Starting a new business LLC in San Diego is an exciting time. Most new businesses in San Diego will be Limited Liability Corporations or LLCs or an S-Corporation. What are the advantages of an LLC for a new business startup?
LLCs Provide Protection and Flexibility
LLCs provide protection for you personally, as well as your personal assets and financial accounts. The reason to have an LLC (or any corporate entity) is that it establishes a separate legal “entity” from you as a person. The new business (LLC) is a protected company that conducts business and any resulting liabilities are legally associated with that business. They cannot be passed on to you personally as long as you protect the “corporate veil” of your LLC.
The LLC is designed to be simpler to operate and maintain and passes income through to the “Member(s)” (owners) for taxation purposes. There is no corporate tax on an LLC, however, the entity must pay California a tax of $800 per year as a “franchise tax” fee.
Are California LLCs Different than Other LLCs?
Are California LLCs different than other LLCs? Yes, there are many advantages to consider when starting a new business LLC in San Diego and Southern California. A California LLC does not require a board of directors or corporate officers (CEO, etc). One doesn’t have to hold annual corporate meetings, record minutes or even establish corporate bylaws.
It is important to note that California laws are different than most states, and the types of LLC incorporation documents and operating agreements you find on popular download sites and on the internet do not address these laws specifically or adequately. For example, the default position of California law is basically designed to protect minority ownership interests in your LLC above your own, unless the corporate documents and the operating agreement specifically state otherwise.
It is important to invest the time and effort to develop a thorough LLC operating agreement if there is to be more than one member/owner. The operating agreement focuses more on the relationship between the members and provides important protections while establishing the rules under which the LLC will operate as well as how disagreements between the members will be managed. There are many contingent scenarios which must be planned for such as the death, incapacitation, divorce or bankruptcy of a member. What happens if someone isn’t carrying their weight or can’t make a needed capital contribution? How will voting rights be distributed? What happens if a member needs to sell their stake in the company? How will valuation be distributed and how will existing members be protected from a potentially unwelcome new member?
Starting a New Business LLC in San Diego or Southern California
Are you considering starting a new business LLC in San Diego and Southern California? We understand that every dollar is precious at this moment in time, but your new business entity is all that will separate creditors from your personal assets – your home, your cars, your bank accounts. The structure of your entity and important documents like the operating agreement provide important protections and prevent costly disputes down the road. It’s important to invest the time to understand all of the clauses and documents when forming an LLC in San Diego.
The best news is that the attorneys at the Watkins Firm will provide a free and comprehensive consultation that explains many of these core issues. We invite you to review our Podcast Episode 2 – Starting a Business, the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.
We will have an informative discussion and share the benefit of our more than four decades of service to the San Diego business community. We will tell you up front all that we will do for you, and how much it is going to cost before you agree to hire us. We will give you a solid budget that is cost-effective and serve as your personal business coach to help ensure that your new business lays a solid foundation upon which your venture can survive and thrive.
