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In Spidell's California Newsletter (When must an LLC file in California?, December 2013), there was a paragraph stating "However, the FTB is examining the issues surrounding LLCs and member agreements that restrict the ability of some members to engage in the management of the LLCs, and therefore cannot provide a response to the question at this time. We expect to be able to provide additional information by January 2014."
I have been unable to find any subsequent information about whether the FTB came to any conclusion as to how much, if any, consideration the FTB will give to an operating agreement that denies a SMLLC member the ability to participate in the management of a multi-member LLC when the FTB determines whether the SMLLC is "doing business" in California.
My client has a single-member Delaware LLC that is a member of a LLC classified as a partnership which will most likely be generating some California income in the future.