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CALIFORNIA CORPORATE & SECURITIES LAW

Alter Ego and the Nevada LLC

California’s version of the Revised Uniform Limited Liability Company Act expressly subjects members to potential alter ego liability:  A member of a limited liability company shall be subject to liability under the common law governing alter ego liability, and shall also be personally liable under a judgment of a court or for any debt, obligation,…

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LLC Bound By Agreement Signed By Manager’s Manager

Justice Kenneth R. Yegan clearly and concisely frames the question in Western Surety Co. v. La Cumbre Office Partners, LLC, 2017 Cal. App. LEXIS 77 (2017): ” natural person is the managing member of a limited liability company (LLC 1) that is the sole manager of another limited liability company (LLC 2). The person signs an…

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O Frabjous Day! Court Holds Passive Member Is Not “Doing Business”

The State of California imposes its franchise tax on every corporation (other than a bank, financial corporation or exempt corporation) that is “doing business” in California.  Cal. Rev. & Tax Code § 23151.  This tax is imposed without regard to whether the corporation is incorporated in California.  This makes the name of the tax somewhat misleading…

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When Partnership “Members” Are Employees

Last week, I wrote about how AB 2883 changes the definition of “employee” vis-a-vis corporate directors.  See Is A Corporate Director An Employee Subject To Workers’ Compensation?  AB 2883 also rewrites the definition of “employee” for purposes of partnerships and limited liability companies.  Effective January 1, 2017, an “employee” for purposes of California’s workers’ compensation law…

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More Silliness In California’s Revised Uniform Limited Liability Company Act

Readers will know that I have been a frequent critic of California’s Revised Uniform Limited Liability Company Act, Cal. Corp. Code § 17701.01 et seq. In many cases, it is simply hard to believe that the legislature really intended what it enacted. See, e.g., How Confused Is This? California Defines LLCs Subject To New Law To Include…

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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…

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CARULLCA Amendment Purporting To Eliminate Surprise May Do The Opposite

Readers will know that I’m no fan of California’s Revised Uniform Limited Liability Company Act (aka CARULLCA).  As originally enacted, the law was rife with technical errors.  As the legislature continues to tinker with the CARULLCA, it creates even more problems for existing California LLCs.  The legislature’s recent enactment of AB 1722 (Wagner) is yet another dispiriting legislative “fix” that is likely to increase, rather than…

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Contractors Do It, PIs Do It; Why Not Real Estate Brokers?

Individuals and corporations, but not limited liability companies, may be licensed as real estate brokers under the California Real Estate Law.  This is a result of a bargain reached when California’s enacted its first limited liability company law – the Beverly-Killea Act.  In order to overcome the objection of the California Trial Lawyers Association, the act proscribed…

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Does An LLC Maintain Its Records At Its Designated Office When They Are In The Cloud?

Section 17701.13 of the California Corporations Code requires that a limited liability company designate and continuously maintain in California both an office and an agent for service of process.  The office need not be a place of the LLC’s activity in California.  However, the LLC is required to maintain specified records at the designated office. …

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Is a Trustee Ever Just A Trustee?

Trusts are confusing.  Fundamentally, a trust describes a relationship, not a person.  Thus, the California Supreme Court has described a trust as “a fiduciary relationship with respect to property in which the person holding legal title to the property — the trustee — has an equitable obligation to manage the property for the benefit of another — the…

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