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California LLCThere are a wide variety of entity choices for your business in California. The California LLC is a popular choice, particularly given its flexibility. California LLC California was a bit late in coming around to the idea of letting businesses form an LLC. The first legislation allowing for an LLC was in Wyoming in the late 1970s. California didn’t join the fun until the early 1990s. That being said, California has embraced the business entity and it has become a popular choice for many businesses in the state. A limited liability company, better known as an “LLC”, is a hybrid entity. To be frank, it provides the best parts of two other business entities. From a liability point of view, it provides protection from personal liability just as a corporation does, but without requiring the owners of the entity to go through the sometimes burdensome formalities of keeping a corporation up and running. From a tax perspective, the entity takes on the positive aspects of a partnership. As with a partnership, the finances of the entity are passed directly through to the owners of the LLC. This allows the business to avoid the double taxation issue that can arise with corporations. The primary advantage of using an LLC instead of a partnership is the liability protection. As mentioned above, the LLC gives you the protection of a corporation, but the partnership does not. There are a couple of potential downsides to an LLC. If you intend to take your business public at some point in the future, you cannot do it as an LLC. The primary reason is the LLC entity does not have shares to evidence ownership. As a result, there are no shares to be sold on the stock market! A second potential issue is the tax situation of the single owner LLC. The IRS taxes such an entity as though the owner is self-employed. This is not that big of a problem, but it can be a surprise of business owners the first time the file taxes. If you wish to file an LLC, please contact me. |
