LLCs in California can be formed with the right information. This guide provides the information needed for a complete journey. California is the 7th largest economy in the world if it were it’s own country. Can you believe this state is one of the largest economies in the world?
This guide will take you through how to start an LLC in California and make it easier for you to understand how to run an LLC in California. We will take you through the operating agreement details along with the steps to conduct business, think about your business name, business structure and whether you need to collect sales tax.
Here are the steps you’ll need to take in order to have a successful LLC in California.
The LLC formation process is complicated and there are services that can help you whether that’s just using registered agent services or your own registered agent. It’s important to always keep in mind that a California registered agent is important when filing to create an LLC.
So, let’s get going and start on our journey to forming the right business structure and helping you setup a business website, business accountant and whether or not you’re going to be collecting sales tax. The journey begins now!
Choose a name for Your California LLC
You have to create unique names for the company. The name of this name is not identical to, or similar to a current name in California’s state archives, and cannot be misleading. Name availability can be checked in state business name databases. The reserved name can be reserved for up to 60 days on the request form. The form must be sent or mailed by mail to state offices in California. Under the laws of California, a LLC name must begin with LL.C. Limited and Company or the abbreviations LL & Co.
If you’re going to run an LLC business then you’ll be running a California business which will require you to setup the right business structure which requires submitting the correct forms to the state’s office and getting the right business advice.
All of this is important after you’ve chosen your California LLC name. The name you choose can differ if you’re a sole proprietorship or a California Limited liability company so make sure you’re following the California LLC naming guidelines as discussed above.
Choose your registered agent
California has requirements for you to be a registered agent. Registered agents can be persons or entities authorized to receive service of processes or other official legal documents or notice for the LLC. These are people who are entitled to e-mail notices and legal papers on behalf of the LLC.
A registered agent may include a person in your business or a company providing registered agents. They should also meet these conditions.
You’ll be able to find a registered agent service that is associated to a law firm or one of the LLC services we recommend in the sidebar you see. This is one of those things that seems like overkill and confusing why they charge so much but it’s important to make sure you get the legal documents associated to your federal employer identification number or anything that you need to respond to related to California law.
As an individual, you are not a government agency nor should you have to act like one. Think of the registered agent service as your way of keeping your personal liability lower and it gives you the right business structures to make sure as a business owner that you’re California LLC formation is setup correctly and you’re following the right protocol.
File Articles of Organization with the Secretary of State
Formation of California LLCs occurs through filing the form LLC-1 at state offices in California. The article must list the name of the LLC and its purpose and include the details regarding its operations, its address and names and addresses of its registered representatives and representatives.
You may complete Form LLC-1 online or send a paper copy directly to the state department. Fees are $75 for filing. If you want expedited filing from Sacramento Secretary of State office, you need to pay a fee.
This is different than an operating agreement but it’s important to do for your Limited Liability Company. As you’re building your LLC in California, you’ll need to make sure you have the right business licenses, operating agreement and have your business entity setup the right way to make sure the California Secretary of State knows that you mean business – pun intended!
File a Statement of Information
Upon establishing the LLC, all California corporations must submit their statements to the State Department of California. Generally, this statement summarizes as:
- The name and address of the LLC
- The names and addresses of the LLC’s managers and/or members
- The address of the LLC’s principal office
- The name and address of the LLC’s registered agent
- A statement that the LLC is authorized to do business in California
- The signature of a person (not necessarily a member or manager) authorized to sign on behalf of the LLC
- The statement must be filed with the Secretary of State within 90 days of the LLC’s formation and every two years thereafter. The current filing fee is $20.
- You can file online, by mail or in person at any California Secretary of State office. If you want to expedite the process, you can pay an additional $15 fee and file in person or by mail at the Sacramento office.
Prepare an operating agreement
During LLC registration, it can be difficult to file operating contracts for the California Secretary of State. Operating agreements can define certain aspects of your business like: If etiology is not written under the state law, the rules will apply to your corporation, which may not give you the best possible protection for your assets. When looking for a business agreement template it can be very helpful.
An LLC operating agreement is not required in California, but we recommend that you create one anyway. This document can help you avoid personal liability for debts and obligations of the business, and it can also help you resolve internal disputes among members.
You can find many LLC operating agreement templates online, but be sure to customize it to fit the specific needs of your business. You can also have an attorney help you draft this agreement.
One thing to consider here is whether your personal assets should be associated to your operating agreement. You’ll have the appropriate California taxing authority that will want to make sure the operating agreement is following California’s corporate tax rules and the best way of doing that is to have it documented which you can do using an operating agreement.
Will you need to hire employees?
If so, it might be good to define what they are responsible for in this agreement.
Will you be offering professional services or are you just looking to run an llc in California that is not working through services? Either way – use your operating agreement to really think through how you want to run your business and make sure you’ve got it setup from the beginning in the right way. The California franchise tax board will thank you (if you’re running a franchise of course).
Get an Employer Identification Number (EIN)
The Internal Revenue Service requires a new LLC owner to use an Employee Identification Number (EIN). It should be provided by you as part of your taxable income. Its straightforward and quick application process is not expensive but can easily be completed in one day. You must have your SSN or ITIN for completing this application.
If you’re looking for how to keep track of employer taxes, federal income taxes or how to handle your annual franchise tax, it’s going to be important that you have an EIN. With this, you’ll be able to really feel that with your California LLC documents that you’re going to have a designer business that others will want to work for. The EIN is a powerful thing and helps you really keep track of payroll and incorporate it into your business expenses.
Setup a Business Bank Account
If you’re going to be running your own business, it’s important to separate your business from personal expenses. One way of doing this is by setting up a business bank account and potentially getting a business credit card to make sure you separate this from your business and residence address too. If you don’t have a business address you will need to do that too. Yes you can run a business out of your home but having a desired business does also require having some liability protection and one step to do that is by having your own business address and credit card.
What is required for a California LLC?
Prepare and file with California. Developing the company in CA requires two documents: articles of incorporation and statements of facts. Your Article of Incorporation forms your firm in California. A Statement of Information is an annual filing required for every 90 days of formation.
You will need to file this form with the Secretary of State’s office.
Get an EIN from the IRS. You can apply for your EIN online, by fax, or by mail.
Opening a business bank account. You will need your EIN and Articles of Incorporation when opening a business bank account.
How do I start an LLC in California myself?
There are several ways to get your LLC started in California, but the most common way is to file Articles of Organization with the Secretary of State. You can find this form online or through a registered agent service.
Another important document that you’ll need to have for your LLC is an operating agreement. This document outlines the ownership and management structure of your LLC, as well as the rights and responsibilities of each member.
You’ll also need to obtain an Employer Identification Number (EIN) from the IRS. This number is used for tax purposes and will be required when you open a business bank account and file taxes.
You can start an LLC in California on your own, but it’s often helpful to hire a registered agent service or an attorney to help with the process.
How much does it cost to own an LLC in California?
Online registration for California LLP is $60. These fees must be paid in order to file an Article of Organization with the California Secretary of State.
Aside from the filing fee, you’ll also need to pay an annual statement of information fee of $20. This fee is due every year on the anniversary of your LLC’s formation date.
You may also need to obtain a business license from your city or county. The cost of a business license varies depending on the location of your business.
Do you have to pay the $800 California LLC fee the final year?
LLC companies in California are liable for yearly taxes ranging from $750 to $1500. It is required to pay tax every year even when the business is not running. You must pay one-time annual tax for up to 15 days after filing your taxes with SOS.