California is a great place to do business, and forming an LLC can be a wise choice for your business structure. Here’s how to set up your California LLC:
1. Pick a California LLC Name
Your LLC’s name must be distinguishable from other entities on record with the California Secretary of State and must include “Limited Liability Company,” “LLC,” or “L.L.C.” Check the California business name database online for availability. California also has specific rules (for example, certain words like “bank” or “trust” need approval). You can reserve a name for 60 days for a $10 fee if needed.
2. Choose a Registered Agent in California
California requires an LLC to have an Agent for Service of Process (same as registered agent) in the state. This can be an individual California resident or a registered corporate agent with an address in CA. Their job is to accept legal documents for your LLC. Many business owners use a registered agent service for privacy and convenience. Whomever you choose, list their name and physical address on your formation documents.
3. File Articles of Organization (Form LLC-1)
File Form LLC-1 with the California Secretary of State to create your LLC. You can file online or by mail. The filing fee is $70. The form will ask for your LLC name, business address, registered agent info, management structure (whether the LLC will be managed by one manager, more than one manager, or all LLC members), and the LLC’s purpose (California allows a general purpose statement). Once filed, California can take a few business days (online) to a few weeks (mail) to process. You’ll receive a stamped copy upon approval.
4. File the Initial Statement of Information (Form LLC-12)
California LLCs must file an Initial Statement of Information with the Secretary of State within 90 days of forming the LLC. This is a separate filing (it can be done online, $20 fee). It asks for basic LLC details: business addresses, members/managers names and addresses, LLC’s principal business activity, and the same registered agent info. You will then need to file this Statement of Information every two years (biennially) for $20.
5. Create an Operating Agreement
California law requires LLCs to have an operating agreement, although it’s not filed with the state. It can be written or oral (but definitely do a written one). The operating agreement sets the rules for ownership and operation of the LLC. Include how decisions are made, how profits are split, the roles of members vs. managers, what happens if a member leaves, etc. Banks and investors may ask to see this document. Single-member LLCs should create one too for legal formality.
6. Obtain an EIN
Get an EIN from the IRS for your California LLC (unless you’re a single-member LLC with no employees, you might not need one, but it’s usually beneficial to have). The EIN will be used for federal tax filings, opening bank accounts, and payroll tax if you hire staff. It’s quick to apply on the IRS website.
7. Pay California’s LLC Annual Tax and Fees
California imposes an $800 annual franchise tax on LLCs (regardless of income, except the first-year exemption, see note). This tax is due by the 15th day of the 4th month after your LLC is formed (for example, if you file in March, the $800 is due by July 15 of that year). Then $800 each year, due April 15 normally. Additionally, if your LLC’s income is $250,000 or more, there is an extra LLC fee on a sliding scale. First-year LLCs formed after January 1, 2021 and before Jan 1, 2024 do not have to pay the $800 in their first tax year (thanks to a temporary waiver), but they will in the second year. Be sure to budget for these taxes and file Form 3522 (for $800) and Form 3536 (if the additional fee applies).
8. Business Licenses and Permits
Check for any required licenses for your business in California. California doesn’t have a general statewide business license, but many cities and counties do. For example, Los Angeles requires a city business tax registration. Also, certain businesses (contractors, restaurants, salons, etc.) need specific permits or professional licenses. Research state boards or local government sites relevant to your industry.
9. Open a Company Bank Account
Open a bank account for your LLC to keep finances separate. California has many banking options. You’ll need your EIN, Articles of Organization, and possibly your Statement of Information and operating agreement to open the account. Keeping your personal and LLC funds separate is crucial for maintaining liability protection (and will simplify your accounting).
Tip: To simplify forming a California LLC and ensure you meet all requirements, consider using Registered Agents Inc. . They can file your Articles of Organization, act as your registered agent, and remind you about the $800 tax and Statement of Information filings. Start your California LLC with Registered Agents Inc. to save time and avoid costly mistakes.
Final Thoughts
California has a couple of extra steps (the Statement of Information and the annual tax), but it’s straightforward when you know the process. Once your California LLC is formed, stay on top of your annual obligations: file your Statement of Information every two years ($20) and pay the franchise tax every year ($800). Also, be mindful of any additional LLC fee if your earnings grow. With these compliance steps handled, you can fully enjoy the benefits of your LLC while doing business in California. Good luck with your California venture!
