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Can an LLC member receive a salary for services that is not treated as a distribution of profits?

Summary answer—Yes:  an LLC may account for regular payments to a member for services and paid ahead of payments to members as distributions of profits as guaranteed payments, essentially a salary substitute.  And like a salary, guaranteed paymen…
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Why does the “active” status of a California corporation get suspended, and how is this avoided?

The right to conduct business as a corporation in California is considered a privilege which can be forfeited or suspended. When the State of California suspends a California corporation’s “active” status it is more often than not because eithe…
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What is an Earn-out?

In connection with the purchase and sale of a business, including a merger transaction or sale of substantially all of a business’ assets (a merger and acquisition or “M & A” transaction) an earn-out is a mechanism to delay and make conting…
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Shielding shareholders from liability for corporate acts and omissions

So you incorporated, and now the shareholders are protected from individual liability for acts of the corporation, right? Not exactly. Filing articles of organization in California or a certificate of organization in Delaware is a the necessary first…
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Term sheet for a convertible debt financing

A convertible debt financing, like a preferred stock financing, is usually negotiated at first as a non-binding term sheet, rather than a full set of financing documents. The advantage of this is that it allows parties to wait and only invest in the…
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The “defacto” dissolution of a California LLC; it can result in member personal liability for a judgment against the dissolved LLC

California law provides generally that members of a limited liability company (LLC) are not personally liable for LLC “debts, obligations, or other liabilities.”   There are, of course, exceptions. These include: a member’s liability under t…
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