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A California LLC is a Limited Liability Company. An LLC is not a corporation; however, this business model does share certain characteristics with corporations and partnerships. Limited liability companies are popular with California business owners because, like corporations, they offer protection for the entrepreneur’s assets while providing the tax benefits of partnerships. Also like a partnership, California LLCs are easy to run.
Owners of California LLCs enjoy limited liability protection, which means owners’ personal assets are not at risk due to actions or debt incurred by the LLC. California LLC status may protect you from losing your assets if lawsuits arise against your business. The extent to which owners of a California limited liability companies are protected are defined by state shield laws, which will be best understood by your California incorporation lawyer.
Keep in mind that liability protection through any business model is not a guarantee. If your business in sued, the courts may decide to hold you or other individuals associated with your California LLC or California corporation liable. However, following filing procedures correctly and working with a skilled California incorporation lawyer greatly decreases risk to your assets.
A California limited liability company is similar to a partnership and an S – corporation because members enjoy pass-through income taxation, explored in the California LLC Taxation section.
California limited liability companies are ideal for small to medium-sized businesses, especially those which are operated by one person. However, a California LLC also permits multiple owners, called members rather than partners.
LLCs are much newer entities than corporations. This business model did not become prevalent until 1997, when changes in tax laws made limited liability companies possible. Because they are newer, California LLCs have greater flexibility, but also have fewer precedents for success. This makes governance potentially confusing, and sometimes makes it difficult to attract investors, which may or may not impact small businesses. Keep in mind that due to a lack of precedents for California LLCs, in a legal conflict, courts are likely to apply laws designed for corporations.
If you choose to establish an LLC, keep in mind that limited liability companies are regulated state by state. A California LLC is a distinct entity, separate from LCCs of other states. This is why it is important to work with an incorporation lawyer who has substantial experience working with LLCs specifically in California. With the help of an experienced incorporation lawyer, establishing and operating a successful California LLC can be a relatively simple process.