How to Start an LLC in California: Step-by-Step Guide -

If you are looking to start an LLC or limited liability company in the state of California, then you’ve come to the right place. Today, we’re going to provide you with a detailed and step-by-step guide on exactly how to start an LLC in California.

For those of you who don’t know, a limited liability company or LLC has various benefits.

First and foremost, this allows you to form a business where you are not legally liable in the event that something goes wrong. However, you can still decide how to divide profits and losses. It’s a very beneficial company structure, and right now we’re going to teach you how to form it.

Step 1: Choose a Company Name

The all-important first step of setting up your LLC is choosing your name. You could not set up a limited liability company in the state of California before you choose a name. There are several requirements that you must follow here.

The name of your business must include either LLC or limited liability company in the title. For business name ideas, you can use our AI-powered business name generator to help you with unlimited number of ideas for your industry.
The name of your LLC cannot be the same as another business already existing in the state. Use the Secretary of State’s website to research if your business name is available or not.
There are certain words that your business name cannot contain, including those related to any government agency.
There are also certain restricted words that you’ll have to consider, such as lawyer, credit union, bank, and others.

Your LLC will most likely also need a website, so do some research to see if the website URL that includes your business name is available. You always want to choose a business name that has an available URL, so you can create a dedicated website. You can check our guide for how to check if your domain name is available.

If at this point you aren’t yet ready to register your LLC, you may still want to reserve the name for a small fee. You can reserve a business name in California for up to 60 days by submitting proper documentation and by paying a fee.

More useful tips: Business Name and Trademark: What are the Main Differences for Entrepreneurs

Step 2: Decide on a Registered Agent

Your business in the state of California, your LLC, must have a registered agent. A registered agent is simply an entity person that is authorized to receive the service of process, as well as other official legal documents on behalf of your limited liability company.

This is the person or entity that will receive government correspondence, tax forms, and legal documents of all sorts.

As far as California is concerned, a registered agent can be a person or individual, as well as an entity or company that offers registered agent services. Whatever the case may be, the agent must have an address located in California, and they must be available on site during regular business hours to accept business documents.

Step 3: File Articles of Organization

To form your limited liability company in the state of California, you need to file an article of organization. You need the LLC-1 form. File the articles of organization with the California Secretary of State.

Although this might sound difficult, it’s actually a simple and quick online form that you just have to fill out and submit. You can also submit the form by mail.

Secretary of State instructions for filing a submission cover sheet

There are a few vital pieces of information that need to be included in this form. These include the name of your LLC, the address of your LLC, the purpose of your company, the address and name of the registered agent, the management structure, and you’ll need to provide your signature as well.

Once you’ve sent all the documentation to the Secretary of State, they can decide to either approve or deny your application.

Step 4: Get Your Certificate

The state of California will issue you a certificate that confirms that your limited liability company formally exists after everything has been approved. Keep in mind that the quickest way to get your certificate is to file online.

Step 5: Create the Operating Agreement for Your Company

An operating agreement is simply a document or agreement that outlines exactly how your LLC will conduct business. All LLC’s in the state of California need an operating agreement, although it doesn’t technically have to be filed with any entity. However, it should be easily accessible by anyone who needs to go check.

Writing an operating agreement is beneficial for several reasons, including for settling any kind of financial disputes or other types of litigation that can arise from the business. If there is no agreement in place, courts will make determinations based on California State law, and not what is in the best interest of the limited liability company.

Several things you can include on the operating agreement include:

the LLC’s name
the address
how long it’s existed for
the name and address of the registered agent
the articles of organization
the purpose of the business
the members of the business
how you will divide profits and losses
the management structure

Step 6: File the Statement of Information

All California limited liability companies have to file a statement of information with the California Secretary of State. You must do this within 90 days of forming the limited liability company. The statement of information has to include various pieces of information.

This includes:

the name of the LLC
California Secretary of State file number
the agent address and name
the principal executive office
the mailing address
the complete business or residence address
the name of any chief executive officer or manager
the e-mail address
the principal business activity

Step 7: Obtain the Employer Identification Number

The next step in creating a limited liability company in the state of California is to obtain your EIN. This is also known as the employer identification number. This is a nine-digit number. The IRS or Internal Revenue agency assigns this number to all businesses. Your LLC has to have an EIN for various reasons.

Online Application for official EIN/Tax ID

An employer identification number allows you to manage taxes and file taxes at both a federal level and a state level. This also allows you to hire employees and to open your own business bank account. As you can see, without an EIN, you can’t really operate an LLC at all. Click here to get your California EIN.

Step 8: Pay the California Annual Franchise Tax

All limited liability companies in the state of California must pay a franchise tax fee. This is an $800 fee that you must pay on a yearly basis. This is regardless of the amount of income you make. If your LLC produces a gross revenue of over $250,000 per year, you’ll have to pay another fee as well.

However, there is an exception for all limited liability companies formed in California between 2021 and now. Under this new law, any LLC that registers itself to do business in the state of California does not have to pay the $800 minimum annual franchise tax for the first taxable year. However, you’ll then have to pay that $800 fee in the second tax year.

Additional Steps

Important to know is that every LLC in California must file what is known as a biennial report, which is also known as the statement of information. You have to file this with the Secretary of State along with paying a fee.

You’ll also have to pay tax payments. For instance, if you have employees in your limited liability company, you have to register with the California Employer Development Department. You will have to pay various employer taxes.

If your limited liability company is selling goods and collecting a sales tax, you also need to register with the required California taxing authorities. For instance, if you’re collecting sales taxes, you must register with the California State Board of Equalization.

Your business may also require a variety of zoning permits, health department permits, and other types of licenses, depending on the type of business you’re running. You’ll then also need to open a business bank account, possibly apply for a business credit card, and purchase specific types of insurance for your business.

How Much Does it Cost to Create an LLC in California?

To create an LLC in California, expect to pay $10 to reserve your business name, $20 to file your statement of information, $70 for the articles of organization, and $800 for the franchise tax fee.

If your business is registered in another state and you’re moving it to California, you’ll also have to pay $70 and register it as a foreign LLC period of course, various other business licenses, permits, and more may also cost you more.