LLC Formation in California
Advantages to register in California
The main advantages of incorporating in California are: lawsuit protection, credibility, tax savings, deductible employee benefits, anonymity, and the simplicity of raising capital. By creating a separate legal entity for personal protection purposes, a California corporation has a broad range of powers beyond that of the standard sole proprietorship such as small claims court benefits, separate liability for corporate debts, and best of all perpetual duration. When you incorporate in California you create a separate legal individual.
If you register a California LLC you will receive protection from personal liability for things like lawsuits and other financial claims against the company. In an LLC, you do not issue stocks to raise funds, or revenue for capital investment. Instead, members are issued interest certificates that reflect the amount or share of their investment in the company. An LLC is run by the members, and the power vested in these members is determined by percentage of ownership. You can register an LLC by filing with the office of the Secretary of State. In most cases this process is simple, and takes as little as a couple of days to complete. It’s a good idea to consult with an attorney or other financial adviser before filing for this status. You may want to weigh the alternatives to determine which business structure meets the needs of your business, your customers and your partners.
No requirement of an annual general meeting for shareholders;
No loss of power to a board of directors;
Much less administrative paperwork and recordkeeping than a corporation;
Pass-through taxation (i.e., no double taxation), unless the LLC elects to be taxed as a corporation;
Limited liability, meaning that the owners of the LLC, called “members,” are protected from some liability for acts and debts of the LLC, but are still responsible for any debts beyond the fiscal capacity of the entity;
Using default tax classification, profits are taxed personally at the member level, not at the LLC level;
An LLC can elect to be taxed as a sole proprietor, partnership, S corporation or C corporation, providing much flexibility.
LLCs in California can be set up with just one natural person involved.
Unless the LLC has chosen to be taxed as a corporation, income of the LLC generally retains its character, for instance as capital gains or as foreign sourced income, in the hands of the members.