Contrary to popular opinion, you may be much better off avoiding an expensive, possibly worthless California LLC when establishing or changing your business entity.
In the age of DIY everything, including legal services online, we can set up an LLC with a few clicks on the internet. Sometimes we forget one of the important tenets of sound business decisions, "hire for your weaknesses".
Unless you're already a tax attorney, full time CPA, or specialized legal professional, chances are you should be conferring with a licensed professional before you move forward.
There's plenty of advice for free on the web, just about every argument for or against the reasons to form an LLC, but what the advice may be missing is something no one ever tells you about.
Your LLC, California Limited Liability Company will pay thousands of dollars a year, indeed, maybe per month, just for the privilege of being in business in California.
Worse yet, if you ever fall behind, miss a payment and get suspended you are suddenly without ability to transfer any assets, bind any contract, or even defend yourself in a lawsuit, labor claim or any legal proceeding. Anyone with whom you have any contract or agreement can instantly void that agreement and you can't even legally collect money, write checks or do business. In-fact, it's a crime to do so.
It may sound simple to un-suspend your LLC, but it's not. It's called reviving and is pretty expensive and very time consuming. Most importantly, you have to bring ALL your state LLC taxes current (the annual deadline is March 15th, for calendar year-FY LLCs) and you have to wait, sometimes, months for the revivor to take effect.
Whats more, a California LLC will likely not protect you from legal liability. Owners often mistakenly believe that the LLC entity will shield them from personal liability. This is very rarely the case in reality. If you get a bank loan, accept credit cards, collect sales tax or have employees you are personally responsible for almost any debts or liabilities that the LLC incurs. Thousands of lawsuits each year are a nasty wake up call to LLC owners who thought their personal property, homes and valuables were protected by the LLC formation.
Want to sell your business? Have an offer to sell your real estate? If it's held in your LLC and you're suspended you're out of luck.
Want to hold a buyer to their written agreement to buy, want to sue a dead-beat customer for non-payment, want to defend a slip and fall liability claim? Can't do any of these things while your LLC is suspended.
Want to attract potential investors? Think you might want to open an office in a neighboring state? Interested in buying and selling real estate?
A California LLC makes all of these things more of a challenge.
Interested in setting up a corporate office and parent company in a more business friendly state? Maybe want to set-up a Nevada, Delaware (or usually the best choice, Wyoming), HQ? California will penalize you with even higher fees and taxes.
Business expert, Jean Murray talks about good reasons you should not form an LLC in this article here.
Joe Wallen, from StartUp Law Blog discusses the extreme importance of choosing the correct entity here in his post, "12 Reasons Not to Form an LLC"
Whatever your decision, we urge you to work with a professional who has experience in your situation.
If you would like to speak with a specialist at Crawford, Nolan & Zink, send us a message for an immediate and complimentary consultation. Within a few minutes we might be able to be able to save you years of problems, on the house.
In the age of DIY everything, including legal services online, we can set up an LLC with a few clicks on the internet. Sometimes we forget one of the important tenets of sound business decisions, "hire for your weaknesses".
Unless you're already a tax attorney, full time CPA, or specialized legal professional, chances are you should be conferring with a licensed professional before you move forward.
There's plenty of advice for free on the web, just about every argument for or against the reasons to form an LLC, but what the advice may be missing is something no one ever tells you about.
Your LLC, California Limited Liability Company will pay thousands of dollars a year, indeed, maybe per month, just for the privilege of being in business in California.
Worse yet, if you ever fall behind, miss a payment and get suspended you are suddenly without ability to transfer any assets, bind any contract, or even defend yourself in a lawsuit, labor claim or any legal proceeding. Anyone with whom you have any contract or agreement can instantly void that agreement and you can't even legally collect money, write checks or do business. In-fact, it's a crime to do so.
It may sound simple to un-suspend your LLC, but it's not. It's called reviving and is pretty expensive and very time consuming. Most importantly, you have to bring ALL your state LLC taxes current (the annual deadline is March 15th, for calendar year-FY LLCs) and you have to wait, sometimes, months for the revivor to take effect.
Whats more, a California LLC will likely not protect you from legal liability. Owners often mistakenly believe that the LLC entity will shield them from personal liability. This is very rarely the case in reality. If you get a bank loan, accept credit cards, collect sales tax or have employees you are personally responsible for almost any debts or liabilities that the LLC incurs. Thousands of lawsuits each year are a nasty wake up call to LLC owners who thought their personal property, homes and valuables were protected by the LLC formation.
Want to sell your business? Have an offer to sell your real estate? If it's held in your LLC and you're suspended you're out of luck.
Want to hold a buyer to their written agreement to buy, want to sue a dead-beat customer for non-payment, want to defend a slip and fall liability claim? Can't do any of these things while your LLC is suspended.
Want to attract potential investors? Think you might want to open an office in a neighboring state? Interested in buying and selling real estate?
A California LLC makes all of these things more of a challenge.
Interested in setting up a corporate office and parent company in a more business friendly state? Maybe want to set-up a Nevada, Delaware (or usually the best choice, Wyoming), HQ? California will penalize you with even higher fees and taxes.
Business expert, Jean Murray talks about good reasons you should not form an LLC in this article here.
Joe Wallen, from StartUp Law Blog discusses the extreme importance of choosing the correct entity here in his post, "12 Reasons Not to Form an LLC"
Whatever your decision, we urge you to work with a professional who has experience in your situation.
If you would like to speak with a specialist at Crawford, Nolan & Zink, send us a message for an immediate and complimentary consultation. Within a few minutes we might be able to be able to save you years of problems, on the house.