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Limited Liability Companies
Under the Beverly-Killea Limited Liability Companuy Act (LLC
Act) (Corp C §§17000-17655), one or more members can form a limited liability company (LLC). This form offers the
flexibility and pass-through tax treatment of a partnership in addition to limited liability, making this a very appealing
choice of entity. Members draft an operating agreement that controls a panoply of management issues: how profits and losses
are distributed; what occurs when members leave or transfer their membership, how management will be organized, and the rights
and privileges of the members. As with Limited Partnerships, the members must be careful when drafting the provisions of the
operating agreement to meet the requirements of the statute. Another attractive aspect to the LLC is that memberships can
be classified as securities, which can be offered or sold under California corporate securities laws. There are certain limitations
to LLCs. For instance, professionals cannot offer services under the LLC form.
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