As a San Diego LLC attorney, Nikki Semanchik and the entire Semanchik Law Group team is proud to have helped countless local entrepreneurs start their businesses. Of course, one of the first steps in the process is always LLC formation.
How to Form an LLC:
To start the LLC Formation process, you have to look first to the state you are located in. California LLCs are formed by filing Article of Organization with the California Secretary of State. Once these Articles have been filed, the LLC is a distinct legal entity in the state of California. From there, LLC Formation requires drafting an operating agreement and determining tax options. Though it is certainly possible to work through these steps alone, many small businesses prefer to work with a specialized business attorney who understands LLCs and can guide clients through the start of their business from a legal, tax and operational perspective. Doing so ensures that the LLC formation process runs as smoothly as possible and that the company can be up and running without any delays.
Drafting of Operating Agreement:
LLCs must have an operating agreement which creates the governing rules for the entity. This operating agreement will look different if the LLC has more than one member or is managed by members as opposed to managers. An experienced LLC attorney can help you put together the right kind of operating agreement for your new company.
When starting a business with partners who may also be friends or family members, it is essential that you protect your personal and business relationships. The operating agreement provides this protection by laying out what will happen when members of the LLC disagree or want out of the business. Deciding to form a business or enter into a partnership with friends of family is a huge decision and one that really deserves careful thought and intention. At Semanchik Law Group we thoughtfully guide clients through the LLC formation process to make sure they are fully protected and confident in how to move forward with their business.
How is an LLC Taxed?
For federal tax purposes, LLCs that have just one member are typically taxed as a disregarded entity. For LLCs with two members, the entity is typically taxed as a partnership. LLCs can also elect to be taxed as either a C Corporation or an S Corporation. At Semanchik Law Group we think of LLCs as legal chameleons that can choose the tax status to serve the best interest of the LLC and its members.
It is generally a good idea to discuss your specific tax situation with an LLC attorney before filing any paperwork with the IRS. They will be able to provide you with a detailed breakdown of the financial implications of your new company – and help you avoid any nasty surprises during tax season.
What is the Minimum Franchise Tax Fee?
LLCs, as well as Corporations, are required to pay an annual minimum franchise tax fee of $800 per year. You can think of this as the cost of doing business in California and an insurance policy that provides you with liability protection. If you need more information about the franchise tax fee, you should speak to your business attorney.
How much does it cost to form a California LLC?
The fees to form a limited liability company in the state of California can change on a year-to-year basis. However, at the time of writing, the cost to file Articles of Organization with the California Secretary of State is $70. There is also a $20 fee for the filing of the company’s Statement of Information with the Secretary of State and the $800 annual franchise tax fee to consider.
If working with an attorney, you will also need to pay LLC lawyer fees. While these costs can be quite high with some firms, Semanchik Law Group offers LLC formation on a reasonable flat fee basis. When working with SLG you are not just paying for the legal documents to form your LLC. By hiring SLG you are investing in your business by getting an experienced business attorney that will guide you through the entire process of starting a business from opening a bank account to deciding how much to pay yourself and how to grow your business.
How Does an LLC Provide Liability Protection?
Limited liability companies provide liability protection when the owners properly treat the LLC as a distinct legal entity. This means that the entity has its own bank account and observes all corporate formalities.
To make sure that your company is fully compliant with the rules and regulations, it is advisable to speak with your business attorney on a regular basis. They will be able to help you spot any potential issues and work to fix them before you have to deal with any legal issues.
Should I still carry insurance if I form a California LLC?
Forming a California LLC provides you with a great deal of personal protection from lawsuits and other legal issues. However, it is usually a good idea to carry a commercial general liability insurance policy as well.
Depending on the exact nature of your business, you may also wish to take out a more specialized policy. Your LLC attorney will be able to walk you through your potential liability and provide you with guidance on the policies you may need.
Why Should I choose a limited liability company?
A California limited liability company may be the right choice for your business. At SLG we can help with every stage of the formation process. For LLCs with more than one member, SLG can assist with drafting, reviewing and negotiating the operating agreement.
LLCs are a great choice for businesses that want liability protection but don’t intend on having investors with different rights. LLCs also have less rigorous corporate formality requirements making the entity an appropriate structure for small businesses or people looking to hold rental property in an LLC for liability protection.
If you would like to enlist the help of an experienced San Diego LLC attorney for your LLC formation, you need to look no further. Semanchik Law Group can ensure that your LLC Formation process runs as smoothly as possible. Just give us a call at (619) 535-1811 to discuss your specific needs.