Limited Liability Company (or LLC) is a business entity that features both the characteristics of an incorporated structure and a partnership. One element that an LLC has in common with a corporation is its limited liability, while its similarity with a partnership lies in flow-through taxation. An LLC is a legal structure mostly preferred by real estate holdings and small businesses.
Let us first define the terms limited liability and flow-through taxation. Limited liability is a type of investment wherein the owner is not financially responsible for the debts and obligations of their company. In essence, limited liability protects the personal assets of business owners and members. Flow-through taxation is simply defined as an income that is not taxed on the corporate level.
An LLC may consist of a single member, two or more individuals, or a corporation. It is considered a pass-through entity. This means that all profits and losses of a limited liability company are passed to its members, who settle it through their personal income tax.
If your business offers a professional service, you may not be able to form an LLC! Click to learn more!
Aside from its pass-through tax status, there are several advantages to establishing a Limited Liability Company. One major advantage is that it shields LLC members from any personal liability. Creditors can’t go after the personal assets of the owners to settle financial obligations of the business entity.
Since the members have full limited liability protection, most people see this as a form of insurance. Let’s say someone files a lawsuit against the company. The plaintiff is only entitled to the assets invested in the company. Because of limited personal liability, the other assets of the owners are secured against further claims.
Another advantage is the flexibility in management and operations. A Limited Liability Company is free to form any management structure agreed upon by its members. The affairs and activities of LLCs can be managed directly by the owners themselves.
There are a few disadvantages to forming an LLC as well, one of which is the cost of setting up this business structure. LLC formation requires business owners to file the Articles of Organization, as well as pay the filing fees with the state.
Depending on the state wherein the business files the formation documents, ongoing fees may be charged for annual reports and franchise tax. In the state of California, for instance, there is a minimum franchise tax fee of $800 that LLCs pay every year.
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Although establishing Limited Liability Companies can be accomplished by the owners themselves, it is advantageous to work with an LLC small business attorney Orange CA throughout the process. This comes with a fee, but it ensures protection from any liability nevertheless.
Some LLC small business attorneys have two approaches to setting up this entity: one is an annual program that pays monthly and the other is paying one flat fee broken down into two payments.
Click here to learn more about the facts behind incorporating a company and the need for corporation attorneys.
Small Business Lawyer Orange County California LLC Services – Processed Video Transcription
Andy Gale of Incorporation Attorneys Orange County
Hi, Mark. It’s me, Andy Gale. I’m just responding to your email message. Hope you’re having a good long weekend. Let me sort of walk through the answers to your questions just quickly if I could. Here was your email and here’s a quick read, and what I’d like to do is sort of taking the questions in reverse order if we could.
(1) What are the pros and cons of having the properties in an LLC (especially the cons)?
I would say the cons probably are the cost of setting up the LLC. Once you’ve got the LLC built I recommend that my client do annual legal maintenance of their annuity. That means we, the small business lawyers, treat it like we would pretty much a corporation.
We would have an annual meeting. There would be a series of questions that we would walk through to see what was happening, what was not happening in the LLC.
Small business lawyer Orange County California would actually keep formalized records, so in the event that our limited liability company was attacked in a lawsuit or by the government we could clearly establish through good record-keeping that in fact, we had treated it like a business and that we were intending to use it in such a way that we were trying to limit our liability.
Another con to running an LLC would be that on an annual basis, you have to prepare a tax return and in the state of California, there is at least a minimum franchise tax fee of $800 due every year. Now the pros are big ones and it shields all of your other assets from anything going wrong with the asset that you have placed in the LLC.
LLC – Small Business Lawyers Orange County CA
So if you created a rental property, you placed it in the LLC and then someone is using your rental property and they get asbestos poisoning or something like that. If they sue, they’re only going to be able to get the assets that are inside the limited liability company rather than all of the other assets that you worked so hard to put together.
So, there’s a massive pro to it and most people would look at it like another layer of insurance. The smartest thing to do is have a big insurance policy.
Make sure that you have an umbrella insurance policy and then they like that extra layer of protection of having that business entity that protects you as well. One of the ways to look at it is that it’s a lot of money to set it up and run it on an annual basis, but if you got into a problem, you’d happily pay five times that amount of money not to be in the lawsuit and so it’s one of this preventative kind of things like fire insurance.
I mean, I’ve had fire insurance on my house. I’ve owned it for 25 years, never once had a fire. And I’ll tell you the day that I do have a fire is the day that I want to have it. That’s kind of the flaw beyond setting up an entity like this.
(2) What is the ballpark figure of trying to set up an LLC?
I’d do it in two ways. I can set you up in an annual program that pays monthly. That’s $187 a month. A lot of my clients kind of like that smaller amount of money that they can budget into putting together the entity.
Or if you prefer to just pay it in one flat fee, the way that I’d do it is in one lump sum of $1,987.00 and I can break that up into two payments because it takes about 4 – 5 weeks to get it all set up, so a thousand to start and a thousand when we’re done.
(3) Lastly, do I think it’s best to have it in one umbrella or not?
I almost always do the analysis based on the amount of assets that we got on the LLC. One is easier to take care than multiple LLCs, but if I get
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$250,000 – $500,000 worth of equity in one LLC, it starts to be too much money at risk in one.
So if I have multiple rental properties and they’ve got a couple of hundred thousand dollars something like that in each, then it might be worthwhile of going through the cost and trouble of the taxes and the annual operation or the annual maintenance.
It might be worth it to do it. I would say most people would look at it in terms of how much equity do I have in the LLC and maybe I should break it down, kind of how many eggs in one basket do I want to have. So, those are my thoughts on your questions.
I certainly hope that helps you. I really look forward to meeting you and hopefully, we can get started on this project. Thanks for shooting me your email and maybe we’ll meet soon.
Orange County Small Business Lawyer Question #2332Q
Can I use a Pseudonym in my corporate records for my California S corporation corporate records?
I formed a corporation by myself and I am the only shareholder, officer, or director of the corporation.
The state requires that I be listed as an officer of the corporation on the annual Corporation report filed with the Secretary of State which is a public document.
I am a publicly recognized person that has led to a rash of threats of lawsuits (which I think are completely frivolous).
Because you are a publicly recognized person, it tends to lead people to think that you are a person with deep pockets and have the money to pay off any kind of crazy lawsuits.
I was wondering if I could use a pseudonym, instead of my legal name, when I file the Statement of Information cried which requires the name of an officer or director to be listed in the document.
What do you think?
Orange County Small Business Lawyer Answer#2332A
I must admit, I have been practicing law for 30 years and I have never run across this particular question before today.
I think the problem with the analysis for you is that this is a corporation owned by you where you are presumably the sole director and shareholder.
In this type of situation, the various duties and responsibilities of each particular position as it relates to the Corporation get a bit murky. It is common for people to think, in this situation, that they own the corporation and therefore they should be able to do whatever they want.
It may help you a bit to think about it a different way.
What if you had made a large investment in this company. You then hired a board of directors who then hired a 3rd person to be president of the Corporation.
Let’s say that the president came before a meeting of the shareholders and directors, and stated that he wanted to use a false name in place of his legal name when signing corporate documents including those to be filed with the state government. How would you feel about that?
My guess is that you immediately object to that notion because the president would be perpetrating a fraud on the state. Not to mention, anyone else who subsequently relied on that public record.
Consequently, I would tell you that I would not recommend that you do it
Furthermore, I would guess that if you look at the fine print immediately above the signature line on the Corporation Annual Report, you will probably find some language to the effect that you are signing this document under penalty of perjury certifying the truth of the information contained in it.
Once you file this document, it becomes a matter of public record.
Now imagine yourself in a situation later on where the corporation has been sued for breach of contract wherein the complaining party alleges that there is been fraud in the transaction.
I would think that any sharp lawyer in Illinois would carefully review all of the publicly filed corporate documents and quickly realize that you had filed documents using a false name.
I would bet that this document, and your testimony relating to the filing of the document, would likely be a foundational piece of evidence in a successful prosecution against the company because of a recurring case of fraud.
You need to remember that the corporation is not you.
It is a separate entity and you have a fiduciary duty to the corporation to act in the best interests of the company. Most states apply the doctrine called the business judgment rule that protects officers and directors with respect to decisions they make on behalf of the corporation.
Were mismanagement is the heart of the case, the presumption that officers and directors of a corporation make decisions on an informed basis, in good faith with the best interest of the Corporation at heart may go right out the window.
I think you have several better options
First, if you are concerned about lawsuits, have the corporation buy an insurance policy for general business liability and another for “errors and omissions” that will specifically protect the officers and directors.
Secondly, hire someone else to be the president of your company.
Third, go through the process to change your name legally.
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Highly recommended!
Andy Gale & the associates at Gale and Vallance were awesome in setting up the CA Professional Nursing Corp for ARF Admin Solutions. They were very responsive and knowledgeable from the start. Highly recommended!
George
01/01/2023
Business legal services
Gale & Vallance provided excellent business legal services. The firm was professional, prompt and prepared. The entire process of starting a new corporation was easy and affordable. They have my recommendation.
Raj
07/10/2022
Highly Recommend!!!
I met Andrew Gale through a mutual friend several years go. I was so impressed with their business practice that I made it a point to get to know the attorney to expand my own business. Several years later following their advice i am successful with my business endeavors and do not make any decisions unless i consult with them. Not only do they manage my corporations but also literally help 30 of my clients who use their services. Rare gems in the industry. Highly recommend Gale and Vallance.
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1820 W Orangewood Ave Ste 104a, Orange, CA, United States
This firm is excellent, efficient, reliable, with great valuable expertise and very thorough. Their dedication to providing great work and service is apparent in their kind, supportive, consistent great communication. Including providing consistent updates on new laws and regulations. Working with them and having them on my team, I have the confidence and reassurance that all services provided will be of great assistance and help to the continued positive growth and success of my corporation business along with the maintenance of keeping in compliance with and within federal state laws and regulations.
Hannah K
27/01/2024
A trusted colleague/friend of mine actually referred me to Andy's firm and I'm really grateful!
He and his team were incredibly prompt, informative, helpful, and patient (with inevitable questions that came there way by a new business owner like myself). With all the specificities it takes to create a business, this team was awesome in communicating with me and assisting me with navigating not only the needs to get the ball rolling but also how to keep it rolling and with tips to help with bank accounts and accounting packages (if I were to want to take those routes).
They were also very neutral in providing all the options possible and when I requested advisement or pros/cons, they were able to share these promptly and in a way that helped me choose what was best for me.
I'm glad to have worked with them and will continue to work with them
Courtnie L.
07/11/2023
I am so grateful for Andy Gale and his firm's help in getting my S Corp established. He has great expertise and I feel more at ease knowing everything was set up properly with their assistance!
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Incorporation Attorney
1820 W Orangewood Ave Ste 104a, Orange, CA, United States
Andy and his team were a pleasure to work with! As an LMFT opening a private practice, I was nervous and felt like I didn't know what I was doing. Andy did a great job at explaining everything step by step. I got off of our kick-off call feeling confident and ready to take the next step to opening a practice! I decided to go with a corporation for my private practice. Andy and his team are thorough and answered all my questions throughout the process. I was surprised how quickly everything was taken care of. They also sent me emails along the way, giving me updates. I will be using them for my yearly legal needs. 10/10 recommend!
Julie Eyssallenne
12/11/2023
Andy and his team of professionals are amazing to work with. Not only are they extremely knowledgeable and professional, but they are also very friendly and easy to work with. They will always be my go-to. I appreciate Andy and his team!
Z D
12/01/2024
I could not be more pleased, and frankly impressed with the expertise, attention to detail, follow-up and professionalism of the whole office staff. Andrew Gale Esq is extremely knowledgeable of his craft. His overall approach to corporation creation and management took any doubt or apprehension I had about the process.
Thank you so much for everything and I look forward to a long relationship with your legal practice.
Zouhair Kevin Daif, FNP, Nursing P. C.
