California Limited Liability Company (Llc) Tax Options

If you're contemplating starting a limited liability company (or LLC) in California but are unsure about the process, you should consider working with an experienced California Limited Liability Company lawyer to help guide through the paperwork. An LLC is a separate legal entity from its owners or proprietors. A typical California Llc consists of the following documents: Articles of Organization, Form LLC-01, Statement of Authority, and Operating Agreement.

california llc


To get started, you must file Articles of Organization. These documents tell California state officials how your company will operate, including who is responsible for hiring employees and how it will conduct business. The Articles of Organization must also include the names of all partners or members of the LLC, and any contact information. The articles may also include a brief description of the business, its objective, how it will be operated, and its date of dissolution.


Form LLC-01 is the initial application you complete after filing the Articles of Organization. This form must include all of the information necessary to register a business entity in California. Among these items are business name, address, and contact information. It is helpful if you include a photo of the business as well. All supporting documents, such as the original articles of organization, Statement of Authority, and Operating Agreement, must also be included.

California Limited Liability Company (LLC) Tax Options


Form LLC-01 also requires that California residents register the LLC by submitting a complete Operating Agreement. The operating agreement is a document that endorses the rules-approved by the California Corporation Commission (also known as the "corporation law"). The operating agreement binds all members of the LLC, who are known as LLC owners, to work together in harmony. Additionally, the operating agreement establishes the terms of the limited liability company's (LLC) and its members' (its "asset owners") liability for debts of the LLC.

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The next step in starting an LLC in California is to file a notice of proposed certificate of authority with the Secretary of State. A certificate of authority must appear on one or more forms filed with the California secretary. Each form required to create an LLC in California requires the LLC to name its local office and registered agent, which are commonly located at the office of the Secretary of State. The name of the LLC owner must be followed by the word "limited" and the word "for profit."

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One other requirement that new LLCs in California must meet is the filing of an Annual Tax Affordability Statement with the California Franchise Tax Board (CTB). The statement shows each member's individual income tax return for the taxable year ending within the notice period, but does not include LLC income or dividends. Only the Annual Tax Affordability Statement reveals the total income of the LLC, which may not include dividends. California state law requires all tax-exempt non-profit corporations and LLCs to file a state tax return for the entire taxable year; however, some states allow an unlimited number of exempt corporations and LLCs to file one state tax return and collect the same amount of tax liabilities from all members as all other members would have.

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There are a number of different methods of incorporating a business in California. The most popular way is to use a California Limited Liability Company (LLC). An LLC provides many advantages over corporation filings, including the ability to pass corporate taxation through to a separate account, lower cost or no upfront fees, avoidance of double taxation, and exemption from certain federal and state taxes. In addition, an LLC can be classified as a business as well as a legal entity, allowing it to be sued by other businesses or individuals for debts or losses. In addition to these benefits, there are some drawbacks to an LLC such as limited liability, incurrence of bankruptcy, and lack of itemized income tax returns.


Most small businesses in California begin by forming a C-corporation, which permits them to issue stock in the form of shares to the holders of their capital, but restricts them from transferring their ownership to themselves once ownership is obtained. Some businesses choose to form a C-corporation, but wish to avoid being taxed like corporations, or wish to retain the benefits of limited liability. Business owners in California can avoid this by forming an LLC instead of a C-corporation, which allow them to circumvent the double taxation on their investment while maintaining limited liability. Both types of corporation filings offer limited liability protection and do not result in California state income tax unless the business owns property in California and files a state income tax return.

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