Can an International Corporation Own a California LLC?

By Joseph Nicholson

Limited liability companies are created under state law and, therefore, the particular rules for LLCs vary somewhat in each state. One of the most frequently cited benefits of an LLC is its flexible structure and management. There are no restrictions on who can own a California LLC, but no LLC can perform professional services in the state. California allows foreign LLCs -- those created under the laws of another state or country -- to register to do business within the state.

Ownership

According to the State of California Franchise Tax Board, an LLC may be owned by any combination of individuals or business entities. There are no restrictions on ownership in the California statute and the California Corporations Code provides that “any” applicant can reserve a name for future registration as an LLC. Any LLC registered to do business in California, whether foreign or domestic, is liable for a minimum annual franchise tax, which is $800 as of 2011, plus an additional fee based on the total income of the entity.

Single- and Multiple-Member LLCs

California recognizes both single- and multiple-member LLCs. This means that just one individual or organization can form an LLC, or it can be created by a partnership between more than one such entity. Though an operating agreement need not be filed with the state, California law requires that the members of a multiple-member LLC enter into an operating agreement prior to filing the articles of organization; the business must keep a copy of the current agreement at all times. Failure to have a copy of the agreement is one factor considered in piercing the veil of limited liability.

Ready to start your LLC? Start an LLC Online Now

Taxation and S Corporations

Under state law, a California LLC must file Form 568 by the 15th day of the fourth month after the end of the company's tax year. If the LLC has foreign members, it must also file Form 3832 showing their consent to California's taxation of their share of the LLC revenue. For federal tax purposes, the IRS automatically treats a single-member LLC as a sole proprietorship and a multiple-member LLC as a partnership. Either type of entity can elect to be taxed as an S corp, but must meet the requirements for this type of an entity, which are much stricter than the ownership of a California LLC. Nonresident aliens cannot own an S corp under these federal rules; therefore, this is effectively a restriction on foreign ownership of a California LLC if federal taxation as an S corp is desired.

Professional Services

Another potential restriction on LLC ownership is that no LLC may conduct professional services in California. Professional services are those that require a license, certification, or registration authorized by statute. Though a foreign corporation that provides professional services in or out of California may own an LLC, it may not use the LLC to render such services.

Ready to start your LLC? Start an LLC Online Now
California General Partnership Law

References

Resources

Related articles

What Is the Difference Between an LLC & an S Corporation?

Both a limited liability company, or LLC, and an S Corporation, or S-Corp, offer an owner limited liability protection. An S-Corp is a corporation that qualifies under subchapter S of the U.S. Tax Code to be taxed as a partnership rather than as a corporation. An LLC can elect similar tax status, but without the regulations and restrictions inherent in the corporate form.

Requirements for a C-Corporation in Nevada

A C corporation is a type of business entity with advantages and disadvantages. Perhaps the biggest advantage is that a C corporation can ultimately become a publicly traded business, enhancing its growth potential. The biggest disadvantage is that a C corporation is subject to double taxation. This means that the profits of the corporation are first taxed at the corporate level and then the shareholders are personally taxed once the profits are distributed. Nevada has specific requirements for individuals wishing to form a C corporation.

Definition of a C-Corporation

Classification of a corporate entity as a C corporation rests entirely on whether it’s subject to the income tax rules in subchapter C of the Internal Revenue Code, or IRC. The C corporation designation solely relates to income tax, so states make no distinction when you create the entity. However, many state taxing authorities recognize the designation for state income tax purposes.

LLCs, Corporations, Patents, Attorney Help

Related articles

California LLC Filing Requirements

A limited liability company, or LLC, provides the small business owner with the security of limited liability for the ...

Massachusetts LLC Vs. S Corp

An S corporation, or S corp, and a limited liability company, or LLC, are two business entities offering liability ...

What Does a Limited Liability Company Mean?

A limited liability company, or LLC, is a hybrid business form created by state statute. The LLC combines the corporate ...

Can an S Corporation Be a Member of an LLC?

LLCs and S corps are two different types of designations under two different legal frameworks. LLCs are entities of ...

Browse by category
Ready to Begin? GET STARTED