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CSUN Online Jewelry Business Under Limited Liability LLC Business Entity Case Study

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Hypothetical Corporation Assignment
Part 1: Starting an Online Jewelry Business Under a Limited Liability L.L.C Business Entity
I will create an online jewelry business named Double Delight L.L.C under the limited liability
company (LLC) business entity with its headquarters in Melroouse Avenue, Los Angeles, California. I
chose this business entity because first I am passionate and I love jewelry and also since it will offer
multiple advantages to me and my two members, Pete Cross Terki and John Flex Gregory and the business
structure are easy to set up compared to a company and offers flexibility and protection for me as an
investor in the business. Also, since we require a private equity business, a limited liability company will be
suitable for buying privately-owned firms, which is our aim to boost their value. Besides, the choice for an
LLC was because I need to contribute funds to buy real estate. The company is expected to bring in a net
profit of $75,000 annually, and we plan on splitting the proceeds equally among the three of us; hence each
member of the LLC will receive $25,000 at the end of the financial year. Each partner will then contribute
20% of this amount, which is $5,000, to purchase real estate, one of the primary goals of forming the online
jewelry business. Another main advantage of choosing an LLC is that the entity will safeguard me as the
owner and a member from being held personally accountable for the liabilities such as litigation and debts of
the business. That means that if the business becomes bankrupt or is sued, my assets as an owner or investor
will not be trailed. Also, all the business proceeds will be directly passed to us as the investors and owners to
be levied as personal revenue. This way, it will avert double taxation of us as the owners, investors, and
A limited liability company (LLC) is a structure of business that offers many profits to its partners
and necessitates articles of a business to be filed with the state (Fernando, 2021). The business entity can be
viewed as a mix of a partnership, a direct business contract among two or more investors, and a corporation
that possesses specific liability safeguards. It entails a relationship where all the members engage in the
daily business operations, although the business entity restricts their liability for one another’s practices and
actions. The partners are entirely accountable for all the business’s legal liabilities and debts, although they



are not answerable for the omissions or mistakes of their business associates LLCs are authorized by
individual states and are well-acknowledged in all states. This form of business entity is prepared by filing
with the appropriate state government office, although state regulations affecting LLS differ. According to
all states in the United States, an LLC enables the pass-through taxation of an enterprise with the restricted
responsibility of a company.
It is worth noting that the business is known as a member. No maximum number of members can
form an LLC as even a single member can make an LLC. LLC members can totally engage in everyday
activities of the business and still enjoy their limited liability, unlike limited partners. Example of commonly
recognized limited liability companies includes Westinghouse, Johnstone and Johnstone, PepsiCo Inc.,
Blockbuster, Exxon Mobil Corp, Google’s parent Company-Alphabet, and Anheuser-Busch (Fernando,
2021). Other small examples of LLCs include family LLCs, sole proprietorship LLCs, and memberadministered LLCs. Besides, many professional bodies and groups such as accountants, lawyers, and
doctors are registered as LLCs to safeguard the persons from personal liability for either medical, law or
accounting malpractice awards.
Besides, LLCs are allowed under the United States’ different state’s statutes, and the rules
administering these businesses differ from one state to another. Multiple states fail to delimit possession;
thus, any person can an LLC’s member encompassing foreigners, corporations, individuals, foreign entities,
and other LLCs (Fernando, 2021). However, other business entities such as insurance companies and
banking institutions cannot form LLCs.
When forming an LLC, the obligations often vary from state to state, although some similarities
exist. Members have to select the name of the business initially (Simkovic, 2018). We went with Double
Delight Company for our online jewelry business for our case. Secondly, it is essential to document and file
apprenticeships of business with the state. Articles of organization outline the duties, rights, liabilities,
powers, and other mandates of every associate of the LLC (Fernando, 2021). There is extra information
encompassed in an article of organizations such as the names of the registered agent, names and addresses of



the affiliated, and the statement of purpose of the business. Other states require the company owners to file a
working contract that is just like the partnership agreement. The documents are filed, and a fee is reimbursed
straight to the state. Additional levies and paperwork must also be acquiesced at the civic level to attain an
employer identification number (EIN).
Advantages of LLCs
There are several reasons why my business partners and I decided to go for a limited liability
company as opposed to any other business structure such as a general partnership, a corporation, or a limited
partnership. This is because of LLCs’ benefits and advantages to their members. These are discussed below:

Tax Flexibility and Simplicity
LLCs offer two chief benefits, which all that origin from other familiar business entities. LLCs pass
across business proceeds such as a partnership or a sole proprietorship in the sense that business proceeds
and LLCs are not distinctly taxed and therefore averting double taxation. This means that the Internal
Revenue Service (IRS) does not take the business as a distinct tax entity and rather the proceeds from the
business flow or pass through straight to the members. Thus, the profits from the business make the income
of the LLC’s members. The members can then file their tax returns and compensate their income tax on their
revenue. Also, an investor or owner of an LLC is not necessitated to compensate for unemployment
insurance taxes on their salaries. Nonetheless, LLC will be beneficial to us as it can elect to be treated such
as a company for tax reasons, whether as an S- corporation or a C-corporation.
LLCs are not taxed twice, such as the case with corporations where the owners of the business entity
are taxed by their revenue being distributed to the individual shareholders after the profits of the business
are first levied at a corporate level. Multiple investors and businesses deprecate this double taxation
(Fernando, 2021). In contrast, limited liability businesses permit their proceeds to be directly transferred to
business investors and owners as they are only taxed once as a segment of their revenue.



For instance, we will divide all the company’s profits similarly in our business. If the limited
liability company say will make a net profit of $75,000 in the first annual. I can take one $25,000 for my
income; my other two business associates can take up $25,000 for their income each. Hence, the business
will not compensate taxes on the $75,000 on its net profit. As members, we all compensate income taxes on
our $25,000 cuts.
However, suppose an LLC selects to be taxed by the state by filing as a partnership. In that case, its
revenue may be assigned across all the business members instead of ownership ratios (Pătru, 2018).
Members of the company have to agree with this in the operating contract, which serves the same purpose,
such as the corporation’s bylaws.
Liability Advantage
The second primary benefit that LLC offers their members is the full limited accountability, just like
a corporation. LLC permits their member’s full exception from individual obligation for financial business
requirements such as litigation, debts, and obligations. This means that the LLC can be held accountable
only to the company asset’s value, just like a firm’s insolvency. The only risk that one can risk in an LLC is
the capital they contribute to the company (Simkovic, 2018). The owner’s and investors’ business liabilities
and other debts cannot be taken out of their assets. However, if one guarantees a debt, they have lost their
limited liability.
Besides, the other advantage of the limited status of LLCs, such as that of corporations, is protection.
The business exists as a legal entity, and therefore, this status safeguards members and their owners from
personally being held accountable for the debts and operations of the LLC. For instance, if the staff member
is found performing unlawful physical doings, then legal action can be susceptible against the LLC to
compensate for the caused damage. The court can pursue the firm’s assets but has no legal right to go after
the assets of the individual owners or investors to recompensate for the damages caused. However, the only
exemption would be in the case that the investor or the owner of the LLC was fully conscious of the
unlawful happens g and persistently enabled the activities to occur.



Full participatory role in the operations of the business
Besides, in LLCs, members have been allowed to engage in business daily running fully
(Akhmetshin et al., 2018). They can manage the business’s operations, take part and make decisions
regarding the issues of the business. This is unlike in limited partnership, where limited partners are not
permitted to engage in the business’s day-to-day operations and contribute to the decisions on matters
impacting the partnership.
Less corporate formalities
The managers and members of LLCs do not have to hold a constant meeting which a corporation
necessitates. Corporations have to hold constant meetings with the shareholder and board of directors,
maintain drafted business minutes, and file yearly reports with the state. This, in return, minimizes the
paperwork and complications with marinating and handling the business.
No ownership restrictions
Limited liability companies have no restrictions regarding the number of stakeholders. Every
shareholder has to be a natural person and a civilian or inhabitant of the United States. For example, Scorporations cannot possess over 100 shareholders, and every stockholder has to be a natural person residing
in the US or be a resident of the US (Simkovic, 2018).
Ability to employ the cash accounting method
Limited liability organizations have the freedom of using the cash means of accounting (Simkovic,
2018). This is unlike the C-corporations that, in most cases, have to use the accrual method of accounting.
Therefore, this implies that revenue is first received to be earned.
Ability to put membership interests in a living trust
LLC members are free to put the interests of their membership in a living trust (Pătru, 2018). This is
a benefit that most S-corporations do not enjoy as they find it challenging to place their shares in a living
Ability to subtract losses



LLC business members who are active participants in the daily running of the business activities can
deduct their operating losses against the average income of their members to the degree that is allowed by
the authority and the law. In the case of C-corporations, their shareholders are not permitted to subtract their
working losses (Mancuso, 2021). However, the shareholders of S-corporations are capable of subtracting
operating losses against the constant revenue of their partners to the degree authorized by the state laws.
Flexible management
A member like a shareholder in a partnership may be an individual, a corporation, or a partnership.
Therefore, members can obtain a specific ratio of ownership (Pătru, 2018). In case the idealist group or
persons cannot administer their percentage of ownership or accomplish their portion of responsibilities and
duties. They can opt to recruit management to assist. Although not often, smaller limited liability
organizations are typically managed by their members.
Flexible distribution
There is extraordinary flexibility in the capacity to assign the losses and proceeds to the limited
liability members in different values. LLCs members may not share the profits and losses equally as this
may be determined according to the investment amount. All in all, LLCs enable easy allocation of profits
and losses to their members. In our case, we all the three members. Suppose I put in more time and effort in
the business as compared to my other business partners. In that case, I will naturally end up earning more
money even though we contributed the same starting capital. We can decide on the ratio on which to share
the proceeds on how we think is suitable but must adhere to the IRS guidelines on partnership revenue

Disadvantages of Limited Liability Companies
Limited liability companies are expensive to create.
Limited liability companies are expensive to create compared to sole proprietorships and general
partnerships. Owners of Limited Liability Companies end up paying more taxes compared to those in sole



proprietorships and general partnerships. In Limited Liability, Companies, salaries, and any other profit
earned through self-employment taxes (Akhmetshin et al., 2018). At the same time, in sole proprietorship
and public partnerships, only salaries and not profits are subject to taxes. However, creating a Limited
Liability Company becomes very expensive because of the double taxation compared to sole proprietorships
and general partnerships.
However, a limited liability company is a business organization that offers a very small liability
protection trait in a business and the taxation effectiveness and the operational flexibility of a corporation.
Limited Liability Company owners are not taxed as separate business entities compared to shareholders and
sole proprietorships in a corporation. The owners of this company have no personal liability obligations of
the LLC (Mancuso, 2021). In this case, an LLC is an optional choice for a business looking forward to
flowing through losses to its members. This is because a Limited Liability Company gives complete liability
protection to all its members.
It is hard to transfer ownership compared to a partnership in limited liability companies.
Ownership transfer in a limited liability company is challenging because it involves a more
protracted process compared to sole proprietorships and general partnerships. The processes through which
a limited liability company is formed make it a bit harder when it comes to the time the owner wants to
transfer or sell their ownership to another person. All the processes involving taxation and liability are
considered before the process is completed. The limited liability company’s laws are followed to complete
the process (Akhmetshin et al., 2018). However, transferring ownership of a limited liability company be
contingent on the form of transmission and the supplies of the working contract. When creating a limited
liability establishment, one signs a contract that describes the functions and operations of the business.
However, this paper is not mandated by law. Still, many limited liability companies have the documents,
and in these papers, one can find the proper procedure to be followed when transferring ownership of their
limited liability company.
Also, we have a buy-sell agreement used in limited liability companies. This document is an



operating agreement that shows the instructions to be followed when buying out a little liability company
member. Some of the things covered in these documents include who may develop a limited liability
member, whether the industry must buy back the shares from the leaving member, the dispersal of the
remaining claims, and the processes for endorsement of the transfer (Mancuso, 2021). The contract also
must address how the business and association benefits will be valued in case of interest transfer. All these
processes followed when transferring ownership in limited liability companies are long, making the process
slow and laborious.
Limited liability companies have a limited life.
Limited liability companies have limited life compared to sole proprietorships and general
partnerships (Akhmetshin et al., 2018). A limited liability company has an unlimited life and limited
liability for its members, and this is because there is no limit on the number of shareholders the company
can have. However, the shareholders can be anybody interested, for example, citizens, residents, foreigners,
partnerships, and corporations. In this form, earnings and losses flow through limited liability companies to
the members.
Limited liability companies have fewer fringe benefits.
Employees of a limited liability company who get benefits like group insurance, health repayment
procedures, parking, health insurance, and others have to take these assistances as chargeable revenue. Also,
workers who possess over 2 percent of an S-corporation have to take their fringe advantages as taxable
income (Fernando, 2021). Nevertheless, C-corporations’ staff who receive these reimbursements should not
consider these paybacks as chargeable pay.
Profits are subjected to social security and Medicare levies and fees.
Proprietors of Limited liability companies may lastly result in compensating additional levies
compared to sole proprietorships and general partnerships. This is because the salaries and profits of a
limited liability company are subjected to taxation. Such taxes, known as self-employment taxes, are
compensated twofold, both as the employer and the owner of the business (Pătru, 2018). However, in other



corporations, only wages are subjected to tax. This mode brings about double taxation in LLCs. For
example, in a few states, they mandate an annual fee for the benefits of the limited liability that they provide
to their members. Such kind of fee is often called the franchise tax. For instance, this franchise fee in the
state of California stands at 800 USD a year and also escalates with the LLC’s net income (Akhmetshin et
al., 2018).
LLC owners are not taxed as separate business entities, unlike stakeholders in a corporation. Instead,
all profits and losses are dispersed to the business to each limited liability company member. However, little
liability company members report gains and losses on their tax returns, just like members of a partnership
In limited liability companies, owners must immediately recognize profits
In sole proprietorship and general partnerships must not have allocated their proceeds to their
stockholders as bonuses instantaneously (Simkovic, 2018). This means that bondholders in these
corporations are not overstretched on the corporation’s returns; however, the proceeds of the limited liability
company are mechanically encompassed in a member’s income. This means that in limited liability
companies, immediate gains are made. Hence, they have to be distributed to its members.
State laws and regulations usually administer limited liability companies. This can radically
transform how the firm conducts itself during distinct situations. For instance, in a case where an LLC
member dies, a few states may decide to dissolve the business while others may resume continuing the
company and the shares of the deceased members paid to their executor. However, members of an LLC can
determine what to happen in the case such scenarios happen in the operating contract (Fernando, 2021).
Also, in the international markets, rules and regulations of the state determine how an LLC is treated. For
instance, an American LLC is considered a corporation in Canada as the dissimilarity is not acknowledged
in Canada.
Part 2: Articles of Organizations



Secretary of State
Business Programs Division
Business Entities
1500 11th Street, Sacramento, CA 95814
P.O. Box 944260, Sacramento, CA 94244-2600

Submission Cover Sheet

Complete and include this form with your submission. This information only will be used to communicate with you in
writing about the submission. This form will be treated as correspondence and will not be made part of the filed document.

Make all checks or money orders payable to the Secretary of State.

In person submissions: $15 handling fee; do not include a $15 handling fee when submitting documents by mail.

Standard processing time for submissions to this office is approximately 5 business days from receipt. All submissions are
reviewed in the date order of receipt. For updated processing time information, visit

Optional Copy and Certification Fees:

If applicable, include optional copy and certification fees with your submission.

For applicable copy and certification fee information, refer to the instructions of the specific form you are submitting.

Contact Person: (Please type or print legibly)

First Name: STEPHEN

Phone (optional): 7601234567

Entity Information: (Please type or print legibly)



Last Name: MARK



Entity Number (if applicable): 1234628


This limited liability company (DOUBLE DELIGHT L.LC) is between three members:






Return Address: For written communication from the Secretary of State related to this document, or if purchasing a copy of
the filed document enter the name of a person or company and the mailing address.




Secretary of State Use Only




 −

Doc Submission Cover – BE (Rev. 11/2020)


Clear Form

Print Form

Secretary of State


Articles of Organization
Limited Liability Company (LLC)

IMPORTANT — Read Instructions before completing this form. Filing Fee –
Copy Fees – First page $1.00; each attachment page $0.50; Certification Fee – $5.00

Note: LLCs may have to pay minimum $800 tax to the California Franchise Tax Board
each year. For more information, go to

This Space For Office Use Only

1. Limited Liability Company Name (See Instructions – Must contain an LLC identifier such as LLC or L.L.C. “LLC” will be added, if not included.)

2. Business Addresses

Initial Street Address of Designated Office in California – Do not enter a P.O. Box

City (no abbreviations)




Zip Code


Initial Mailing Address of LLC, if different than item 2a

[email protected]

City (no abbreviations)



Zip Code

3. Service of Process (Must provide either Individual OR Corporation.)
INDIVIDUAL – Complete Items 3a and 3b only. Must include agent’s full name and California street address.


California Agent’s First Name (if agent is not a corporation)

Middle Name

Last Name




Street Address (if agent is not a corporation) – Do not enter a P.O. Box

City (no abbreviations)

Zip Code




CORPORATION – Complete Item 3c. Only include the name of the registered agent Corporation.
c. California Registered Corporate Agent’s Name (if agent is a corporation) – Do not complete Item 3a or 3b

4. Management (Select only one box)




The LLC will be managed by:

One Manager

More than One Manager

All LLC Member(s)

5. Purpose Statement (Do not alter Purpose Statement)
The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company
may be organized under the California Revised Uniform Limited Liability Company Act.
6. By signing, I affirm under penalty of perjury that the information herein is true and correct and that I am authorized by
California law to sign.
Additional signatures set forth on attached pages, if any, are incorporated herein by reference and made part of this Form LLC-1. (All attachments should be 8 ½ x 11,
one-sided, legible and clearly marked as an attachment to this Form LLC-1.)

Organizer sign here

Print your name here



Part 3: California Chicken Café Partnership
California Chicken Café is registered by the State of California as a limited partnership
(LP). A limited partnership exists when two more of the partners form the business and the
general partner supervises and manages the business. In contrast, the other limited or silent
associates are not involved in the daily running of the business. An LP is dissimilar from other
partnerships as associates possess limited liability in the sense that they are not accountable for
debts in the business that surpass their initial investment.
The general partner in an LP possesses unlimited liability for the firm’s liabilities, such as
debts. At the same time, the limited partnership’s silent or limited associates offer capital to the
business. However, they have limited responsibility for the firm’s financial requirements, such as
litigation and debts up to the volume of investment in the business. They are not allowed to make
managerial decisions. Limited partnerships ought to be established to define the particular duties
and privileges of both limited partners and general partners. LPs comprise pass-through entities
that provide minimal to zero reporting obligations.
There are two general partners in the California Chicken Cafe’s limited partnership is the
Dave Najarian, Andre de Montesquieu. Both Dave Najarian and Andre de Montequiou live in
313 N. Mariposa, Los Angeles, California, United States, zip code 90004. Besides, Andre de
Montesquiou is the agent for the service of procedure and filed the return of the acknowledgment
service with the court.
The two general managers got into a contract of limited partnership on October 25, 1990,
with Cecilia Robertson, who is a limited partner in the business (“California Secretary of State”,
n.d.). According to the agreement’s section 1.01 of the limited partnership, both the limited and
general associates were done according to the provisions of the California Revised Partnership



Act. They agreed that the name of the limited partnership will be CALIFORNIA CHICKEN
CAFÉ, a California Limited Partnership.” The business’s partnership will be carried out under
this name. However, the Limited partnerships’ name can be changed by the general partners
through offering written notice to the limited partners.
The general managers agreed they would also participate in running a store under the
name “California Chicken Cafe” that will wholesale and retail things like salads, coffee, and
chicken and maybe franchise the store (“California Secretary of State”, n.d.). The limited
purpose will have six percent while the general ones will have 94% of the stock ownership in the
new partnership California chicken Café.
The chief place of the partnership’s business can be a place since it may be determined by
the general partners. In case the general partners alter the central business place of the
partnership, they have to give a written notice regarding the change of the address of every
limited partner a minimum of 30 days prior to the change. The partnership term will start on the
date which the documentation of the limited company gets filed by the state secretary of
California in a way needed by the Revised Limited Partnership Act of California and will keep
going on till it is dissolved as provided.
According to the certificate of a limited partnership, the partners will immediately get rid
of a limited partnership certificate and make the certificate to get filled in the secretary’s office of
California State. After that, the general partners will execute and make the amendment
certificates belonging to the limited partnerships when they are needed by the revised limited
partnership act (“California Secretary of State”, n.d.). The partners as well agreed they shall
execute and make the amended or original certificates showing the operation and formation of
the partnership when needed under the laws of any country where the partnership decided to



conduct business. They shall also record a certified copy belonging to the permit and any
amendment in the office of the region’s recorder in each county where the partnership has real
No other individual should be admitted as a limited partner or general partner after the limited
partnership certificate is filled with no consent of all the partners.
They also agreed that the partnership would have a starting capitalization of $120,000 of
and in that, $10,000 will be contributed by the limited partners. Moreover, every one of the
limited partners will contribute to the capital of the partnership cash in $10,000 (“California
Secretary of State”, n.d.). They also agreed there would be no additional contributions of capital
that will be needed of the limited partners, and no interest shall be paid on the starting
contributions to the partnership capital.
The available distribution cash as the general partners determined will be disbursed to the
partners according to specific proportions 30 days after each taxable year of the partnership is
closed. There is no limited partner who will be titled to any preference or priority over any other
limited partner as to the distribution of available cash for distribution. The general partners will
have exclusive and sole control of the partnership. The partners will have the power and power
to take such action from time to time as they may see to be appropriate, essential, or suitable in
association with the conduct and management of the affairs and business of the partnership.
The partners will exercise normal business ruling in managing the partnership affairs.
Unless there is deceit, fraud, or wrong taking is involved, the partners are not obligated or liable
to the limited partners for any judgment or fact mistake made by the general partners via carrying
out the partnership business, which results in any form of loss to the partners or the partnership.
The partners in the business do not guarantee in any manner the reoccurrence of the capital or



profit if the limited partners from the partnership operations. Also, they are not liable to any
limited partner due to a loss of that partner’s investment or operations loss unless it has been
accompanied by deceit, fraud, or unfair taking by the general partners. During every time, the
general partners will cause to be upheld or maintain proper and true books, reports, records, and
accounts (“California Secretary of State”, n.d.). They will be entered accurately and thoroughly
all the partnership transactions.
The general partners made several records as per the contract and agreed to maintain
them at the executive agency of the principle of the partnership in California. One of the
proceedings is a certified copy of the limited corporation and all amendment documentation
together with implemented duplicates of any attorney powers pursuant to which any
documentation has been implemented.
Another one is a present list of the full name and final recognized residence or business
address of every partner set in consecutive order together with the share and contribution in
losses and profits of every partner. Moreover, there are duplicates of the restricted federal state
of the partnership and local revenue tax or info reports for the six most chargeable current years
(“California Secretary of State”, n.d.). There are also copies of all amendments and the
agreement, financial declarations of the partnership for the six greatest recent financial years, and
the records and books for a minimum of three current or past fiscal years.
Upon any limited partner’s request, the general partners will promptly give to the partner
at the partnerships’ expense a copy of the amended agreement, a current list of every name of the
partner, contribution, address and share in losses and profits and the limited partnership
certificate as adjusted and any attorney powers pursuant to which any certificate got executed.



About the accessing of records by limited partners, every partner that is limited and each limited
duly of the authorized representative of the partner or attorney will have the right upon request
that is reasonable to copy and inspect during usual hours of business, any partnership records the
partnership is needed to pursuant, maintain to the section 6.01 of the agreement and get from the
general partners punctually after getting available, a copy of the limited federal of the
partnership, local and state income information returns or income tax for every year.
Under the banking section, the general partners shall open and, after that, sustain a …


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