MBE Rules · Business Associations
LLC Formation (RULLCA)
Cal. Corp. Code § 17701.01 et seq.
The rule
A California LLC is formed by filing Articles of Organization with the Secretary of State. Members' rights and duties are governed primarily by the Operating Agreement, with the RULLCA supplying defaults. Members enjoy limited liability, and the LLC may be member-managed or manager-managed.
In plain English
To form a Limited Liability Company (LLC) in California, you must file Articles of Organization with the Secretary of State. The rights and responsibilities of the members are mainly outlined in the Operating Agreement, while the Revised Uniform Limited Liability Company Act (RULLCA) provides default rules. Members benefit from limited liability protection, and the LLC can be managed by its members or by appointed managers.
Worked example
Jane and Tom decide to start a business and file Articles of Organization to create their LLC in California. They draft an Operating Agreement that specifies they will manage the LLC together. Since they followed the proper filing and created an agreement, they enjoy limited liability for the business's debts. As a result, their personal assets are protected from any claims against the LLC.
Memory hook
File the Articles, draft the Agreement, enjoy limited liability!
The trap
Exams may present scenarios where students overlook the importance of the Operating Agreement, assuming default rules apply without considering member-specific agreements. Be cautious of questions that imply members have no say in management when an Operating Agreement exists.
How examiners test it
Questions often test the distinction between member-managed and manager-managed LLCs, as well as the implications of the Operating Agreement versus default RULLCA provisions.
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