Creating A California LLC

There are certain terms in society that get used interchangeably that shouldn’t. This is true with the LLC and corporation phrases. Is a LLC a corporation or not?

Think of a warrior in the days of the mighty Roman Empire. What did they have with them when going into battle? They had a nasty looking sword or weapon of some sort and they had a shield. When it comes to businesses, the entity you choose is your shield against personal harm. Both a corporation and LLC can act as a shield, but that does not mean they are the same thing.

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The corporate entity has been with us for hundreds of years. It is the grand daddy of all formal business entities. The LLC, in turn, is a recent upstart at least as applied to the United States. The first LLC didn’t come into existence until 1979 when Wyoming passed legislation allowing for the use of the entity. Over the next 20 years, the others states in the nation passed similar legislation.

So, just how are these entities different? Well, one has to look to the specifics of each. Let’s start with ownership. A corporation is a stand alone entity. To own it, a person must buy shares in the corporation. This can be done on a small scale where two people form a business and split 1,000 shares or it can be done on a huge scale like when you and I buy stock in Google, Microsoft or some other company on the NASDAQ or New York Stock Exchange. Unsurprisingly, the owner of a share of a corporation is known as a shareholder.

The ownership of an LLC works differently. There are no shares. Instead, the investors own a percentage interest in the business. The owners are known as members instead of shareholders. Regardless, this percentage ownership can present problems down the road if you are not prepared for it. How so? Well, let’s assume your business goes big. You are  going to be the next Google. You want to go public, but you can’t. Why? You don’t have any shares to trade on the stock exchange! Your only solution is to try to convert to a corporation or close up and restart as a corporation. Neither is easy, fun or inexpensive.

Another manner in which an LLC is not a corporation has to do with a unique tax issue. A single person may form either an LLC or a corporation to protect their business. The IRS, however, doesn’t like single owner LLCs. As a result, it classifies them as “disregarded entities”. This effectively means that the person will be taxed like a sole proprietor, which means paying self employment tax. A corporation, in contrast, can have a single owner and be taxed as either a corporation or s-corp without the IRS batting an eye.

Is a LLC a corporation? While both provide a business owner with asset protection, the simple answer is a LLC is not a corporation.

Easily Create A California LLC Today Fast and Cheap

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The LLC is such a business friendly entity, it is amazing more people don’t use it. Setting up an LLC in California is about as easy as it comes and a process that can be done very cheaply.

The California limited liability company is a business entity created under a state law known as the Beverly-Killea Limited Liability Company Act of 1996. Why should you care? Well, the Act made it incredibly easy to form these businesses. The days of paying an attorney $2,500 or more to set up a business went “poof” overnight and rightly so. Why? There wasn’t any need.

Business attorneys were needed in the past to set up corporations because, well, they were incredibly paperwork intensive. You had to have incorporators, special minutes, notice of minutes, share issuances, securities waivers, elections, blah, blah, blah. Most businesses ended up with a corporation and had no idea how to run or use it!

The LLC is a completely different matter. It is mostly a matter of filing the correct forms, which is why you no longer need an attorney to do it. Instead of costing thousands of dollars, it now costs less than $200. That makes a huge cash flow difference when it comes to setting up an LLC in California.

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Looking up an LLC in California is incredibly complex. I kid. It is incredibly easy to do. One just need to visit the California Secretary of State website to do it. Here’s how.

The first step is to go to the website. You can click here to visit it. Now click the “Business Programs” button in the upper right hand column. The next page should show a bunch of links decending the page. Click “business entities” and wait for the new page to load. In the left hand column, you will see a “business search” button. Click it.

You should see a page with a blank box you can enter a business name in. Make sure to click the “LLC” button above that box. Once it is filled in, hit the search button and you should get what you are after.

A couple quick notes. The Secretary of State site has not really mastered how to make databases work. This means two things. Sometimes you will get an error when you search. Just wait five minutes and then try again. It will usually work then. The second issue is the database can be a month or more behind. If you are looking up an LLC that was recently formed, it might not appear in the results. Other than that, there isn’t to much else to it.

Don’t Do Business Without Protecting Yourself From Lawsuits and Debts
Click Here To Protect Your Personal Assets and Family With An LLC

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If I set up an LLC and/or a 501(c)3, how do I handle moving to another state in a few years? Is there a form?

Is there an amended form or something I would complete so I can keep my company and just change address or change the name of the company and the address?

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An Llc Is Now In Demand

Limited liability companies (LLC) are great for medium and small companies alike. Forming an LLC is quite easy for any business who would like to start off, since it does not require much paperwork to worry about.

And having a personal protection for assets is great, and is often offered to corporations against business debts which is truly a great help for them. As Read the rest of this entry »

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Hey Readers! I’ve been comin across some crazy stuff the past few days from a few different blogs around the web which I just had to share with you. Check em out below…

RUTENBERG v. BOYNTON CAROLINA ALE HOUSE, LLC

Celotex Corp. v. Catrett, 477 US 317, 323 (1986). When the non-moving party bears the burden of proof on an issue, the moving party may discharge its burden … Read More…

SEIKO EPSON CORPORATION v. ABACUS 24-7 LLC Read the rest of this entry »

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The consequences of not meeting with a financial advisor or not being prepared for your retirement are enough reason why you should schedule an appointment. At any point in your life, you should have been contributing to your 401(k) and you should also have an Individual Read the rest of this entry »

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There are a wide variety of business entities one can choose from in the legal field. In this article, we take a look at the difference between an LLC and LLP.

Let’s start off with the basics. LLC is an abbreviation for the business entity known as a limited liability company. An LLP is an abbreviation for the business entity known as a limited liability partnership. The two entities are very similar in some ways, but also very different in others. Let’s take a closer look.

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What is the difference between an LLC and LLP when it comes to liability protection? Well, the LLC will protect its owners, known as members, from business liabilities such as loans and lawsuits. An LLP works a bit differently. The entity serves to move liability from itself to individual partners. Huh? An example will help.

I am a partner in a law firm. There are five other partners. We form a limited liability partnership. In the course of business, I am accused of committing malpractice by a client. The client sues me. I am personally liable for any judgment, but my fellow partners are not. The LLP sets up “walls” between us. So long as a partner is not involved in the transaction, he or she will not be liable.

What about tax issues? Ah, the entities are very similar in this area. The LLP is taxed as a partnership, which should hardly be a surprise given its name. The LLC can choose to be taxed as a partnership or corporation. The vast majority choose the partnership designation. The exact tax preparation and filing process is a bit different for each of these entities, but not dramatically so.

So, do more people prefer the LLC or the LLP for their business? It’s a trick question to be honest. Every state will let you file a LLC for your business. Most states, however, limit LLPs to certain groups of professionals like lawyers, doctors, accountants and so on. Each state is different. Regardless, most businesses end up choosing between an LLC and a corporation, not an LLP.

Given the restriction on use, it should hardly be a surprise that the LLC is chosen far more often than the LLP by businesses.

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