Legal Question in Business Law in California

Re: Transfer of DBA to LLC.

After you form the LLC, you should go to the County Recorder's office. As the owner of the DBA, you can file an abandonment of the DBA. You can then immediately reregister the DBA under the then name of the LLC. All the forms are available at the recorder's office.

By the way, check with your CPA about whether forming an LLC is the best for you. Corporations are just as good with respect to the asset protection and are generally better from a tax stand point for a sole owner.

Re: Transfer of DBA to LLC.

You can easily form an LLC (limited liability company) and transfer/assign the rights to your dba to the LLC.

The form of doing so is a little different since the right is registered with the county. However, it can be done.

First form the LLC, then transfer.

Let me know if you've got any questions or would like us to form the LLC for you.

Caleb Donner

Re: Transfer of DBA to LLC.

To understand the difference between the two answers you've already received, first note that they're both correct; they just address different aspects of the transfer.

You need to file two documents with the County. First, a notice of abandonment of the dba by yourself, then a notice of use on behalf of the new LLC. The latter can only be done after the LLC has been formed through filing a Form LLC-1 with the Secretary of State. By the way, I think the proper county office is the Clerk, and not the Recorder, although in some counties the functions have been consolidated. OK, that's legal issue #1.

Legal issue #2 has not to do with filing papers with government agencies, but rather the transfer or assignment of the legal right to use the dba from one entity to the other. Business names have value, so when you transfer the use of the name from your proprietorship to an LLC, you might want to consider assigning a value to the name, drawing up a bill of sale, and entering the value of the name as an asset on the LLC's books. The LLC might then pay you for the name, or show an offsetting debit on its books in either an equity or a liability account, depending upon whether you treat the name as contributed capital or something you will be paid for later.

As to the choice between an LLC and an "S" corporation, an accountant with some tax knowledge could advise you. An LLC must pay a somewhat higher franchise tax (based on a percentage its gross revenues), making it somewhat less attractive for high-volume, low-margin businesses, but LLCs may write off more early-stage losses from non-recourse borrowing, making them possibly more attractive for businesses with certain types of losses in the early stages or with large amounts of borrowing - maybe farming, real estate or R&D businesses.

Re: Transfer of DBA to LLC.

You can get local legal help in doing the transfer, and in establishing the corporate entity, feel free to contact me.