Most California LLC questions cluster around the same six topics: annual franchise tax and gross-receipts fee, operating agreement requirements, member vs. manager management, sale and transfer of membership interests, conversion to a corporation for fundraising, and dissolution. A single-member LLC is taxed differently than a multi-member one, and operating agreements aren't legally required to exist — but California courts strongly favor LLCs that have them.
Our clients ask the same set of LLC questions over and over. Here are the answers to the most common ones.
Choose a business name, register with the Secretary of State, file Articles of Organization, create an Operating Agreement, secure any required business licenses and tax permits, and open a dedicated business bank account.
The name must include "limited liability company" or "LLC" and must be distinguishable from existing registered entities. It cannot use words implying government approval or terms restricted by law.
Yes. Mixing personal and business finances can pierce the corporate veil and expose your personal assets to business liabilities. A separate account also dramatically simplifies tax filing.
Typically one to two weeks. Expedited filing is available for an extra fee.
Not legally, but strongly recommended. Attorneys ensure your formation documents are correct and that your Operating Agreement actually reflects what you and your partners intend, including tax elections, member buyouts, dispute resolution, and exit provisions.
A required filing with the Secretary of State, due within 90 days after Articles are filed and every two years after that. Failure to file can result in administrative dissolution of the LLC.
Yes, file IRS Form 2553, ideally within 75 days of formation. The S-Corp election can reduce self-employment tax in many cases. Consult a CPA on whether the election makes sense for your specific income mix.
The S-Corp election has stricter ownership rules than a regular LLC. Owners must be U.S. citizens or permanent residents. Non-immigrant visa holders (visitors, students) and those with expired visas don't qualify. If any single owner is ineligible, the entire S-Corp election is invalid.
S-Corporations are limited to 100 shareholders, all of whom must be individuals (not other entities) and U.S. citizens or permanent residents. California LLCs without an S-Corp election allow unlimited members of any residency.
Generally yes, members aren't personally responsible for company debts beyond what they invested. But personal loan guarantees override that protection, and failure to observe corporate formalities (commingling funds, ignoring minutes, undercapitalization) can let a court "pierce the veil" and reach your personal assets.
Yes, managers can be personally liable for wage violations, overtime issues, and other labor law violations. California's worker protections against discrimination and harassment also impose direct manager liability.
No. Members can contribute money, services, or property, anything of value. The Operating Agreement should detail what each member contributed and how those contributions translate into ownership interests.
Membership interest transfers require approval of all existing members. The relevant documents need to be filed with the Secretary of State before completion. Money exchanged in the transfer is subject to California taxation.
California's $800 minimum annual franchise tax applies to most LLCs. Depending on your industry, you may also owe sales and use tax, excise taxes, or other industry-specific levies. A CPA can map your full obligations.
Have a question that isn't on this list? Send it through our contact page or call us, initial consultations are free.
Browse our full library of insights on business law, contracts, ADA defense, and estate planning.
All articles