California Limited Liability Company Formation
Relevant information for starting a limited liability company in California.
STATE LAW REFERENCE: California Corporation Code, Section 17000+.
ADDRESS OF STATE OFFICE FOR FILING:
California Secretary of State
Limited Liability Company Unit
Box 94422 8
Sacramento CA 94244
TITLE OF FILING: Articles of Organization.
AVAILABILITY OF FORMS: Blank Articles of Organization with instructions and a copy of the California Limited Liability Company Act are available.
FILING FEE: $70.00 to Secretary of State.
NAME REQUIREMENTS: The official name must contain the words “Limited Liability Company” or the abbreviation “LLC.” The word “Limited” may be abbreviated as “Ltd.” The word “Company” may be abbreviated as “Co.” The company name may not contain any of the following or their abbreviations: “bank,” “insurance,” “trust,” “corporation,” “incorporated,” or “trustee.” A company name may be reserved for 60 days for a $10.00 fee.
ORGANIZER REQUIREMENTS: A limited liability company may be organized by one or more persons. The organizer need not be a natural person, nor a member. (Section 17052).
ARTICLES OF ORGANIZATION REQUIREMENTS: Articles of Organization must contain the following: (1) name of company, (2) duration of company, if less than perpetual, (3) company purpose, (4) registered agent name and office address, (5) initial members’ names and mailing addresses, (6) whether company will be managed by managers or members, and (7) any additional matters. Past and future contributions, and the limited liability company’s power to avoid dissolution need not be stated. (Section 17051).
ANNUAL REPORT REQUIREMENT: Yes, to Secretary of State.
PUBLICATION REQUIREMENT: No.
EFFECTIVE DATE OF LIMITED LIABILITY COMPANY ORGANIZATION: On the date of official approval of Articles of Organization, the company becomes a legal entity and the members are shielded from personal liability. (Section 17050(c)).
MEMBERSHIP REQUIREMENTS: Minimum number of members required is two. The members may be a natural person or a business entity. Note: there is a provision in the California Statute which allows for a single entity limited liability company under limited circumstances involving a single trust with two or more owners. (Section 17050(b)).
TRANSFERABILITY OF INTEREST: Unless provided otherwise in the Operating Agreement, there is no free transferability of a member’s limited liability company interests. Transfers of interests must be approved by majority vote of all members. (Section 17303(a)).
CONTINUITY OF COMPANY: Unless provided otherwise in the Articles of Organization or Operating Agreement, a member’s withdrawal (or manager’s if the company is manager-managed) may cause the dissolution of the company. (Section 17350(d)).
MANAGEMENT REQUIREMENTS: Unless provided otherwise in the Articles of Organization or Operating Agreement, a limited liability company is managed by its members. (Sections 17150 & 17151).
OPERATING AGREEMENT REQUIREMENTS: Operating Agreements govern the rights, duties, and obligations of the members. They must be in writing. (Section).
RECORDS REQUIREMENTS: The limited liability company must maintain copies of the following records at the company’s registered office: (1) Articles of Organization, (2) any amendments, (3) a current list of all members and managers (if any) and their addresses, (4) Operating Agreement, (5) financial statements, and (6) federal, state, and local tax returns. (Section.).
LIABILITY SHIELD: The members of the limited liability company are expressly shielded from liability for debts, obligations, and liability of the company by the statute. (Section.
DEFAULT RULES: The following are default rules which are in effect, unless otherwise provided for in the limited liability company Articles of Organization or Operating Agreement: (1) voting rights of members are on a per profit interest basis, (2) operating distributions are per profit share, unless the distribution is a return of capital, and (3) profits and losses are based per contributions of members. (Sections 17103, 17202 & 17250).
STATE CLASSIFICATION: Limited liability companies are classified in the same manner as they are for federal income tax purposes. State level taxation is based on the federal taxation entity classification. (See below under FEDERAL TAXATION)
STATE FRANCHISE TAXATION: There is franchise taxation at the state level. The minimum annual franchise tax is $800.00 for a limited liability company. This amount is due within three months of formation of the company, payable to the California Franchise Tax Board. If the Limited Liability Company has a total annual income of over $250,000.00, an additional tax of from $500.00 to $4,500.00 is due.
FEDERAL TAXATION: Multiple member limited liability companies are treated as partnerships for federal tax purposes. Single member limited liability companies are not allowed at present under California law. (Federal Internal Revenue Code Section 701).
Excerpted with permission from: Laws of the United States: Limited Liability Companies. Copyright 1999 Daniel Sitarz. All rights reserved.
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