Limited Liability Company

California Limited Liability Company


Frequently Asked Questions 

What is the difference between a limited liability company and a limited liability partnership?

A limited liability company consists of one or more members which may be individuals, partnerships, limited partnerships, trusts, estates, associations, corporations, other limited liability companies or other business entities. The members of a limited liability company are afforded limited liability similar to shareholders of a corporation and have pass-through taxes comparable to a partnership.

A limited liability partnership must have two or more partners whose type of business is to engage in the practice of public accountancy, the practice of law or the practice of architecture.

 

What is the difference between a limited liability company and a limited partnership?

A limited partnership consists of at least one general partner and one limited partner. The general partner is potentially liable for all the obligations of the partnership. The limited partner has limited liability. Limited partners may jeopardize their limited liability status if they actively participate in the business of the partnership.

A limited liability company consists of one or more members which may be individuals, partnerships, limited partnerships, trusts, estates, associations, corporations, other limited liability companies or other business entities. The members of a limited liability company are afforded limited liability similar to shareholders of a corporation and have pass-through taxes comparable to a partnership.

 

What do I have to do to form a limited liability company? What are the advantages?

A domestic limited liability company must complete and file Articles of Organization (Form LLC-1) with the Secretary of State. The fee for filing Articles of Organization is $70.00.

A foreign limited liability company must complete and file an Application for Registration (Form LLC-5) with the Secretary of State. A certificate of good standing from the home state must accompany the Application for Registration. The fee for filing the Application for Registration is $70.00.

Every limited liability company which is doing business in California or has filed Articles of Organization or an Application for Registration with the Secretary of State’s Office is subject to the annual limited liability tax of $800. The tax must be paid for each taxable year until a Certificate of Cancellation is filed. Questions regarding franchise tax requirements must be directed to the Franchise Tax Board.

The advantages of forming a limited liability company are that the members are afforded limited liability and have pass-through taxes similar to a partnership.

 

Do I send the $800 minimum tax to the Secretary of State or to the Franchise Tax Board?

The $800 minimum tax is due directly to the Franchise Tax Board. Questions regarding franchise tax requirements must be directed to the Franchise Tax Board.

 

Does California recognize single member limited liability companies?

As of January 1, 2000, single member limited liability companies may be formed in California.

 

What is an agent for service of process?

An agent is an individual (manager, member or any other person, whether or not affiliated with the company) who resides in California or a corporation designated by the limited liability company to accept service of process if the company is sued. The agent must agree to accept service of process on behalf of the company prior to designation.

If a corporation is designated as agent, that corporation must have previously filed with the Secretary of State a certificate pursuant to Corporations Code section 1505. Note, a limited liability company cannot act as its own agent and no domestic or foreign corporation may file pursuant to section 1505 unless the corporation is currently authorized to engage in business in California and is in good standing on the records of the Secretary of State.

 

How do I cancel my limited liability company?

A domestic limited liability company must file a Certificate of Dissolution (Form LLC-3) and a Certificate of Cancellation (Form LLC-4/7), unless all the members vote to dissolve, in which case only the Certificate of Cancellation is required; OR, in limited circumstances, a Short Form Certificate of Cancellation (Form LLC-4/8) may be filed. In addition, certain franchise tax requirements must be met.

A registered foreign limited liability company must file a Certificate of Cancellation (Form LLC-4/7). In addition, certain franchise tax requirements must be met.

Please refer to Forms LLC-3, LLC-4/7 and LLC-4/8 for filing information and instructions.

CONCLUSION:

To decide which type of business entity is best for you, many factors have to be weighed. Please contact a professional to help you achieve your goals.


NOTICE:

This and other great information is available here on the California Secretary of State web site. This webpage was created entirely with information obtained from the California Secretary of State web site and presented in this convenient format for reference. This page is NOT intended to provide legal advice.