Legal Question in Business Law in California

Re: Multiple ownership of LLC's in two different states.

You can have common ownership for separate LLC's. If you have any litigation matters in California, our firm can help you.

Re: Multiple ownership of LLC's in two different states.

There doesn't seem to be anything wrong with what you propose; lots of businesses and business people use entities in different states for different or overlapping purposes.

However, you can't sanitize a scheme for avoiding state taxes, skirting state licensing laws, or the like, by forming multiple entities. They could be disregarded.

I recommend having a business lawyer look at your plans from top to bottom; you'll get your LLCs formed properly, your operating agreements well drafted, and as a byproduct the attorney can review the overall legality of your multi-state setup.

Re: Multiple ownership of LLC's in two different states.

I think Mr. Whipple has given you excellent advice; let me add my two cents worth.

If I hear you right, you want to have 2 separate LLCs, one formed and operating under California law, and the other formed and operating under Texas law. Also, you want to have the members of the Texas LLC also be the members of the California LLC.

My difficulty comes with use of the term �represents the interests�. I�m not sure what you mean by that. Are you talking about legal representation, or one LLC acting as the agent for the other, i.e., CA LLC is authorized to enter into contracts in CA on behalf of the TX LLC, and likewise, the TX LLC is authorized to enter into contracts, etc., in TX on behalf of the CA LLC.

I see no problem, so long as all the necessary documentation is handled properly.

First, each LLC must be set up in concert with the laws of the jurisdiction in which it will operate. Then, appropriate agreements must be executed which authorizes each LLC to �represent� (whatever that really means), the other in the relevant jurisdiction. Also, to the extent that the two LLCs might have differing interests, you�ll probably need counsel to guide you through the maze of disclosure of the all the potential conflict of interests, and all the waivers necessary to protect you against the day when some members decide they don�t like what other members are doing, etc., etc.

Question: Why not form one LLC with all the intended members, then take those steps necessary to allow that LLC to operate in the other state? For example, why not form a TX LLC, file the necessary papers with the CA Secretary of State to do business in CA as a foreign LLC, and avoid the expense and administrative hassle of forming two different LLCs?

A complete answer to your question would require a lot more information, such as the nature of the business you contemplate, where your primary focus of business will be, what your goals are regarding minimizing liability to individual LLC members, etc., etc.

Mr. Whipple has stated a major point � don�t try to use two different entities to avoid operating requirements and application of tax laws in the two jurisdictions. Also, if the idea is to avoid liability for operations in the other state, that raises a completely different analysis and set of issues dealing with agent-principal law and constitutional considerations of one state�s jurisdiction over the operations of an entity formed and operating in another state.

Feel free to let me know if you have additional questions, and I wish you the best in your endeavors.

Now the inevitable caveat: The foregoing information is provided as an accommodation only, and does not constitute a legal opinion based on comprehensive analysis of all facts, relevant documents and legal authority. Provision of the foregoing information may not be construed as creating any attorney-client relationship.