Business

New rulings and regulations continue to surface regarding the newest entity in California, the California LLC. These limited liability companies became available less than ten years ago and appear to be having a major impact on the success of many small businesses. An LLC is preferred by many for its limited liability and other benefits that will be explained below.

Who Needs a California LLC
A defining characteristic of a CA LLC is that all members and managers have limited liability in the company. The Internal Revenue Service have published rulings that state the IRS will not rule that a California LLC lacks limited liability unless at least one member validly assumes personal liability for all obligations of the company. In other words, there is a very slim chance that you or the other members of the company would ever be responsible for company liabilities.

In addition to the limited liability, a California LLC also affects taxation. A limited liability company must follow the check the box regulations when deciding the tax treatment. This gives the owners the opportunity to select partnership or corporate tax treatment.

A huge benefit of the limited liability company is that there is no tax detriment to owners. Regular corporations are subject to double taxation issues which frequently lead to dissension within the company. For many, forming an LLC in California is the new preferred entity.