Legal Question in Business Law in California
In order to be granted multi-member status, thus extra protection, I'm giving my friend a 10% stake in my business. He will be involved in day-to-day activities and collect his share of the profits. I'm going to file the LLC in a few days and I want to know if I should leave his name off the statements of information because he is currently on unemployment for at least one more month. At first, revenues from the LLC will virtually be nothing, thus it's in his best interest to stay on unemployment. Should I simply wait to file the statements of information (California you have 90 days after filing your articles of organization) or should I list myself as the sole-member and later amend the statements of information, listing him as a member, when his unemployment benefits run out. Thanks!
2 Answers from Attorneys
There is no reason to give your friend an interest to get "extra protection" Your statement makes no sense. A single member LLC works fine. You must make the decisions as to being a single member, multiple member, member managed or manager managed before you file. See an attorney as to how to make these decisions. It's much easier than screwing it up because you don't understand how it works. Alternatively, spend the time to read one of the many books on the issue and educate yourself. God texts will probably cost about as much as an attorney for a project like this, but you need to understand the basics to proceed effectively.
I agree with the attorney above that it is important for you to have a better understanding of the laws involved in what you are doing. I do see the importance of having two members in your LLC to protect the business from the personal creditors of its members under a charging order protection, however forming an LLC is not as straight forward as many may think and will behoove you to consult with an attorney. Feel free to contact me should you have any questions or concerns.
Best,
Jim
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