Key Takeaways

  • In California, most licensed professionals, including lawyers, cannot form an LLC for their practice due to state law restrictions.
  • Law firms in California must generally operate as a Professional Corporation (PC) or a Limited Liability Partnership (LLP), both regulated by the State Bar of California.
  • Forming a PC or LLP allows law firms to comply with licensing requirements while maintaining liability protections and tax advantages.
  • Limited exceptions exist for certain licensed professionals in California to form LLCs, but attorneys are not among them.
  • Understanding the difference between an LLC, PC, and LLP is essential before choosing a structure for a California law firm.

California LLC rules govern how this type of business can be created in the state, what taxes apply, and everything else that an entrepreneur must do to keep a California limited liability company (LLC) in good standing. Learn more about what these businesses are and how to set one up successfully to determine whether an LLC is the right structure for your enterprise.

What Is a California LLC?

A California LLC, also known as a limited liability corporation, combines some benefits of a sole proprietorship with some perks of a corporation.

For example, members of California LLCs have personal limited liability protection, which members of a corporation enjoy. This ensures that the individual members' assets aren't liable for business issues such as bankruptcy in most situations. Unlike corporations, however, LLCs have a pass-through tax structure, like a partnership.

In California, you can form a:

  • Single member LLC
  • Multi-member member-managed LLC
  • Multi-member manager-managed LLC

To create an LLC, you must file your company's Articles of Organization, pay the filing fee, and pay all other organizational fees that apply.

Other requirements in the state include:

  • Drafting and filing an operating agreement
  • Filing a statement of information for your LLC
  • Paying the $800 franchise tax, which is due at the end of every calendar year or at the end of your company's fiscal year

Can Anyone Form a California LLC?

No. California LLC rules prohibit banking services, insurance services, and trust company businesses from forming this type of company.

Also, if a license is needed to provide professional services (such as physician or certified public accountant services), the business must be structured as a professional limited liability company instead of an LLC. You can read more about this regulation in the California Corporations Code Section 17375. If a licensed professional is providing services as a contractor, they may set up a business as an LLC. This is typically not recommended, however, because other business structures offer better tax benefits for licensed professionals who provide these services.

Can a Law Firm Be an LLC in California?

No. Under California’s Beverly-Killea Limited Liability Company Act and the California Corporations Code, licensed professionals—including attorneys—are prohibited from forming an LLC to provide professional services in the state. This restriction is designed to ensure that professional services are delivered under structures that comply with industry-specific licensing and ethical standards.

For law firms, this means that the LLC business structure is not an option. Instead, the State Bar of California requires that attorneys practice through one of the following:

  • Professional Corporation (PC):
    A corporation formed under California’s Professional Corporation Act, which allows attorneys to limit their personal liability for the debts and obligations of the business while still being accountable for their own professional negligence. PCs are subject to specific ownership, naming, and operational rules set by the State Bar.
  • Limited Liability Partnership (LLP):
    A partnership that provides liability protection for partners against the malpractice of other partners, while allowing a more flexible management structure than a corporation. Only law firms and certain other professional service firms may register as an LLP in California.

Choosing between a PC and an LLP involves considering liability protection, tax treatment, management preferences, and compliance requirements. Both options preserve the professional accountability expected in the legal industry, something an LLC would not meet under California’s current laws.

Rules for Naming Your California LLC

One of the first steps for creating a business in the state is picking a name for your LLC. In addition to not infringing on any companies that are already registered, you'll need to follow these rules in California:

  • Your LLC name must end with “Limited Liability Company,” which you can abbreviate using “Ltd.” and “Co.” You may also use the abbreviations “LLC” or “L.L.C.”
  • Words that suggest your business is in the insurance industry can't be used for your LLC. You also can't use words such as bank, trust, incorporated, and corporation as these words are reserved for specific business types.
  • Your business name must be unique and distinguishable. This means that you can't use an LLC name if you find an exact match or a match that's too similar.
  • The name must be unique enough to avoid any possible confusion about which products or services customers are purchasing.

Naming Rules for California Law Firms

Because law firms in California cannot be organized as LLCs, their naming requirements differ from standard LLC naming rules. Professional Corporations and LLPs must comply with State Bar of California guidelines, which generally include:

  • Using a name that is not misleading about the firm’s services or qualifications.
  • For a PC, including a corporate designation such as “Professional Corporation” or “P.C.” in the name.
  • For an LLP, including “Limited Liability Partnership” or “LLP” in the name.
  • Avoiding trade names that imply a partnership when one does not exist, or that misrepresent the legal scope of services offered.

Law firm names may also be subject to approval by the State Bar, and violations of naming rules can result in disciplinary action.

How to Perform a Name Search for California LLCs

You can perform an LLC name search online through the California Secretary of State's website. It's free to search using this database. After typing the name that you want to search, the database will show you all exact and similar results for other LLCs registered in California. 

Depending on your industry and the geographic area where your business will operate, you'll also need to check for LLCs registered at the national level. Your material may even infringe on international trademarks or service marks. For this reason, it's vital to perform a thorough search and to check whether your company may infringe on content protected at the national or global level.

After searching through the California Secretary of State, check the United States Patent and Trademark Office database for LLCs registered across the united states.

If you're not ready to register a name in California, you can reserve the LLC name for up to 60 days by filing a name reservation request form. No one else will be able to register that name during this period, which gives you enough time to create an online domain using the name, register a business email address using that name, and perform other important steps in creating a California LLC using your protected content.

The name reservation request form can be mailed or delivered in person. It only costs $10 to reserve an LLC name in California.

Frequently Asked Questions

  1. Can a law firm be an LLC in California?
    No. California law prohibits attorneys from forming an LLC to provide legal services. They must operate as a Professional Corporation (PC) or a Limited Liability Partnership (LLP).
  2. Why can’t lawyers in California form an LLC?
    State law restricts licensed professionals, including lawyers, from forming LLCs to ensure compliance with licensing and ethical standards.
  3. What business structures are allowed for California law firms?
    Attorneys can operate as a PC or LLP, both of which provide liability protections while meeting the State Bar’s requirements.
  4. Can a law firm in another state be an LLC and operate in California?
    If an out-of-state LLC provides legal services in California, it still must comply with California’s restrictions and cannot practice law here as an LLC.
  5. What is the main difference between a PC and an LLP for law firms?
    A PC is a corporate structure with more formal governance requirements, while an LLP offers partnership flexibility with liability protection from other partners’ malpractice.

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