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AGENTS & BROKERS: Business Entity Limited Liability Company Requirements

Limited Liability Company Requirements
Limited Liability Company Original Application Additional Filing Requirements
Limited Liability Company Annual Reporting Requirements

Limited Liability Company Requirements 
As defined by the Internal Revenue Service, "A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. Unlike a partnership, none of the members of an LLC are personally liable for its debts. An LLC may be classified for Federal income tax purposes as a sole proprietorship (referred to as an entity to be disregarded as separate from its owner), partnership or a corporation. If the LLC has only one owner, it will automatically be considered to be a sole proprietorship (referred to as an entity to be disregarded as separate from its owner), unless an election is made to be treated as a corporation. If the LLC has two or more owners, it will automatically be considered to be a partnership unless an election is made to be treated as a corporation. If the LLC does not elect its classification, a default classification of partnership (multi-member LLC) or sole proprietorship (single member LLC) will apply." 

The following information must be provided for approval of a name for a Limited Liability Company: 

  1. A statement as to the number of licensees rendering professional services on behalf of the LLC. 
  2. The LLC must maintain and Errors an Omissions (E&O) policy.  Proof of the E&O policy must be provided in the form of evidence of security requirements of financial responsibility naming the LLC as the named insured and/or as an amendment or endorsement to the policy. Additionally, the aggregate dollar amount of E&O Liability Insurance, Cash, Bonds, Bank Certificates of Deposit, U.S. Treasury obligations, and so forth, held to provide security for claims against the LLC must be specified. (The amount required over the minimum of $500,000, is at least $100,000 multiplied by the number of licensees rendering professional services on behalf of the company; however, the maximum amount is not required to exceed $5,000,000.) 
     

Limited Liability Company Original Application Additional Filing Requirements

For purposes of satisfying the security requirements of Section 1647.5 of the California Insurance Code (CIC), one of the following needs to be provided with the original business entity application filing:

  1. Complete and return the "Certification of Coverage for Limited Liability Companies", form LIC CC1 signed by a representative of the insurance company confirming the E&O policy is in effect; or
  2. If assets other than or in addition to the E&O liability insurance are being used to satisfy the security requirement, provide verification from the bank or escrow holder listing the type of asset and the current dollar amount.

Limited Liability Company Annual Reporting Requirements
For purposes of satisfying the security requirements of Section 1647.5 of the California Insurance Code (CIC), one of the following needs to be provided on an annual basis by March 31st:

  1. Complete and return the "Annual Certification of Coverage for Limited Liability Companies", form LIC CC1B signed by a representative of the insurance company confirming the E&O policy is in effect; or
  2. If assets other than or in addition to the E&O liability insurance are being used to satisfy the security requirement, provide verification from the bank or escrow holder listing the type of asset and the current dollar amount.

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If you have any questions about this form or the license information you retrieved, please see the most commonly asked questions in our License Questions and Answers section. If you need further assistance, please call our Business Entity Licensing Inquiry line at (916) 492-3069. You may also send an e-mail to the Producer Licensing Bureau. Please be sure to include your name, telephone number, license number and e-mail address in all correspondence with the CDI.
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