California LLC formation by attorney / MBA. Every California limited liabilty company formation includes a consultation to determine whether an LLC is right for you / your business (versus a corporation, limited liability partnership); what state to form the LLC in (California? Nevada?); and to make sure that all your questions and concerns are addressed. Also included is perhaps the most important step in the LLC formation process: drafting an Operating Agreement customized to your needs and explaining its significance and operation to all of the LLC members.Flat fee one-owner small business LLC formation services start at $1,500 inclusive of standard filing fees and costs. For this purpose, husbands and wives and legally-sanctioned domestic partners count as one owner. Multiple owner LLCs start at $2,000, inclusive of standard filing fees and costs; however, in more complex situations, a higher flat rate or an hourly rate of $375+ may apply for all - or for additional - work. Nevada LLC's are $350 more, due to increased filing fees versus California's for the state business license and initial annual list (but potentially lower taxes in the long run), and LLCs with foreign national ownership are an additional $250. Please contact me with information about your legal needs to receive a more detailed quote.
The standard full-service LLC organization packages include the following:
Assistance with choice of jurisdiction and entity issues (corporations are the same flat fee, and the services including when incorporating are equivalent)
Unlimited legal advice and consultation regarding the LLC formation
Name search and reservation
Custom Articles of Organization
Indemnification of managers/officers/directors/agents articles or operating agreement provisions if desired
Custom operating agreement including basic buy-sell agreement provisions
Custom organizational meeting minutes
Transfer of currently owned non-titled personal property into the LLC (real estate, intellectual property, and vehicles are at additional cost)
Filing of Statement of Information with Secretary of State
Obtain federal EIN number (taxpayer ID number)
Obtain California seller's permit if needed
Obtain California Employment Development Department (EDD) employer account number if needed
File City of Los Angeles business tax registration if applicable, or assistance with other county or city local business license(s)
IRS Form 8823 or 2553 election by LLC to be taxed as a C corporation or S corporation if requested
California limited offering exemption notice filing if required
Advice and counsel on operating your LLC to maintain its limited liability status as a separate legal entity
All junk mail solicitations for credit cards and other business services every organizer is deluged with shredded to help preserve your privacy and avoid identity theft
The following are also available at additional cost:
Transfer of purchased ongoing business or assets into LLC
California LLC organization the slow/standard way is generally a one to three month process from retaining the firm until you have an EIN number in hand, ready to open a bank account, but this depends on a number of factors, including the time of year, and can always be expedited at additional cost.
Need a California LLC fast? Rush (approximately 2-3 week turnaround) and expedited (approximately 7-10 day turnaround) service is available; additional filing and legal fees of $250 and $750 respectively apply. Rush service includes over-the-counter filing, express mail service, and priority internal handling. Expedited services includes payment of the California Secretary of State 24-hour expedited processing fee, over-the-counter filing, express mail, and priority internal handling. It is important to consider at the outset whether time is of the essence in the formation of your LLC; once the Articles are filed with the Secretary of State for standard processing, it is not possible to speed up the process. A shelf LLC is another option to consider, and these aged limited liability companies may also assist in obtaining corporate credit in some circumstances.
About LLCs; LLC Terminology: A limited liability company ("LLC"), sometimes mistakenly called a limited liability corporation, is often referred to as a "new" type of business entity. The LLC, while relatively new in comparison to the business corporation, is now well established, commonly used, and available in all 50 U.S. states (although it is still true that the case law is more well developed for corporations). The LLC is a hybrid entity combining characteristics of a corporation with those of a general partnership. LLCs have limited liability protection (which general partnerships lack) and passthrough tax treatment (unlike C corporations subject to double taxation). Single-member LLCs are now permitted in all 50 U.S. states and have been allowed in California since the year 2000. The owners of an LLC are called members, and they either manage the LLC's business themselves, or hire managers to handle these duties.
Federal & California Taxation of LLCs: While corporate taxation may be elected for specific reasons after consultation with an accountant, the LLC is generally taxed on the federal level as a pass-through entity, which means that profits and losses after business expenses pass through to personal tax returns of the members, by way of IRS Schedule K-1 profit/loss distributions issued to each member. Single-member LLCs are disregarded for federal tax purposes, meaning that the profits/losses of one-owner LLCs are reported on IRS Form 1040 Schedule C, just as a sole proprietor would report income. In California, all LLCs are subject to an annual $800 minimum franchise tax. This CA LLC fee is payable to the California Franchise Tax Board and increases when gross revenues in any given year exceed $250,000. See also Self employment taxes: S corps versus LLCs.
Advantages / Disadvantages of LLCs: LLCs are often chosen over corporations because they provide the flexibility inherent in a partnership (for example, profits and losses can be allocated among members without regard to their ownership percentages); can usually select how to be taxed; are easy to maintain (generally no annual meeting or other formalities are required); and provide excellent limited liability protection for members. Disadvantages of LLCs versus corporations include less settled case law due to the newness of LLCs versus corporations; greater formation costs if unusual operating agreement provisions are required; and potentially greater federal and California taxes when compared to corporations. Finally, California does not permit some business types to be operated as LLCs.
When considering whether an LLC is right for you, an attorney will likely also consider alternatives to organizing a California LLC, such as a S corporation, C corporation, limited liability partnership, limited partnership, and Delaware or Nevada LLC, depending on the circumstances.
In sum, the LLC is a useful entity, and the right choice for many entrepreneurs, small businesses, real estate investors, and music, TV, and film projects, but the all too common knee-jerk "I need an LLC" or "I'm starting a business so I'm going to form a Nevada LLC online" approach will many times result in the selection of an LLC when another entity, or an LLC formed in the most advantageous jurisdiction, may well have been less expensive in the near or long term (or both) and/or better suited to the client's individual business needs for non-tax related reasons.
Maintenance and Annual Meetings - Starting at $375; inquire with details. Note that, unlike a corporation, unless otherwise specified in the operating agreement, LLCs are not required to hold an annual meeting of the members (however, it may be a good idea in LLCs with more than one member or that are managed by a manager or managing member). As with a California corporation, a Statement of Information filing with the California Secretary of State and tax filings are still required.
LLC Dissolutions - Dissolve your inactive or suspended California LLC, starting at a flat fee of $495 for LLCs in good standing with the state; inquire with details to determine if this rate applies to your entity. Cancellation or revival (restoring to good standing) of suspended LLCs is generally handled on an hourly rate basis. Other alternatives include selling the LLC and its business if a buyer can be found (with an appropriate attorney-drafted custom sales agreement that complies with applicable law); repurposing the LLC to a new venture; or, when it is determined an LLC no longer is - or never was - the best entity type for your business, the LLC can be converted to a corporation, or dissolved and a corporation formed to operate the business.
LLC Conversion: Your California LLC can be converted to a California corporation or other entity. Hourly rates apply and because of potential tax implications, tax advice is always recommended when considering such action.