There are advantages and disadvantages to creating a limited liability corporation (LLC) in California. When an LLC is properly formed, it protects members from liability, as a corporation does. However, depending on the choices that you make, the profits may not be taxed at a corporate level but pass on as the members' self-employment taxes, which are sometimes higher than they would be if there were a tax applied to the corporation. Under California law, an LLC may not engage in providing professional services that need to be rendered under a license or certification or the Chiropractic Act. It also may not provide banking, insurance, or trust company services. If you are interested in forming an LLC or creating better paperwork for your LLC, the business lawyers at the Sowards Law Firm may be able to help. Our San Jose LLC attorneys assist clients throughout Silicon Valley and beyond.Understanding the Structure of LLCs
There are three types of LLCs, including single-member LLCs, multimember manager-managed LLCs, and multimember member-managed LLCs. When forming your LLC, you need to make sure that the name that you choose is not too similar to a name that already exists in the California Secretary of State website. The name needs to conclude with "limited liability company" or the abbreviation "LLC," or it may abbreviate "limited" to "Ltd" and abbreviate "company" to "Co." You may reserve a name for up to 60 days by filing a name reservation request form and mailing or delivering it to the California Secretary of State's office.
You will need to file articles of organization to form the LLC. The articles need to include the name, the purpose of the organization, information about how it is going to be managed, its address, and the name and address of its registered agent (for purposes of lawsuits and other official notices). The LLC may not be its own agent for service of process. Only a single agent who has agreed to accept service may be designated. You must also file a Statement of Information within 90 days of filing the articles of organization and every two years.
Although an LLC operating agreement is not a legal requirement, it is wise to have one drafted, especially if there is more than one member. Our LLC lawyers can help San Jose clients and others with this process. When properly drafted, this document will explain how the LLC is to be internally governed, including provisions about capital accounts, profits, losses, management, voting, books and records, confidentiality, restrictive covenants, and dispute resolution. Each member's membership interest needs to be expressed as a percentage that can vary when new members are added. Often, the interest will include an economic and a management interest. There may be classes of interests.
Although it is not exciting to contemplate the possibility that your business may not work out, you should account for this potential development and also include provisions for the dissolution of your LLC. There may also be restrictions placed on transferring interests.Explore Your Options with an LLC Attorney in San Jose
If you are seeking an experienced attorney to ensure that you make informed and appropriate choices, the San Jose LLC lawyers at the Sowards Law Firm may be able to help. We represent clients in cities such as Campbell, Mountain View, Palo Alto, Santa Clara, Berkeley, Oakland, Concord, Walnut Creek, San Rafael, Salinas, San Mateo, Santa Cruz, and San Francisco. Call us at (408) 371-6000 or use our online form to set up an appointment with a corporate attorney.