Formation & Operation of an LLC in California – continued.
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Organizational Formalities

One or more persons may form a limited liability company by signing and filing articles of organization with the California Secretary of State. If the members conduct business prior to filing the articles of organization, they run a substantial risk of having the LLC treated as a general partnership with liability of all members for all obligations incurred prior to filing the articles.

The articles of organization must disclose basic information about the limited liability company for public inspection, including, among other items:

  • The name of the California LLC;
  • The name and address of an agent for service of legal process on the limited liability company. (This agent may be an individual, a California limited liability company or corporation, or a foreign limited liability company or corporation authorized to do business in California);
  • If the company will be managed by:
  • One manager;
  • More than one manager;
  • All limited liability company members.
  • The latest date, if any, on which the limited liability company must dissolve.
  • The articles of organization may include any other legal provisions.

A limited liability company’s articles of organization are amended by filing an amendment with the California Secretary of State. An LLC must amend its articles of organization if there is a statement in the articles that is false when it was made, or if facts described in the articles have changed, making the articles inaccurate in any respect. For example, an amendment is required if the membership changes and management has been reserved to the members (owners).

If management has not been reserved to the members, an amendment is required after any change in managers or in the members holding 20% or greater interest in the LLC.

The members in a limited liability company customarily enter into an operating agreement at the time the articles of organization are filed. The purpose of the operating agreement is to describe the members’ financial responsibilities, management rights, and profit and distribution shares. As with general partnerships and limited partnerships, if the members do not define their rights and obligations in an operating agreement, California law will supply any missing rights or obligations in a manner which may or may not be consistent with the members’ expectations.

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