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What are the requirements for forming an LLC in California and how is it different from a corporation?

Picture of Chris Battis By   ·  1 minute read

To form a Limited Liability Company (LLC) in California, the following requirements must be fulfilled:

  1. Choose a name for the LLC: The name must contain the words "Limited Liability Company," "LLC," or "L.L.C." Additionally, the name must not be identical or similar to any existing LLC or corporation registered in California.
  2. File Articles of Organization: The Articles of Organization must be filed with the California Secretary of State. The Articles must include the LLC's name, address, registered agent information, and the name and address of the LLC's organizer.
  3. Obtain an EIN Number: The LLC must obtain an Employer Identification Number (EIN) from the IRS. The EIN is used for tax purposes and to open a business bank account.
  4. File Statement of Information: Every California LLC must file a Statement of Information with the Secretary of State every year. The Statement of Information includes the LLC's name and address, names and addresses of its members and managers, and the name and address of its registered agent.

In contrast, a corporation is formed by filing Articles of Incorporation with the California Secretary of State. A corporation must have a board of directors, officers, and shareholders. Shareholders own the corporation and elect the board of directors. The board of directors is responsible for making major decisions for the corporation, including hiring officers and managing the corporation's business.

One major difference between an LLC and a corporation is the way they are taxed. An LLC is a pass-through entity, which means that the profits and losses of the LLC are passed through to the LLC members and are taxed on their individual tax returns. In contrast, a corporation is taxed as a separate entity and is subject to double taxation. The corporation pays taxes on its profits, and then the shareholders pay taxes on any dividends they receive.

It is important to note that there may be limitations or exceptions to the advice given based on the individual circumstances of each situation. For example, if the LLC has non-U.S. resident members, there may be additional tax and reporting requirements. Additionally, if the LLC is engaged in certain types of businesses, such as banking or insurance, there may be additional state and federal regulations that apply.

If you are considering forming an LLC, it is recommended that you consult with a licensed attorney who can provide legal advice tailored to your specific situation.