Thinking of forming an LLC in the Los Angeles area? There are several options for forming your entity such as a partnership, a corporation, a joint venture, or a sole-proprietorship as the only owner. Our LLC layers know that selecting the right entity for your business can be a pivotal decision financially and we’re here to help you decide/form.
In many cases, prospective owners find that the Limited Liability Company (LLC) is a suitable option for their interests and structure. As its name implies, this company limits the legal liabilities of its owners. LLC owners enjoy the protection of their personal assets and properties from court-ordered attachments, seizures, and garnishments to satisfy the LLCs debts.
While the same protections exist for corporations, it’s simpler to form an LLC in Los Angeles than a corporation and easier to operate and manage. Let’s explore the benefits of an LLC.
What’s an LLC?
A Limited Liability Company (LLC) is a formal legal entity in California that combines the best features of a corporation with that of a partnership. Enjoy the same limited liability benefits of a corporation with the easiness and tax advantages of a partnership.
California laws allow one owner LLC (or more owners) known as members acting as authorized agents for the company. The members become isolated from the LLCs liabilities like a corporation’s shareholders.
Like all other legal entities, an LLC must open its own bank account where all income and expenses flow through. Conduct all business in the LLCs name and not in the members’ names.
Is an LLC the Right Choice for You?
California allows LLC formation for almost every business. An exception exists for a business requiring a professional license. For example, medical doctors licensed by the state as professionals cannot form an LLC.
To answer the question on if an LLC is right for you, it depends on your business. Do you think your company business may contain risks subjecting you to lawsuits? For example, operating a transportation business may result in vehicle accidents. Even owning a pet walking service may result in people getting bitten.
What about buying a liability insurance policy? Don’t think buying an insurance policy protects you from all risks and injuries. Insurance coverage always consists of exclusions and maximum coverage. As an example, purchase a $100,000 insurance policy and get sued for $1 million where $900,000 exceeds the policy limit.
LLC compared to other Legal Entities
An LLC is a hybrid between a corporation and a partnership that contains features of both. But, remains a separate legal entity. Let’s explore the differences.
How does an LLC differ from a Corporation?
One of the biggest advantages of forming an LLC is paying fewer taxes. That’s because the IRS only taxes LLC members like a partnership.
Double taxation remains the biggest disadvantage with a large C-Corporation. The first taxes the corporation’s profits while the second taxes the individual shareholder’s income.
But, a smaller S-Corporation only gets taxed once like a partnership while enjoying the benefits of limited liability. S-Corporations became ideal for real estate brokers, general contractors, and other licensed professionals.
Real estate investors prefer the LLC over the S-Corporation because it’s easier to form an LLC for each real property investment.
Small business owners prefer an LLC over an S-Corporation because of simple structures and formalities. LLCs don’t require corporate minutes or annual meetings.
How does an LLC differ from a Partnership?
As a company, the LLC requires a governing structure for its members. Partnerships don’t require it. LLCs file a Statement of Information (annual report) with the California Secretary of State within 90 days of formation and once every two years. Partnerships do not file annual reports.
However, limited liability protection for its members benefits LLCs over general partnerships. A person sues an LLC and only the LLC remains liable (unless a member got involved with the harm or injury). Yet, someone sues the partnership and every partner becomes liable.
How We at Stone and Sallus help with LLC Formation
Let our LLC attorneys in Los Angeles form your Limited Liability Company. Don’t try to do it yourself. Because complex legal forms and documents require an experienced California LLC lawyer.
We do everything for you including:
- Help with selecting a name for your California LLC;
- Preparing and filing Articles of Organization with the Secretary of State;
- Helping to choose a registered agent;
- Help with deciding on member management or appointing a manager;
- Preparing an Operating Agreement;
- Filing a Statement of Information with the Secretary of State;
- Paying the LLC California Franchise Tax Board tax (if not taxed as a corporation); and
- Obtaining EIN for the IRS, business licenses, and registering for state sales and employer taxes (if needed).
Contact us for all your California LLC needs. Including formation and representation by an experienced Los Angeles LLC lawyer.