How Do I

How Do I Open a Bank Account for My New California LLC?

Question:  I just formed a new California limited liability company.  How do I open a bank account in the name of the LLC.

Answer: You need two a minimum of items to open a bank account in the name of your new California LLC.  Give the following to the bank:

  • Required:  Copy of the Articles of Organization approved by the California Secretary of State.
  • Required:  Give the bank the LLC’s federal employer identification number (the “EIN”).  If you do not have an EIN for the LLC and your LLC is taxed as a disregarded entity (a single member LLC) and it does not have any employees you can give the bank your social security number.
  • Optional:  Some banks require a copy of the an Operating Agreement signed by all of the members of the LLC.
By | 2016-07-03T16:28:02+00:00 July 3rd, 2016|Categories: CA LLC Formation, FAQs, How Do I|0 Comments

How to Dissolve a California LLC

Question:  I am a member of a California LLC.  What are the legal requirements to dissolve the LLC?

Answer:  California’s Revised Uniform Limited Liability Company Act (RULLCA) provides four ways to dissolve or terminate a California limited liability company.  The four methods are:

  • The LLC’s Articles of Organization contains a provision that says the LLC must dissolve on the occurrence of one or more events set forth in the Articles of Organization.  Few California LLCs have Articles of Organization that contain this type of provision.
  • The members signed an Operating Agreement that contains a provision that says the LLC must dissolve on the occurrence of one or more events set forth in the Operating Agreement.  Many California LLCs have Operating Agreements that contain dissolution provisions.  For example, if the Operating Agreement says that the LLC will dissolve on the sale of its real property and the LLC sells its real property then the LLC must dissolve.  Cal. Corp. Code Section 17707.01(a).
  • If the LLC ceases to have a member the LLC for 90 consecutive days it must dissolve.  This happens frequently to California single member LLCs when the member is a person and that person dies.  Cal. Corp. Code Section 17707.01(c).  Automatic dissolution can create a nightmare for the heirs of the deceased.  For example, if a single member California LLC owns valuable real estate and the member dies and no member replaces the deceased member within 90 days of the death, the LLC ceases to exist and there is no owner of the real estate.  Solution: One of the reasons we recommend that people own their membership interests in California LLCs through a trust is to prevent the dissolution of the LLC if the single member dies.
  • The last method to terminate a California LLC occurs if a majority of the LLC’s members vote to dissolve the LLC.  Cal. Corp. Code Section 17707.01(b).  If the Operating Agreement requires more than a  majority vote of the members to approve a dissolution then that requirement must be met to dissolve the LLC.

How to Legally Dissolve the California Limited Liability Company

If the necessary number of members of a California LLC vote to dissolve the LLC the member(s) actually dissolve the company by doing the following:

  • The LLC must file a final current year tax return with the California Franchise Tax Board.  Check the applicable Final Return box on the first page of the return, and write “final” across the top.  The LLC must not conduct business in California after its final taxable year.  For more on this topic read the FTB Publication 1038, Guide to Dissolve, Surrender, or Cancel a Business Entity.
  • After filing the final tax return with the FTB, the members must file the California Secretary of State form called Certificate of Dissolution (Form LLC-3) to dissolve (i.e., elect to wind up) a California LLC.  To complete the cancellation process, the LLC members must also file a Certificate of Cancellation (Form LLC-4/7)Note: Form LLC-3 is not required when the vote to dissolve was made by all of the members and that fact is noted on a Certificate of Cancellation (Form LLC-4/7) filed by the members with the California Secretary of State.  Note: If the vote to dissolve was not made by all of the members, a Certificate of Dissolution (Form LLC-3) must be filed prior to or together with Form LLC-4/7.
By | 2016-12-13T21:20:06+00:00 June 30th, 2016|Categories: CA Law, FAQs, How Do I, Operating Agreements, Operating LLCs|0 Comments

How Do I Prove I am a Member of a California LLC?

Question:  Last year my friend and I formed a California limited liability company by filing Articles of Organization with the California Secretary of State.  He opened a bank account on which he is the sole signer.  Although both of us have been providing services on behalf of the LLC my “friend” now says that he owns 100% of the LLC.  How do I prove I own 50% of the LLC?

Answer:  Unfortunately your problem is one we hear about a lot.  It is a problem that can easily be avoided if all the members of a newly formed LLC would sign an Operating Agreement immediately after forming the LLC.  One of primary reasons to sign an Operating Agreement is because it identifies all the members and states the percentage of the LLC owned by each member.  The lack of a good Operating Agreement leads to member disputes and conflict.

The Articles of Organization of a California limited liability company does not contain the names of the members (owners) of the LLC so it is not helpful.  However, California law requires that the members of a newly formed California LLC file a Statement of Information with the California Secretary of State within 90 days of the date the LLC was formed.  If you or your friend filed this document it would be evidence that you are a member of the LLC.  Read “California LLC Statement of Information.”

If your LLC filed a partnership tax return or an S corporation tax return the names and percentage ownership of the LLC should be set forth in the tax return.  If you friend filed the tax return and didn’t give you a copy of the return your friend may not give you a copy of it now.

If you can’t resolve the situation your only recourse may be to file a lawsuit and ask the court to find that you are a member of the LLC.

By | 2016-07-03T16:52:53+00:00 April 3rd, 2016|Categories: CA LLC Formation, FAQs, How Do I, Member Disputes, Members|0 Comments

How Does the Agent for Service of Process of a CA LLC Resign?

Question:  I am the agent for service of process for a California limited liability company.  How do I resign the position of the LLC’s agent for service of process?

Answer:  You must prepare, sign and file a California Secretary of State Form RA-100, Resignation of Agent Upon Whom Process May Be Served, with the California Secretary of State.  There is no fee to file the form.  Mail the form to Secretary of State, Document Filing Support Unit, 1500 11th Street, 3rdFloor, Sacramento, CA 9581. Upon filing Form RA-100, the authority of the agent for service of process to act in that capacity will cease,and the Secretary of State will give written notice of the resignation to the entity.

A non-refundable $15.00 special handling fee is applicable for processing documents delivered in person (drop off) at the Sacramento office. To get a copy of the filed document, include a separate request and payment for copy fees when the document is submitted. Copy fees are $1.00 for the first page and $.50 for each additional page. For certified copies, there is an additional $5.00 certification fee, per copy.
By | 2016-12-13T21:20:13+00:00 April 30th, 2015|Categories: FAQs, How Do I, Miscellaneous|0 Comments

How Do I Acquire an Ownership Interest in a California LLC as Separate Property?

Question:    I am married and live in California.  I intend to form a single member California LLC.  I know that California community property law my spouse will automatically own  one half of my interest in the LLC.  How do I acquire my LLC interest as my separate property?

Answer:  California residents who are married or who are domestic partners own assets one of two ways: (1) as community property or (2) as separate property.  Community property ownership means each spouse or partner owns an undivided one half of the total interest in the asset.  Separate property ownership means that one person owns 100% of the property and the other person does not own any interest in the property.  Because California law provides that all property acquired by one spouse or partner is automatically community property unless it comes from a gift or an inheritance both California residents will own the new LLC membership interest as community property unless the non-owner signs a document in which he or she disclaims any ownership interest in the LLC.

When we form a California LLC and the one of the members tells us that he or she is to own the membership interest as separate property we prepare a document called a “Disclaimer of Interest” for the non-owner to sign.  When signed the non-owner acknowledges that he or she does have have any ownership interest in the LLC membership interest.

By | 2016-12-13T21:20:13+00:00 April 7th, 2015|Categories: FAQs, Formation Issues, How Do I|0 Comments

Manager Managed CA LLC Change to Member Managed

Question:  I formed a manager managed California limited liability company.  Can the members of the LLC change the form of management from manager managed to member managed by amending the Operating Agreement to state that the LLC is manager managed?

Answer:  No.  To change from manager managed to member managed, a California LLC must amend its Articles of Organization to provide in item 5 that the LLC will be managed by all of it members.  Of course the members should also modify the LLC’s Operating Agreement to provide for manager management.

To amend the Articles of Organization file Form LLC-5 with the California Secretary of State.

By | 2015-04-30T00:26:21+00:00 March 9th, 2015|Categories: Articles of Organization, FAQs, How Do I, Operating LLCs|0 Comments

California LLC Naming Rules

Question:  What are the rules / statutory requirements for naming a new California limited liability company?

Answer:  The name of a CA LLC:

(1) must not be a name that is “likely to mislead the public” and must be distinguishable in the records of the California Secretary of State from the name of an existing LLC or an LLC name that has been reserved by another party.  Note: Names are not considered distinguishable if the only difference is a limited liability company ending;

(2) must include the words Limited Liability Company, or the abbreviations LLC or L.L.C. The words Limited and Company may be abbreviated to Ltd. and Co., respectively;

(3) may not contain the words bank, trust, trustee, incorporated, inc., corporation, or corp.; and

(4) must not contain the words insurer or insurance company or any other words suggesting that it is in the business of issuing policies of insurance and assuming insurance risks.

If the Articles of Organization for a new LLC has a name that does not satisfy all of the above CA LLC naming requirements the California Secretary of State will reject the Articles of Organization.

See California Corporations Code Section 17701.08 and 17708.05.  An LLC name is reserved pursuant to California Corporations Code Section 17701.09 using the Secretary of State’s Name Reservation form.

How to Register an LLC to Do Business in California

Question:  My limited liability company was not formed in California, but it has a an employee who lives in California.  I understand that if a foreign LLC has an employee or office in California the foreign limited liability company must register to do business in California.  How do I register a foreign LLC to do business in California.

Answer:  An LLC formed outside California that does business in California must register to do business in California by filing an Application to Register (Form LLC-5).

When is an LLC Formed Outside CA Doing Business in California?

To learn more about when a foreign LLC must register to do business in California read my articles called “Warning for Non-California LLCs that Have Members, Managers or Agents in California” and “California’s LLC Law Lists Events that Do Not Cause a Foreign LLC to Do Business in CA.”

By | 2015-04-12T08:54:36+00:00 September 21st, 2014|Categories: FAQs, How Do I, Operating LLCs|0 Comments

New IRS Procedure to Get EIN for an LLC Owned by a Nonresident Alien

Question:  I am a not a U.S. citizen and I live outside the U.S., aka a “nonresident alien.”  I formed a limited liability company in the U.S.  How do I get a federal employer id number (EIN) for my LLC?

Answer:  You can get the EIN one of two ways:  the easy way or the not so easy way. Before January of 2014 we could get an EIN for an LLC we formed for a nonresident alien if the nonresident alien completed and signed an IRS form SS-4 that designated my legal assistant as a third party designee authorized to contact the IRS and get the EIN.  My legal assistant would call the IRS international EIN number, fax the SS-4 to the IRS agent and spend about 45 minutes on the phone, but at the end of the call the IRS would give my legal assistant the EIN.

Beginning in January of 2014, the IRS canned that procedure.  Now a company of any type owned by a nonresident alien gets an EIN for the company by one of the following two methods:

You should be able to get the EIN for the new LLC by using the IRS’
online wizard here:

Easy Way: If the nonresident alien has an IRS issued International Taxpayer Identification Number (ITIN), the nonrsident alien can obtain the EIN in a 5 – 10 minute data entry session using the IRS’ online EIN wizard.  After submitting all of the information the website will display the EIN.  Be sure to print the page with the EIN and keep it in a safe place.

Hard Way:  If the nonresident alien does not have an ITIN then he or she must complete and sign an IRS form SS-4 and fax or mail it to the IRS.  Faxing the SS-4 to the IRS is the better method because the IRS will fax the EIN to the applicant in approximately four business days vs. three to four weeks if the SS-4 is mailed to the IRS.  Prepare, sign and fax the IRS form SS-4 to the IRS at 859-669-5760.

To get a partially completed IRS form SS-4 for an LLC and my detailed instructions on how to fill out the form read my article called “How to Complete IRS Form SS-4.”  Be sure to delete all the text at the bottom of the form in the Third Party Designee Fields and insert your name, phone number and fax number at the bottom of the form.

By | 2017-10-05T10:38:16+00:00 June 5th, 2014|Categories: CA LLC Formation, FAQs, How Do I, Tax Issues|0 Comments

How Do I Reserve a Name for a to-be Formed California LLC?

Question: I plan on forming a new California limited liability company in the near future. How do I prevent somebody from taking my desired name before I form the LLC?

Answer: Reserve the desired name with the California Secretary of State. When approved, you will have the exclusive right to use the name for a California LLC for 60 days. Before filing a name reservation you must review the California Secretary of State’s  LLC name rules and then search its business search database for an existing LLC name that is the same or similar to your desired name. If you find a “good” name then file a name reservation on the CSOS’ Name Reservation Request Form.

The California Secretary of State will reject a name reservation if the name is “likely to mislead the public” or not “distinguishable” from an existing LLC name or unexpired name reservation.  The name rules are set forth in California Corporations Code Section 17701.08:

Warning:  Even if you reserve the name the California Secretary of State may reject the Articles of Organization because of the name.

Bottom line:  Review the naming rules and search your desired name on the CSOS’ business search database, but don’t waste the time or money to reserve the name unless your sole purpose is to prevent somebody else from using your desired name.

By | 2016-12-13T21:20:16+00:00 January 11th, 2014|Categories: CA LLC Formation, FAQs, How Do I|0 Comments

How Do I Check if a Name is Available for a New California LLC?

Question: I want to form a new California LLC. I know that the California Corporation Commission will reject the Articles of Organization if the name of my new LLC is exactly the same as an existing California LLC, corporation, limited partnership or tradename. How do I check the records of the California Secretary of State to see if my desired name is available?

Answer: You must search the California Secretary of State’s business search database to see if you can find a company that is identical or similar to the name you want for your new California limited liability company.  If you find a company that has an identical name then you cannot form a California LLC with that name.  Your desired LLC name must also be distinguishable from existing LLC names and not likely to mislead the public.

Don’t search for a name for your new California LLC without first reviewing the California Secretary of State’s LLC name rules.  California Corporations Code Section 17701.08 contains the following California LLC name rules:

  • The name must end with L.L.C., LLC, Limited Liability Co., Limited Liability Company, Ltd. Liability Co. or Ltd. Liability Company.
  • The name must not include trust, trustee, bank, corporation, corp, incorporated, or inc.
  • The name cannot have insurance company, insurer or any other words suggesting that the LLC  issues insurance policies or assumes insurance risks.
By | 2016-12-13T21:20:16+00:00 January 10th, 2014|Categories: FAQs, How Do I|0 Comments

How Do I Get a Federal Employer Identification Number for an LLC?

Question: I just formed my limited liability company. I know I should get a federal employer identification number (an EIN) for the LLC to open a bank account and to give to 1099 contractors and vendors. How do I get an EIN form my LLC?

Answer: The IRS makes it very easy to get an EIN with its online wizard. In a 5 – 10 data entry session a person connected with the LLC can get the EIN by answering a series of questions posed by the IRS’ website wizard. Apply for an Employer Identification Number (EIN) Online.

By | 2016-12-13T21:20:16+00:00 January 5th, 2014|Categories: CA LLC Formation, FAQs, How Do I|0 Comments