Can a professional service business located in California form a LLC?
I'm thinking of forming an LLC and would like know what it costs. Do I need to hire someone or can I do this myself? What are the tax implications, and what are the annual reporting or filing obligations? I'm also considering forming the LLC in Nevada, if that makes more sense to do. Pros and cons of forming an LLC in each state would be appreciated.
shortly and briefly .... like obama once said : "YES YOU CAN"
either find a good lawyer or read how to do it your self in the gov website
It depends on the profession. Every state which licenses a profession sets rules for the formation of corporations or LLCs. Depending upon the profession and the type of license you have you may or may not be able to form a corporation, professional corporation (PC) or a LLC, LLP or PLLC.
For instance doctors and attorneys generally form PC's or PLLCs of LLPs depending on the structure of their organization and the number of partners.
The advantage of any corporation or LLC is if there are more than one licensed professional in the company is the ability to limit your personal liability for the malpractice of another professional. There are also potential tax and other liability protection aspects of using a LLC or a corporation.
As to forming a corporation in Nevada, if you are engaged in a licensed profession you would have to get a Nevada license and get the appropriate certifications to form a corporation or LLC in Nevada for that profession.
Please feel free to email me directly if you have more questions.
The questions you ask can't be answered briefly. I would suggest that you ask each question separately.
Let me give you an example by answering your first question "Can a professional service business located in California ("CA") form a LLC in CA.?"
The answer is "it depends". My educated guess is that your type of business would qualify however another type of professional business may not qualify. As an example, an attorney or a CPA business would not be allowed to form a CA LLC. Following is brief background of the law as I understand it and as I'm not an attorney you should consult with an attorney for further discussion on this matter.
The CA law located under section 17002 of the Beverly-Killea LLC Act (Corp Code Sections 17000-17666 or "LLC Statute") states that subject to any limitations contained in the articles of organization and to compliance with any other applicable laws, a LLC may engage in any lawful business activity, whether or not for profit, except the banking business, the business of issuing policies of insurance and assuming insurance risks, or the trust company business.
One of limitations includes CA Corp Code Sec. 17375, which states that a CA LLC may not render professional services, as defined in Sections 13401(a) and 13401.3 of the CA Corp Code (the "Moscone-Knox Professional Corp Act"). As defined in this part, "professional services" includes any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act. 13401.3. "Professional services" also includes any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Yacht and Ship Brokers Act (Article 2 (commencing with Section700) of Chapter 5 of Division 3 of the Harbors and Navigation Code).
In addition to CA law, you may want to review a CA 2004 Attorney General opinion letter defining a "professional service" for purposes of this law. This opinion letter stated that a profession is distinguished by its extensive educational and training requirements and the passing of a rigorous state administered examination. This 2004 Opinion states that even if a business requires a license, certification, or registration pursuant to the Business and Professions Code it may still conduct its activities as a LLC company if the services rendered require only a nonprofessional occupational license. To determine whether a particular service is "one or the other" requires an examination of the educational, training, and testing prerequisites.
As I understand CA law, an attorney or a CPA would not be allowed to form a LLC in California. However, if you were a CPA you would want to look at recent legislation signed by Governor Brown which allows an "out of state" LLC formed by CPAs "the right to do business" in CA as long as they register to do business in California (See new Section 5096.12 effective as of July of 2013). This conflict between "in state" and "out of state" CPA rules, as I read it is unconstitutional. I contacted Paul Fisher, the Supervising Investigative CPA for the Board of Accountancy (at 916-561-1725) and he agreed that this appears to be unconstitutional and Mathew Stanley with the Board of Accountancy (at 916-561-1792) who agreed that this new provision did conflict with previous law though he was not sure of the "constitutionality or lack of" of this new law.
I am waiting for an attorney from the CA SOS legal office to get back to me on this issue.
What you are speaking to are liability concerns. I would have to know more about your business. LLC's are considered when there are concerns about liability. Nevada corporations are considered when you are looking for certain asset protection benefits.
I think your concerns are more about your business rather than what state has what benefits. Once the liability concerns about your business are addressed, then you can decide on what state is more beneficial.
Generally speaking, it is probably better to form an LLC where a business is operating albeit there are some exceptions. In most states, it is very easy to form an LLC by yourself. However, research the state's website to make sure you meet all the requirements.
Also, there is not enough information to answer your tax question. Last time I checked, California charged a yearly fee of $700 to be an LLC in the state. You will have to pay that plus any other taxes. The manner in which you are taxed depends on whether you qualify to be an S-Corp (LLCs can qualify as an S-Corp for tax purposes) or if you are a single member LLC.
It might be wise to consult a local attorney to further explain the differences.
Please note that any comments made are intended as general information only and not specific legal advice. No legal representation is offered without a written and signed Fee Agreement. Furthermore, I am only licensed in AZ.