Legal Question in Business Law in California

This depends on your financial position so that the tax implications can be analized. It also depends on who the owner (or member or members) are. It this is a single member entity, it is quite simple. Drop assets of Business #1 into a subsidiary LLC and distribute the membership out to the original member. Business #2 stays in the old LLC, and Business #1 is in a new LLC. You need to proper paperwork, to form the new LLC anad to do appropriate Operating Agreements. For most tax purposes, in a single member LLC, this is a non event. Multiple members, liabilities in excess of basis, "hot assets", license requirements or contracts you are not able to assign or transfer can make the question much more complex.If these factors exist you should clearly need to consult with your CPA or tax attorney

By agreement. Without knowing the details of the business, its finances and the intentions, expectations and demands of the owners, that's the only accurate answer you will get.

The most common context for this question to arise is where the LLC has two owners, or maybe two groups of owners, who are in disagreement over something serious. This foreshadows additional problems in devising a split that both camps will agree is fair, on the day the split becomes effective and also maybe a year or two down the road. Probably, involving a neutral and respected third party with significant business experience would be part of a well-designed breakup plan.

It may be helpful to divide the overall process into two categories of problems (which overlap to some extent): those relating to the mechanics of the split-up, and those relating to the fairness of the business deal to each party or group.

Mechanics issues would include creating the new entity or entities, transferring title to assets, paying off or transferring responsibility for liabilities, closing the old LLC (unless it is to survive), dividing up properties and moving, filing and/or delivering revised documents such as bank signature cards, leases, supplier credit applications, etc. etc.

Items relating to fairness include which new or surviving entity gets which assets and assumes which liabilities, perhaps with special emphasis on intangible assets such as customer information, patents trademarks and trade secrets, doubtful receivables, and, if there are employees, who goes with each surviving entity. This is not a complete list.

I would also suggest that a split-up agreement be made, in writing, and that it should contain provisions for mediation, then arbitration, of disputes.