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Experience:  32 years of experience practicing law and a businessman.
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I have just formed an LLC in California with my husband as

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I have just formed an LLC in California with my husband as a sole propriorship, due to community laws here. I am trying to create an operating agreement, and if I have both our names listed, I can only choose 'partnership' on the agreement. Will this affect me legally or tax-wise?

Thank you
Submitted: 4 years ago via LawDepot.
Category: Business Law
Expert:  Richard replied 4 years ago.

Hi there. You have a couple of options. One, because California is a community property state, you can simply list yourself, and the result will be that it is still owned 50/50. This would result in you being a single-member LLC and as a result you would not need to file a separate tax return for the LLC..although the net tax result would be the same--you would simply save the expense of the separate return. In that case, you would set up the operating agreement with you as the sole member, and include provisions requiring spousal consent relating to divorce. Two, if you want the Operating Agreement with both of you as members, it would be pretty much the same, except that the LLC would have to file its own tax return. The issue with "Partnership" is that you want the LLC to be taxed as a partnership...that is why you select that option...as a result the LLC is treated as a flow-through entity and you do not have the issue of being taxed at both the entity level and the individual level. The other option is to be taxed as a corporation, but in that case you do have the risk of being taxed at both levels.

 

 

I hope this has given you the guidance you were seeking. I wish you the best of luck!

 

 

 

The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Customer: replied 4 years ago.
Thank you. XXXXX applied for my EIN by telephone and when I opened my business bank account, I listed my husband as part of the LLC. Does this mean that I am no longer able to write my operating agreement with only my name as a sole prop/single member?
Expert:  Richard replied 4 years ago.

That would create an inconsistency, so you should put both of you in the operating agreement. But your operating agreement will not be that much different. You will just want to put in your operating agreement that although you are both members, you have the absolute right to make any and all decisions, major and minor, and that the consent of your husband is not required on any document requiring action by the LLC. You will also want to address what happens in the event of divorce. :)

 

 

I hope this has given you the guidance you were seeking. I wish you the best of luck!

 

 

 

The information given here is not legal advice. As all states have different intricacies in their laws, the information given is general only. This communication does not establish an attorney-client relationship with you. I hope this answer has been helpful to you.

Richard, Attorney
Category: Business Law
Satisfied Customers: 46169
Experience: 32 years of experience practicing law and a businessman.
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