by Andy Chen | Jul 8, 2025 | California, Enterprise
In today’s post, I want to discuss how California Limited Liability Companies (LLC) are managed. If you search through my past posts, you’ll find several posts on topics related to California LLCs, including (1) filing of Statements of Information, and (2) whether California LLCs can have different classes of members. Like any organization, an LLC requires that someone be in charge. There are two common options. Member-managed First, the various members manage the LLC themselves in a democratic manner. They, for instance, might have meetings, vote on what actions the LLC will and will not take, etc. As a reminder, the term “member” simply refers to a person or entity that owns some portion of the LLC. When discussing corporations, the analogous term for “member” would be “shareholder”. Understandably, many people are not enthusiastic about this idea. They might, for instance, not want to deal with the headache of having meetings. They may also be not want to engage in debates, arguments, or any sort of conflict with other members about why a particular course of action is good, bad, or neutral. Additionally, a member might conclude that the administrative burden of having an LLC is something that should be minimized. Running the business should be the main focus. That is, after all, the whole reason why they formed an LLC in the first place. Manager-managed The second option is for the members to, in essence, outsource the management role by, for instance, hiring someone to manage the LLC. The downside of this, of course, is that this manager won’t work for free. This could make hiring an outside...
by Andy Chen | Jul 7, 2025 | California, Enterprise
In my last post, I went over how a California Limited Liability Company (LLC) is managed. One of the possibly ways to do so is to hire a person to fill that role. By default, the various members or owners of the LLC can manage the LLC between themselves as a group with meetings, votes on decisions, etc. Some members, understandably, don’t want to manage the LLC themselves. Having meetings and conducting votes can, for instance, cause conflict and disagreement. It also can take significant time and energy to handle the administrative tasks needed to actually run an LLC properly. The members might conclude that these administrative tasks are a necessary evil of the real world, the burden of which should be minimized as much as possible. The real focus should be on actually running their business. In a prior post from 2024, I went over one of these administrative tasks — namely, the need to file Statements of Information with the California Secretary of State. Today, I want to go over another of those administrative tasks, namely the paperwork that a California LLC must maintain by law. In my experience, this is something that is a significant problem for the average person who, for instance, just started an LLC as a means to the end of running their business. Generally-speaking, the average person tends to do a very poor job of maintaining documentation and paperwork. The relevant California law here is Section 17701.13(d) of the California Corporations Code, which states: Each limited liability company shall maintain in writing or in any other form capable of being converted into...
by Andy Chen | Jul 6, 2025 | California, Enterprise
In today’s post, I want to discuss the idea of member classes in a California Limited Liability Company (LLC). In prior posts, I’ve mentioned that nowadays, it is extremely easy and inexpensive form an LLC in, basically, any US state. There are many companies on the Internet that claim to be able to do this in just a few minutes. One common situation that I’ve seen arise is the desire to have two or more groups of members within an LLC. Remember that when discussing LLCs, the common terminology is to refer to an owner as a “member”. You might be more familiar with the term “shareholder” when discussing owners of a corporation. LLCs do not have shares so the term “shareholder” doesn’t technically apply. However, aside from the words, the idea behind “shareholder” and “member” is the same. Anyway, one group of LLC members might be, for instance, those who own a part of the LLC, but also have decision-making ability. Members of this group might own very large portions of the LLC so they have more at stake or they might be heavily-involved with the day-to-day given their specialized skills or expertise. The other group of LLC members might be, for lack of a better word, “silent partners”. These members might only own a small percentage of the LLC. They have limited decision-making ability and, basically, are only there for the financial benefits, such as receiving a portion of the LLC’s profits. Some investors may not want to be involved in the day-to-day details of running a business. They instead just want to provide the money and reap...
by Andy Chen | Jul 4, 2025 | California, Enterprise
A few years ago, I wrote about how Operating Agreements work in a California Limited Liability Company (LLC) work. To refresh you all slightly, an Operating Agreement is, in essence, a contract between the various members or owners of an LLC that details the substantive relationship between them. If you want to see more in-depth what an LLC Operating Agreement in California can and cannot contain, take a look at Section 17701.10 of the California Corporations Code. LLC Operating Agreements in California are extremely flexible and can, practically-speaking, be customized in an almost infinite number of ways. This is one reason why LLCs are so popular. In today’s post, I want to go over one topic that can be addressed in a California LLC Operating Agreement and that’s the question of having officers. When it comes to companies, most people have heard of positions such as Chief Executive Officer (CEO), Secretary, Chief Financial Officer (CFO) and so on. Officer jobs like these are customary in corporations, but what about in an LLC? If you’ve created your own LLC, you may be wondering if you can have officer jobs like these also or whether you’re required somehow to have them and, if you do not, then it’s illegal in some way. The short answer to this question of “Can I have officers in an LLC?” is that it depends on what the Operating Agreement says. If the members or owners of an LLC want to have the traditional or customary officer jobs like CEO and CFO, they can. However, the existence of officer roles like this must be clearly specified...
by Andy Chen | Jun 29, 2025 | California
Nowadays, Limited Liability Companies (LLC) are extraordinarily common due to, among other things, the ability to quickly form an LLC online for a relatively low price. As part of forming an LLC, you need to come up with a name for it. In California, there are numerous requirements for that name. In this post, I’m going to go over one of those requirements: Is it necessary to include the abbreviation “LLC” in the name? For instance, if you want to use “Banana Pancakes” as the name of your LLC, does it have to be “Banana Pancakes, LLC” or can you literally just name your LLC “Banana Pancakes”? You might prefer the latter because you think it would be more catchy for advertising purposes, making merch, etc. In California, the answer to this question is found in Section 17701.08(a) of the Corporations Code, which states: “The name of a limited liability company shall contain the words “limited liability company,” or the abbreviation “L.L.C.” or “LLC.” “Limited” may be abbreviated as “Ltd.,” and “company” may be abbreviated as “Co.” “ You’ll notice that I bolded and highlighted the word “shall”. I did that because it reflects that the inclusion of “limited liability company” or “LLC” or “L.L.C.” is mandatory when choosing a name for an LLC in California. To refer back to my prior example, the name “Banana Pancakes” doesn’t comply with this requirement and is, thus, not an acceptable name in California for an LLC. If we follow Section 17701.08(a), however, the following would be acceptable names: Banana Pancakes, LLC Banana Pancakes, L.L.C. Banana Pancakes, a Limited Liability Company Of...
by Andy Chen | Dec 6, 2024 | California, Estate Planning
In 2013, I wrote a post that went over the basic requirements needed to create a Power of Attorney under Section 4121 of the California Probate Code. For clarity, I want to make clear that this is for a financial power of attorney or a non-medical power of attorney. Section 4121 requires that a Power of Attorney either be (1) notarized, or (2) witnessed by at least two witnesses. From a practical perspective, I always favor the notarization option because it is generally going to be very easy to quickly tell one way or the other if that Power of Attorney is notarized or not. In short, look for the notary’s stamp. On the other hand, if you use the witness option, you could potentially run into a whole host of problems. For instance, suppose there is a problem and the witnesses need to come in and testify about what they actually saw when the Power of Attorney was made. The witnesses might not want to get involved. They might have died already. If you can actually locate your witnesses, what’s going to happen if they simply do not remember what they saw because the Power of Attorney was created ages ago? From the perspective of certainty, speed, efficiency, cost, etc., the notarization option is, in my view, superior. One common question that arises with witnesses, though, is who can be a witness? More specifically, can the agent who is being appointed under a Power of Attorney also be one of the two witnesses? The answer to that is no. The governing law for this is Section 4122(b) of...
