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Richard, Attorney
Category: Legal
Satisfied Customers: 55600
Experience:  Attorney with 29 years of experience.
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When I started my small business over 19 years ago I had no

Customer Question

When I started my small business over 19 years ago I had no idea what I was doing and was advised to become an LLC - it was so easy and cheap - I think I only paid the state once and never did the meetings or had officer's. The company was never my only source of income and has bumbled along but haven't ever made more than $5,000 in profit.
When I opened the bank accounts for the company we were "blahblah LLC doing business as mylastname productions " - the problem is our checking account and business credit cards were never changed to reflect the fact that we were not operating as an LLC. Recently while in the bank for something unrelated I mentioned that we never went ahead with the LLC and that it should just be "mylastnameproductions" - which is what is on our invoices etc. They want us to sign a "Function of Agreement" to change the business entity before they will issue new credit cards, if we don't sign it they will close down our account - Business Line of Credit, two credit cards and checking account.
My question is: does this change in entity get reported anywhere and what kind of consequences am I facing?
Thank you for your assistance.
Submitted: 1 year ago.
Category: Legal
Expert:  Richard replied 1 year ago.

Hi Susan. My name is ***** ***** I look forward to helping you.

Can you provide me a bit more information? Did you actually file formation documents with the CA Secretary of State for your LLC? When you opened this account, did the bank require any documentation evidencing the formation of the LLC or your authority? How have you been filing tax returns for the entity? Thanks.

Expert:  Richard replied 1 year ago.

Can you attach a copy of this document they want you to sign?

Customer: replied 1 year ago.
Hi Richard,Yes, we did file with SOS in California and I believe paid the required $800 for the first year only.
As far as the bank asking for documentation, I honestly can't remember.
I have only ever filed as sole proprietorship, husband and wife (while it was still available).
The central loan dept. who were asking for the Function of Agreement form told me today it would take about 10 days to get but I could pick one up at our local branch - when I went down there no-one knew what that was and gave me a Customer/Account Information Change Request - fairly standard form but does say that if you are changing the legal name of your account then they require supporting documentation.
Customer: replied 1 year ago.
Don't know if it makes any difference, but it looks like we filed originally in 2003, not 1997.
Expert:  Richard replied 1 year ago.

Thanks for following up. Signing the form the bank wants you to sign is not really the problem. The problem that you have is the annual CA tax of $800. Since you registered the LLC with the CA Secretary of State and never formally dissolved it, the state can hold you responsible for this annual tax since the inception of the LLC. The tax applies whether or not the LLC has any activity or makes any profit. ( But, that has no applicability to the situation with the bank. The form the bank likely wants you to sign is a document that is going to provide assurance to the bank, probably through a personal guarantee and affidavits contained in the form, so the bank can be sure it has you and your husband personally liable for any debt incurred. Whatever the bank needs you should probably sign unless you don't need the credit cards and line of credit.

This is the part of my job I don't like...when the law is not in favor of my customer. I wish I could tell you there was no possible issue regarding the annual taxes, but, I can only provide you information based on the law so that you can act on the best available information to you. ………..I wish I had better news, but can only hope you recognize and understand my predicament and don't shoot the messenger. I'm sorry!

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