Search:

Would you like to contribute to this site? Incorporation Menu Submit an Article Submit a Tip Place your Ad Add URL Incorporation Questions? Contact Us  Starting A Corporation   How To Incorporate   How To Incorporate By State   Nevada Incorporation   Delaware Incorporation   California Incorporation   Florida Incorporation   New York Incorporation   Texas Incorporation   Nonprofit Incorporation   Forming A Corporation   Form A Corporation In   Incorporate in States A-L   Incorporate In States M-Z   Incorporating A Business   Incorporating Online   Business Incorporation   S Corp   S Corp Benefits   C Corp   C Corp vs S Corp   LLC vs Corporation   LLC   Forming An LLC   LLC By State   International Incorporation   Offshore Company   Corporation Law   State Incorporation Legalities   Incorporation Attorneys   Incorporation Services   Articles Of Incorporation   State Articles of Incorporation   Certificate Of Incorporation   Incorporation Procedures   Obtaining A Tax ID   State Incorporation A-M   State Incorporation N-Z   Incorporation Information   Incorporation   Why Incorporate   Starting A New Business

Return To Incorporation Article Archive   Search the Article Archives California Limited Liability Company - An Overview By Richard A. Chapo Many people are surprised to learn that the LLC business entity is a fairly recent phenomenon. Wyoming was the first state to legislate the creation of LLCs in 1977. Most states didn't jump on the LLC bandwagon until 1988 when the IRS classified the LLC as a pass through entity for tax purposes. This ruling turned LLCs into the popular monster they are today. Now every state has legislation allowing the creation of LLCs and California is no different. What Are The Advantages To Forming A LLC? The LLC business entity offers many advantages to small businesses. An LLC is going to provide a shield between your business activities and personal assets identical to a corporation. Unlike a corporation, there are far fewer corporate formalities. Instead of setting up payroll, you can take draws from the entity. You are not required to maintain a balance sheet, although this is recommended. In short, the LLC entity is all about flexibility. Should I Form A California LLC For My Business? Maybe. While LLCs offer significant flexibility to small businesses, California charges an LLC tax that can really cramp your profits. This tax is charged on your gross revenues for the 'privilege of doing business in California' as an LLC. Lucky you. Depending upon your situation, forming an 'S' corporation may be a better option in California. Additional Tax Issues California allows a single person to own an LLC. This causes problems from a tax perspective. The IRS doesn't really acknowledge the existence of LLCs owned by one person. The IRS takes the position that you must have two people to be taxes as a partnership. Accordingly, it treats single owner LLCs as sole proprietorships. The problem with this result is that you end up paying self-employment taxes. While LLC structures provide significant flexibility, the structure is not always the best choice for a small business. Make sure you speak with competent tax counsel prior to forming an LLC for your business. About the Author: Richard A. Chapo is with SanDiegoBusinessLawFirm.com - This article is for information purposes only. Nothing in this article is intended to address the reader's specific situation nor does it create an attorney-client relationship.

Get your Incorporation questions answered... Subscribe to our Incorporation Newsletter FREE! Your First Name: Your Email Address: Enter above security code

Home  |   Incorporation Blog  |   Ask the Incorporation Expert  |   Incorporation Archive  |   Incorporation RSS Feeds  |   Advertise  |   Sitemap