Corporate Transactions
Limited Liability Company
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An LLC may have one or more owners, and may have different classes of owners. In addition, an LLC may be owned by any combination of individuals or business entities. An LLC, therefore, is more flexible than an S-corporation with regards to types and numbers of owners.
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An LLC is treated as a legal entity separate from its owners, similar to how a corporation is treated, regardless of how the LLC is classified for tax purposes.
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In general, the owners (members) are shielded from individual liability for debts and obligations of the LLC.
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An LLC is formed by filing certain paperwork with the California Secretary of State prior to conducting business.
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LLCs do not issue stock, and are not required to hold annual meetings or keep written minutes, which a corporation must take in order to preserve the liability shield for its owners.
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Either before or after filing its articles of organization, the LLC members must enter into a verbal or written operating agreement. A formal, written agreement is advisable.
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An LLC is typically managed by its members, unless the members agree to have a manager manage the LLC's business affairs.
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Generally, members of an LLC that are taxed as a partnership may agree to share the profits and losses in any manner. Members of an LLC classified as a corporation receive profits and losses in the same manner as shareholders of a corporation legally organized as such.
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Members of the LLC may vote at any time to end the business operations of the LLC.
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