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LLCs California
LLCs
California
The LLC
California is a
relatively new type of
hybrid business structure
that is now permissible in
most states. It is designed
to provide the limited
liability features of a
corporation and the tax
efficiencies and operational
flexibility of a
partnership. Formation is
more complex and formal than
that of a general
partnership.
The owners
are members, and the
duration of the LLC
California is usually
determined when the
organization papers are
filed. The time limit can be
continued if desired by a
vote of the members at the
time of expiration. LLC
California 's must not have
more than two of the four
characteristics that define
corporations: Limited
liability to the extent of
assets; continuity of life;
centralization of
management; and free
transferability of ownership
interests.
Federal Tax
Forms for LLC California
Taxed as partnership in most
cases; corporation forms
must be used if there are
more than 2 of the 4
corporate characteristics,
as described above.
For IRS
purposes,
how do I
classify a
LLC
California ?
Is it a sole
proprietorship,
partnership
or a
corporation?
A LLCs
California
is an entity
formed under
state law by
filing
articles of
organization
as an LLC
California .
Unlike a
partnership,
none of the
members of
an LLC
California
are
personally
liable for
its debts.
An LLC
California
may be
classified
for Federal
income tax
purposes as
if it were a
sole
proprietorship
(referred to
as an entity
to be
disregarded
as separate
from its
owner), a
partnership
or a
corporation.
If the LLC
California
has only one
owner, it
will
automatically
be treated
as if it
were a sole
proprietorship
(referred to
as an entity
to be
disregarded
as separate
from its
owner),
unless an
election is
made to be
treated as a
corporation.
If the LLC
California
has two or
more owners,
it will
automatically
be
considered
to be a
partnership
unless an
election is
made to be
treated as a
corporation.
If the LLC
California
does not
elect its
classification,
a default
classification
of
partnership
(multi-member
LLC
California )
or
disregarded
entity
(taxed as if
it were a
sole
proprietorship)
will apply.
The election
referred to
is made
using the
Form 8832
(PDF),
Entity
Classification
Election.
If a
taxpayer
does not
file
Form 8832
(PDF), a
default
classification
will apply.
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References:
Must
a
partnership
or
corporation
file
a
tax
form
even
though
it
had
no
income
for
the
year?
A
domestic
partnership
must
file
an
income
tax
form
unless
it
neither
receives
gross
income
nor
pays
or
incurs
any
amount
treated
as a
deduction
or
credit
for
federal
tax
purposes.
A
domestic
corporation
must
file
an
income
tax
form
whether
it
has
taxable
income
or
not.
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What is the difference
between a LLC California and a limited
liability partnership?
A LLC California consists of one or
more members which may be
individuals, partnerships,
limited partnerships,
trusts, estates,
associations, corporations,
other LLCs California or other business
entities. The members of a
LLC California
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.
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What is the difference
between a LLC California 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 LLC California consists of one or
more members which may be
individuals, partnerships,
limited partnerships,
trusts, estates,
associations, corporations,
other LLCs California or other business
entities. The members of a
LLC California
are afforded limited
liability similar to
shareholders of a
corporation and have
pass-through taxes
comparable to a partnership.
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What do I have to do to form
a LLC California ?
What are the advantages?
A domestic LLC California must
complete and file
Articles of Organization
(Form LLC California -1) with the
Secretary of State. The fee
for filing Articles of
Organization is $70.00.
A foreign LLC California must
complete and file an
Application for Registration
(Form LLC California -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 LLC California 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 LLC California
are that the members are
afforded limited liability
and have pass-through taxes
similar to a partnership.
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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.
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Does California recognize
single member LLCs
California ?
As of January 1, 2000,
single member LLCs
California may be
formed in California.
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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 LLC California 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
LLC California
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.
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How do I cancel my LLC
California ?
A domestic LLC California must file
a Certificate of Dissolution
(Form LLC California -3) and a
Certificate of Cancellation
(Form LLC California -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 California -4/8) may be filed.
In addition, certain
franchise tax requirements
must be met.
A registered foreign
LLC California
must file a Certificate of
Cancellation (Form LLC
California -4/7).
In addition, certain
franchise tax requirements
must be met.
Please refer to
Forms LLC California -3, LLC
California -4/7 and
LLC California -4/8 for filing
information and
instructions.
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