What is the best business entity for an LDA Business?

New and existing Legal Document Assistant (LDA) business owners ask which entity their business should be. According to the California Secretary of State Articles of Organization Form instructions service-based businesses cannot operate via LLC unless there is an affirmative clause in the California Business Professions Code authorizing the subject profession with the ability to do so.

No such clause exists under the LDA Business Professions Code (see BPC § 6400 et seq.) Because the BPC does not contain authorizing clause for the LDA profession to operate via LLC therefore, LDAs are limited to incorporation or sole proprietorship.

In fact, professional service providers such as Independent Paralegals, LDAs cannot form an LLC. According to CA CORP §17701.04.:

(e) Nothing in this title shall be construed to permit a domestic or foreign limited liability company to render professional services, as defined in subdivision (a) of Section 13401 and in Section 13401.3, in this state.

13401. As used in this part: (a) “Professional services” means any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act.

13401.3. As used in this part, “professional services” also means any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Yacht and Ship Brokers Act (Article 2 (commencing with Section 700) of Chapter 5 of Division 3 of the Harbors and Navigation Code).

That said, many Paralegal Service Providers and a handful of Legal Document Assistants have structure their businesses as LLCs. Whether the LLC limited liability protections will be tested later when invocation become necessary is unknown. Would a court pierce the LLC veil you asked? Well… do you feel luck? Well do ya’?