There are many advantages to forming a company as a limited liability partnership (LLP). As the name would suggest, this form of business typically protects the partners from excessive loss as a result of wrongdoing. But despite being removed from the risk, the nature of a partnership still allows owners to be extremely hands-on, helping to shape the business and roles into precisely what is desired. Here's how to form an LLP in California:
Download a limited liability partnership application from the California Secretary of State's website. Like attorneys, doctors, or accountants, individual professionals may need to file additional registration following application approval.
Make sure that the name of the company is ready. California requires that all registered LLP's indicate that status through their name. This name could look like tacking "LLP" onto the end of the business's title or spelling out the full acronym.
Now would also be a great time to establish a written partnership agreement. This agreement is not mandated in California but is a great way to ensure that partnerships run smoothly.
A registered agent will manage legal documents on behalf of the LLP. They can be found in the form of an individual, or a hired private company.
Registered agents can also assist in finding the best insurance fit for the company. LLP's are required by the state of California to "have security for claims against [them]." Insurance needs vary depending on the nature of the business that will be conducted. Examining the California Corporations Code can assist in guaranteeing an LLP's full, safe coverage.
LLPs pay an annual tax of $800, instead of paying income tax. Despite this, there is still filing to be done with the government. Most owners will need to complete a Partnership Return of Income form and pay taxes on their shares of the partnership's earnings.
Lauded for being one of the easier business types to form, these three steps will quickly get an LLP off the ground. From completing the application to filing the first return, a limited-liability partnership will give owners the freedom and safety they need to run a business successfully. For more information, please view all of the Secretary of State's tips here.
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