. Additional precautions may be required.

4. Drafting and negotiating an operating agreement

Every LLC should have a written operating agreement. While LLCs doing business in California are regulated by California law, the reality is that many of your personal rights and responsibilities related to the business will be derived from your operating agreement. An operating agreement for an LLC should always be negotiated, drafted, and reviewed by an experienced business formation attorney.

5. Compliance with ongoing requirements for LLCs

Finally, it is important to remember that LLCs must comply with certain ongoing legal requirements in California. In setting up an LLC, an experienced California business attorney can help you understand the ongoing and future requirements so that you are in the best position to comply.

Get Help from Our California Business Formation Attorney Today

Lynnette Ariathurai is an experienced business formation attorney. If you have any specific questions about setting up a limited liability company (LLC), we are here to help. Contact us today to arrange a confidential consultation. We provide business law services throughout the Bay Area.

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