California LLC Laws

By Larissa Bodniowycz, J.D.

California LLC Laws

By Larissa Bodniowycz, J.D.

There are several different sources of laws that regulate California's limited liability companies (LLCs). There are federal laws, state laws, and even local codes that could apply to California LLCs. The laws come in different forms such as statutes enacted by Congress, regulations and rules created by state and federal agencies, and opinions written by judges.

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Federal Laws

The laws of each state permit LLCs while federal laws typically apply to larger businesses and those with interstate operations. Accordingly, there are usually not many federal laws that apply to small California LLCs. However, each business is unique and should consult with a business attorney to see if there are any applicable federal laws.

The California Code

California's law includes various legal codes enacted by the state's legislature. LLC owners should pay most attention to the California Business and Professions Code and the California Corporations Code.

The Business and Professions Code contains laws that regulate and protect businesses and licensed professions and professionals, and creates penalties for any violations. The Corporations Code contains the California Revised Uniform Limited Liability Company Act (“RULLCA"). The RULLCA governs LLC formations, the relationship and duties of members and managers, dissociation and dissolution, and other aspects of operating a business as an LLC.

Local Laws

In addition to state laws, California's 58 counties grant the power to create and enforce local ordinances as long as they do not conflict with state law. In addition, there are city governments that have a higher level of autonomy than counties. While licenses and permits are also granted at the state level, LLC owners have to check these local laws to make sure they also comply. There are also local zoning regulations that govern the types of businesses built in certain areas of the city.

One license that most California LLCs need to obtain is a general business license, sometimes called a business tax certificate. Business owners in California need to obtain this license in the city where their business operates. A few cities do not require a license or tax certificate.

California LLCs that operate under a name that is different from the one registered with the Secretary of State must apply for a fictitious business name with the county in which it operates.

Case Law

Another source of law that California LLC owners should pay attention to is case law. Case law is law created from judicial decisions in court. When a judge writes an opinion and decides a case, that creates precedent, or rules for future cases. Case law is a necessary part of California law governing LLCs because statutes and regulations usually cannot define or cover every possible issue that might arise. Case law clarifies these situations and creates supplemental tests and definitions when needed.

For example, a new test for determining whether workers are employees or independent contracts was recently established by a California court in Dynamex Operations West, Inc. v. Superior Court. The court stated workers are only permitted as independent contractors if a business can show the worker satisfies three conditions. This test is now law, and businesses must abide by it when classifying their workers.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.