Forming A Limited Liability Company In California

The creation of an LLC which will operate in Los Angeles County, Orange County, Ventura County, Santa Barbara County and throughout California requires the filing of articles of organization with the California Secretary of State’s office and execution of an operating agreement among the members. A qualified business attorney can be helpful in accomplishing this.

The articles of organization for an LLC formed under California law must set forth the LLC’s name, a date for its dissolution, a statement of purpose, the agent for service of process, and a statement indicating whether the LLC is to be managed by managers and not by all of its members or managed by only one manager.

The operating agreement is not a legal requirement under California law, but it is a necessity, since the parties will find it necessary to define all the rights, privileges and obligations of the members of the LLC. The operating agreement should contain provisions addressing at least the following topics:

1. The rights and duties of members;

2. Contribution of cash, property, or services by members and other issues relating to capital structure;

3. Allocations of profits and losses and other tax consequences of the LLC;

4. Distributions to the members;

5. Maintenance of capital accounts, accounting records and financial information, and delivery of financial reports and tax information to the members;

6. Meetings of members, meetings of managers, and voting requirements;

7. How the LLC is to be managed, whether by the members, by a management group of members, or by hired management;

8. Disposition of interests of members, termination of memberships, assignment of membership interests, admission of additional members, and withdrawal of members;

9. Rights of the LLC or other members to buy out the interest of a member under specified circumstances;

10. Rights of the LLC or other members to buy out the interest of a deceased member;

11. Dissolution of the LLC; and
12. Procedures for amending the operating agreement.

Mitchell A. Port, at (310) 559.5259 is available to consult on these matters as well as other business transactions.