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CALIFORNIA CORPORATE & SECURITIES LAW

One More Thing That A Limited Liability Company May Not Be Able To Do

California law does not permit limited liability companies to render a variety of professional services.  See,  Contractors Do It, PIs Do It; Why Not Real Estate Brokers?  To add insult to injury, the California General Corporation Law does not explicitly authorize LLCs to act as incorporators, even while permitting a wide variety of natural and unnatural persons to do so.  Thus, Section 200(a) of the Corporations Code provides that one or more natural persons, partnerships, associations or corporations, domestic or foreign, may execute and file articles of incorporation.  Conspicuously absent from this list, are LLCs.

One might argue that an LLC is an “association”.  However, the General Corporation Law does not generally define “association”.  Section 174.5 does define an “unincorporated association” as having the meaning in Section 18035 of the Code (“an unincorporated group of two or more persons joined by mutual consent for a common lawful purpose, whether organized for profit or not.”).  The definition of “unincorporated association” appears to be applicable only to Section 174.5, which was added long after the enactment of the General Corporation Law.  The term “foreign association” (but not “domestic corporation”) is defined in Section 170 as a “business association organized as a trust under the laws of a foreign jurisdiction.”  Thus, an LLC would not be a “foreign association”.

I suspect that the omission of LLCs from Section 200 is an oversight on the part of the legislature as there does not appear to be any policy reason to allow a partnership, but not an LLC, to act as an incorporator.

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