What if I attempted to incorporate and failed to do so properly? Am I now personally liable for all of my company’s debts?
November 19, 2008
The situation that you have been placed in is a dangerous one, but not all hope is gone yet. It really will depend on the types of liabilities that you may have incurred and what your state’s laws are. Some states will recognize an attempt to incorporate, if you had carried on as if there was a corporation and the failure to incorporate was not in bad faith. If you are in this situation, seeking the help of an attorney immediately is imperative since there can be a lot of gray area which only a professional can help you sort out.
Once a corporation is formed, what can the corporation do?
November 19, 2008
Once a business is incorporated, all business is conducted in the corporation’s name. The corporation itself borrows money, contracts with other entities and individuals, sues, and can be sued. It acts like a person. The same applies for Limited Liability Companies (LLCs).
How does a S corporation differ from a limited liability company?
September 15, 2008
While LLCs and S Corporations are both taxed as so-called “pass through” entities, the S Corporation is strongly discouraged for the ownership of real estate because S Corporation shareholders may not be able to maximize their depreciation deductions. The reason for this potential pitfall is because the amount of tax loss that may be used by a shareholder or a LLC member is limited to the member/shareholder’s tax basis. The tax basis of shareholders and LLC members is computed very differently. For a LLC member, tax basis includes debt, but debt is not included in the calculation of tax basis for a shareholder of a S Corporation.
In addition, while S Corporations are limited to a single class of stock, there may be more than one class of economic interest held in the LLC, thus permitting special allocations of income, loss and cash flow among the members. Finally, while an S Corporation cannot include more than 75 shareholders, and permitted shareholders may not include corporations, partnerships, non-qualified trusts or foreign shareholders, none of those limitations apply to LLCs.
What is the annual cost of maintaining a LLC?
September 15, 2008
You should speak to your accountant regarding the annual cost of preparing K-1s for the LLC. Generally speaking, the LLC is subject to an annual California Franchise tax, which is $800 plus an amount determined by the gross receipts of the LLC.
In order to do business in California, every LLC must pay an annual tax of $800. California Revenue and Taxation Code Section 17942 also requires that every LLC must pay an annual fee based on total gross revenue.
California LLC Fees
| Annual Gross Receipts | Annual Fee |
| less than $250,000 | $800 |
| $250,000 to $499,000 | $800 + $900 |
| $500,000 to $999,999 | $800 + $2,500 |
| $1 million to $4,999,999 | $800 + $6,000 |
| $5,000,000 or more | $800 + $11,790 |
What is included in the Articles of Incorporation?
July 7, 2008
Articles of Incorporation must contain only very basic information, including (1) the name of the corporation, (2) a statement of the corporation’s purpose, (3) appointment of an agent for service of process, (4) capital structure (e.g., a single class of common shares).
When do I have to pay the Annual LLC Tax?
May 7, 2008
The annual LLC tax is due and payable on or before the 15th day of the 4th month after the beginning of the LLC’s taxable year (fiscal year) or April 16, 2001 (calendar year). The first taxable year of an LLC that was not previously in existence begins when the LLC is organized. For example, if the Articles are filed on June 1, 2001, the annual LLC tax is due on September 15, 2001.
Does a LLC require more than one member?
May 7, 2008
Recent changes to the California LLC law permit one-member LLCs. Prior to Jan. 1, 2000, California law required at least two LLC members.
Is it cheaper to form the LLC in Nevada?
May 7, 2008
If the LLC will own real estate in California, it must be formed or qualified in California. Forming the LLC in Nevada would result in additional cost. Read more about the costs of LLC
Why does my lender require a bankruptcy-remote, separate entity?
May 7, 2008
“Special purpose entities” (SPEs) are used to minimize a lender’s risk of the borrower filing a bankruptcy petition. The lender wants to avoid the situation where a performing loan and property becomes entangled in a Chapter 11 proceeding involving other non-performing loans or properties, simply because multiple properties are owned by a single entity.
How does a LLC sign a document?
May 7, 2008
ABC, LLC, A California limited liability company
By: __________________________
John Smith, Manager
- OR -
ABC, LLC, a California limited liability company
By: The Smith Company, Inc., a California corporation, Manager
By: __________________________
John Smith, President
By: __________________________
Jane Smith, Secretary
