The Benefits of a California LLC

Establishing your business as a California Limited Liability Company (LLC) has numerous benefits. It is an ideal type of formation for businesses that will have multiple members and allows your business to be taxed as a partnership. It also allows you to manage your business similar to a partnership and offers limited liability protection from debts and lawsuits. Read on to learn more about the many benefits of forming your business as a CA LLC.

1. The biggest advantage to forming a California LLC is mentioned above: members are provided with limited liability protection against the debts of the business. This means that members are not personally liable for business debts or for any judgments against the LLC.

2. Forming a CA LLC enables your business to have a single member as a Single Member LLC or multiple members and to add members after formation.

3. A CA LLC has the feature of multi-tiered ownership, which makes it possible for an S or C corporation to be a member.

4. A CA LLC has the option of being taxed as a standard corporation, which means it is subject to taxation at the company level with members being taxed on the distributions they receive. The other option is for the LLC to be taxed as a partnership, whereby the LLC itself is not subject to taxation but instead, LLC activity is passed onto the members to report on their tax returns.

5. Self-employment tax is not imposed on the net revenue of the LLC.

6. The corporate formalities that are imposed on C and S corporations are not imposed on CA LLCs, thereby making an LLC easier to establish and to run.

7. Forming a CA LLC enables your business to allocate profits and losses disproportionately.

8. A CA LLC allows members’ compensation to be in the form of distributions of profit or structured as guaranteed payments. This allows members to pay themselves as needed if structured as a distribution of profit or members can receive the tax benefits of guaranteed payments.

9. A CA LLC allows the managing member to subtract the full amount of health insurance premiums that they have paid, limited to their interest in the net profit of the company.

10. A CA LLC gives members the option to contribute capital and other assets to the company.

11. Members are allowed to loan money to the company.