If you are thinking about starting a California LLC (limited liability company), there are a few things that you should know about. By understanding how an LLC works, you can be better equipped to make the right choice for your business.
Three Things To Know About Starting A California LLC
The LLC form is popular because it is relatively easy to setup and maintain. It doesn’t have as many administrative requirements as a corporation and it offers limited liability protection to its owners.
- An operating agreement is key. An operating agreement is a central document to think about when starting a California LLC. Whether your LLC has one member or many members, an operating agreement sets forth all of the important rules about who can join, how disputes are resolved, how risk and reward are shared, how people can leave, and what everyone must contribute. Depending upon what line of business you are involved in and who is a member of the LLC, the form of the operating agreement will differ. As with any legal document, smart business owners know that there is never a one-size-fits-all solution. Since the operating agreement is so central, it pays to think it through early.
- You have to maintain limited liability protection. One of the main benefits of an LLC is limited liability protection. That means that if there is a debt or other judgment against the business, the owner’s personal assets will generally not be at stake. This is huge if you own a house, car, bank account or anything else of value (or plan to in the future). However, limited liability protection is not always a given and steps must be take to ensure that it is maintained.
- The LLC has an annual minimum tax. As of this writing, anyone starting a California LLC (or with a registered out of state LLC) will have to pay an annual minimum tax of $800. That tax will generally have to be paid even if the LLC earned no revenue – so it’s a good thing to consider ahead of time.
Naturally, there is a great deal to understand when choosing whether or not to start a California LLC, but these are a few of the key points the everyone should know.
Do you have more questions about starting a California LLC? We want to answer them. You can learn more about the services that we offer and easily set up a time to talk to an attorney about how we can help you.
