California Limited Liability Partnership
A California limited liability partnership offers protection from personal liability for business debts, just like a corporation. Additionally, like a Subchapter S corporation, a California limited liability partnership also allows “pass-through” of any profits or losses to its members who likewise report this figure on their individual tax return.
Limited Liability
Like shareholders of a corporation, members of a California limited liability partnership are protected from personal liability for business debts and claims. This means that if the business itself can’t pay a creditor (landlord, vendor, supplier, etc.) the creditor cannot sue and attach a member’s house, car, or other personal assets. Exceptions to this rule are:
- Committing a tort or a criminal act.
- Committing intentional acts that cause harm to the California limited liability partnership.
- Personally guaranteeing a loan or debt for the California limited liability partnership.
- Treating assets of the California limited liability partnership as their own personal property.
Formation
To create a California limited liability partnership you must file “articles of organization” with California’s Secretary of State. Additionally, you must create a written operating agreement which does not have to be filed with any state agency. The operating agreements contain the following information:
- The business to be conducted.
- Members’ rights and responsibilities.
- Each member’s percentage of interests in the California limited liability partnership.
- Which members have control.
Taxes
Like a Subchapter S corporation, a California limited liability partnership is what the IRS calls a “pass-through entity” which means that the business income and losses pass-through the members who report this figure on their individual income tax returns. Each member must also make quarterly estimated tax payments to the IRS. While a California limited liability partnership does not pay taxes, the partnership must file Form 1065 with the IRS each year which is an accounting of each member’s share in the limited liability partnership.
Management
A California limited liability partnership can be either member-managed or manager-managed. If all the owners participate equally in the management, it is a member-managed. If the operating agreement designates one or members (or one or more non-members) to manage it, it is a manager-management entity.
CALL NOW TO MAKE AN APPOINTMENT
