How to Start an LLC in California: If you’re interested in setting up a California LLC, you’ve come to the right place. Having an LLC not only protects your personal assets but also is less complicated than other business structures. California’s laws make it easy to establish your LLC in California. On this page, You’ll find all the steps that must be taken to ensure that your California LLC has been correctly established. We recommend you read the whole article very carefully word by word, don’t miss anything 🙂
On this page, you’ll learn about the following:
- How to Start an LLC in California
- After Starting Your California LLC
- California Foreign LLC
- California LLC Formation Review
How to Start an LLC in California
An LLC or a Limited Liability Company is a hybrid business entity combining a corporation’s characteristics with a partnership or sole proprietorship. It separates your personal assets from your business assets, thus giving you personal asset protection.
If you wish to start an LLC in California, mainly you have to file your Certificate of Formation with the State and pay a filing fee of $70. There are some more steps to follow to get your LLC established in California. The following steps explain everything you need to create your LLC in California in 2022. Let’s get started!
Step 1: Decide a Name for Your California LLC
The very first step while forming an LLC in California is to give a proper name to your LLC. Before you name your business, you must know that the name should be easy to remember, available in the state, and follows all the LLC naming guidelines.
California LLC Naming Guidelines
There are a few specific requirements all the LLCs in California have to follow while naming their Company. Some of the most important requirements are as follows:
- Your business name should be available and no other existing business in California can have the same name. Perform a name search from the below-mentioned source to be sure your name isn’t taken already.
- “Limited Liability Company”, “LLC”, “L.L.C.”, “LC”, “L.C.”, and “Limited Company” – any one of these has to be used as a suffix in your business name.
- You cannot use any name for your business that is confusing or misleading. Terms such as “Treasury”, “State Department”, “FBI”, “CIA”, etc. shouldn’t be included.
- Terms like “Bank“, “University“, “Attorney“, “Doctor“, etc can be added only after the additional requirements by California State Government are fulfilled.
- (Optional) It’s better to name your business something for which your desired domain is available.
|Important Links –||Submit Offline Form to –|
|California Business Entity Search – Online Name Search|
Name Reservation Form – PDF
California LLC Name Search Guide – Instructions
Name Availability Standards – Guidelines
|Secretary of State, Atten: Name Availability Unit|
1500 11th Street, FL. 3
Sacramento, CA 95814
Reserve Business Name for Future
If you do not wish to file your LLC right now but want to hold the name you have decided then you can reserve your LLC name for 60 days. To keep the name, you have to file a name reservation application and pay $10 (by mail) or $20 (in-person drop) to reserve your name with the California Secretary of State. You can renew the name after 60 days but not for another 60 days period.
Doing Business As (DBA) or Trade Name
Once you have a legal name for your LLC, you can register it. However, it is not mandatory. You can, instead, use DBA, Fictitious Name, or Trade Name. In that case, you must register your name with the California Secretary of State by submitting an online form along with the filing fee of $26 for first-time registration, for each additional filing, costs $5 for each.
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Tailor Brands – ($49 + State Fees) Online LLC Setup
Tailor Brands offer DIY website templates and incredible logo designs. If you plan to get a website then it is wise to have a “.com” domain for your business but these days you can also use other TLDs like “.company”, “.xyz” etc. With Tailor Brands, you can get everything you need at an affordable price.
It is not legally mandatory to use the word LLC in your domain name or email. If you want you can use it. However, it is recommended not to use LLC in the domain name. A domain name should be short and easy to remember.
Step 2: Assign a Registered Agent in California
The second step to forming a California LLC is to appoint a Registered Agent. A registered agent is a person or business entity that will act or work on your LLC’s behalf. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in California. Hence, hiring a competent California Registered Agent for your LLC is necessary.
Make sure your registered agent is a resident of California or has a physical street address. Their business address or the principal address should be in California. Most LLC formation companies also provide registered agent services. Below are two great LLC setup services, even if you buy their cheapest plan (normally $49/year) you also get registered agent service and other services at a reasonable price.
These LLC formation services are recommended registered agent services as they are authorized to conduct business in California. Some LLC formation services offer standalone California registered agent services. You can purchase only Registered Agent services from them without purchasing any other LLC formation services.
A person who is above 18 years of age and has a physical address in the state of California can be a Registered Agent. A Registered Agent can be an independent person or can be a business entity. One who is responsible for handling all the legal documents. For more information on the same, read our guide on California Registered Agent.
Yes, you can be your own registered agent if you are a resident of the state of California and you are above 18 years of age. To become a registered agent you must have the authority to conduct any type of business in California.
Step 3: File Articles of Organization in California
The third and most important step in forming a California LLC is to file the Articles of Organization. This California Articles of Organization is a legal document needed to officially register your business with the Secretary of State. It costs $70 (online and by mail filing) to file your formation certificate in California. (Read more on LLC cost in California).
The Certificate of Formation includes details like the name of the LLC, registered agent’s name, address, employees’ details, and structure of the company (member-managed or manager-managed). Before hiring employees in California LLC, one should know about the rules and regulations thoroughly. Also if you are expanding your existing business (an LLC) to California then you need to register as a California Foreign LLC.
How to File Online
Go to the Secretary of State Online Service. You will get the login page. If you are already a subscriber then log in with your credentials. If not, then you have to sign-up with the site. You can either select the option ‘Sign-up’ from the Login page or click on the button below. Read more about the California Certificate of Formation for online registration.
How to File by Mail
If you prefer filing real-life forms for your California LLC registration, then you can download form LLC-1. Read the form thoroughly, fill it out, and send it to the address mentioned below.
Mailing Address: Secretary of State
Business Entities Filings
P.O. Box 944228
Sacramento, CA 94244
1500 11th St.
Sacramento, CA 95814
Mon-Fri. 8 a.m. to 5 p.m.
Processing Time: Normally, it takes 5 business days to form an LLC in California (online or by mail). But this can be expedited by paying an additional fee. $350 for filing in 24 hours, $500 for filing in 4 hours, and $750 for filing on the same day.
Recommended: Online LLC Formation service can provide all these documents in much lesser time along with lifetime customer support and 100% accuracy. We recommend using –
Tailor Brands – ($49 + State Fees) Online LLC Setup
Step 4: Initial Statement of Information Filing
In California, LLCs have to file the Initial Statement of Information with the California Secretary of State. This type of document is not common in all the states. This statement includes all the unknown information that is not mentioned in the formation documents. After 90 days of LLC formation, LLCs have to submit this statement.
California is one of those few states that have the requirement of this document. Basically, this document has everything that has been decided in the LLC in their first board meeting. It costs $20 to file the Initial Statement of Information. It can be filed online or by mail, or in person.
Mailing Address: Secretary of State, Statement of Information Unit
P.O. Box 944230
Sacramento, CA 94244
In-person Submission: California Secretary of State Sacramento Office
1500 11th Street
Sacramento, CA 95814
Step 5: Create Your California LLC Operating Agreement
Moving on to the fifth step, filing your operating agreement. An operating agreement is a document that legally outlines the proprietorship and operating procedures of your LLC. This document is vital as it ensures that all business owners are on the same page regarding how they operate, thus reducing future conflicts.
When it comes to filing a California LLC Operating Agreement, the state does not require you to have a comprehensive operating agreement, but it is ideal to have one that contains all the details of your business operation. California Law requires an operating agreement. But it does not require filing it with any government organization. Like California, there are other states that do not have a mandatory rule to file operating agreements. But, this document would be useful if you decide to dissolve California LLC later. Hence, having an operating agreement may not be necessary but it is definitely ideal.
Recommended: You can get operating agreement templates at only $29 with TailorBrands. You don’t need to worry about drafting it as they will take care of it on your behalf. We recommend using –
Tailor Brands – ($49 + State Fees) Online LLC Setup
Step 6: Filing a California LLC EIN
The Employer Identification Number or, simply, the E.I.N. is a nine-digit number given by the Internal Revenue Service (IRS) to make it easier to identify the type of business for tax purposes and taxes in general. The EIN is necessary for any active business or any form of business for that matter.
EIN is needed when the LLC hires employees. Hiring employees in California LLC requires following specific rules and regulations. On the other side, EIN for California foreign LLC should be obtained if your LLC is based in other states.
To obtain EIN (aka FEIN) one has to fill up a form (Online or by mail) and submit it to the IRS. Enter details of your LLC, and finally complete the form and send it to the address given. You can also get an EIN Assistant who can help you with the process.
Mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999
Fax: (855) 641-6935 | Fee: Free
Recommended: This hassle will be reduced when you hire an LLC formation service. They take care of obtaining EIN and all other things for your LLC. We recommend using –
Tailor Brands – ($49 + State Fees) Online LLC Setup
Note: You don’t need a Social Security number when getting an EIN. You can proceed to fill out I.R.S. Form SS-4 and leave section 7b blank. You must then call the IRS at (267) 941-1099 to complete your application. Agents or employees will help you with that.
Congratulation, you are now done with all the necessary steps to form your California LLC. If you do it yourself it should take you a long time to properly understand and do all the steps.
However, if you use Tailor Brands it should take fewer hours and you always have live chat with expert support for any help you need.
After Starting Your California LLC
After forming your LLC, there are still some things that you will need. Take note of the following:
- Get a company business bank account
- File California business permits & licenses
- Get general liability insurance and professional liability insurance with coverage for employees
- File a California LLC annual report or biennial report
This page has provided you with steps to LLC formation and filing processes. You now have to remember upcoming filing deadlines and filing fees or filing costs, including fees for late filings to make sure your LLC is up-to-date.
Cost of California LLC
Forming an LLC in California is no doubt more cost-effective than other structures of a business. There are some fees and charges one has to bear to form a California LLC. LLCs have pass-through taxation. Hence, your Caifornia LLC won’t bring you a massive tax burden. Here are some of the fees and taxes are needed to be paid while forming an LLC in California,
|Fees/Tax||Amount to be Paid|
|Name Reservation Fee (online and by mail)||$10 (mail) or $20 (in person) for 60 days|
|Articles of Organization Fee||$70|
|Biennial Report (every 2 years)||$20|
In California, LLC name reservation is mandatory. You can register your LLC name at the time of registering your LLC. If you wish to hold the name for some time without registering your LLC, then you can do it for 60 days. It can be renewed by paying $10 (by mail) and $20 (in-person drop-off). Your LLC name will be reserved for additional days (less than 60 days). In some states, Name Reservation is not mandatory.
According to the Franchise Tax rule, LLCs have to pay this tax on a yearly basis. Annual Franchise Tax reports are considered to be the annual revenue report or annual report of the LLC. Read our guide on LLC costs in California for more information.
California Foreign LLC
If you are interested in forming a Foreign LLC in California then you need to file the Certificate of Foreign LLC to the California Secretary of State. Foreign LLCs allow you to operate your business in more than one state. Along with the Certificate of Foreign LLC, you need to submit some more documents like the Certificate of Good Standing, etc. to the California SOS to form your foreign LLC in California. To know more in detail, check out our guide on California Foreign LLC.
Reasons to Start an LLC in California
California is one of the best states to set up an LLC. With a GDP of $2.3 Trillion, California’s economy has become one of the strongest ones in the last few years. Having an LLC in California is not only easy but also economically profitable for any start-up. Among 130 businesses, the top 20 businesses have their business home in California. The reason mostly is the tax benefits. There are some government regulations under which LLCs get incentives and grants. Here are some benefits of having an LLC in California,
Personal Liability Protection
In California, starting an LLC means your personal liability is protected from your professional debts. In any situation, if you are unable to pay the debts, none of your personal assets will be lost. Personal and professional assets and liabilities are separated.
California is a state where various tax credits are given to qualified companies. A couple of important tax benefits that a qualified company can get while starting an LLC in California. Read more on California’s classification of LLC tax.
- Small Business Tax – In California, if the company is small and qualified, it will get access to corporate tax rates. For a small company, the tax rates are lesser than the bigger ones.
- Capital gains exemptions – If qualified, the smaller companies will get the facility of capital gains exemptions.
- Same Tax rate as Partnership – When you start your LLC in California, it will generate a C-corp. You can shift from C-Corp to S-corp if you want if certain eligibility criteria meet. The tax rates will be the same for S-corp as Partnership.
Low-Cost LLC Formation
The cost of LLC formation in California is much lesser than in the District of Columbia, Connecticut, and Delaware.
As per requirement, California LLCs can raise funds through sales of stocks. There are some criteria to meet. Once qualified, companies can raise funds easily.
Businesses to Start in California State
There are plenty of business ideas that must be hitting your mind if you want to start an LLC in California. But it is not possible to enter every business and earn money. So, here is a list of businesses that one can consider starting in California.
Technology Related Manufacturing
The sector of technology manufacturing is employing the most significant proportion of the workforce compared to other industries, i.e., 9.4%. High-tech computers, software developments, and electronic items come under this business industry. It is noted that the technology products have constituted an equal of around 29% of the total export of state, which is equal to a contribution of $120 billion to the state GDP.
The Californian state’s service sectors like educational services, health care services, tourism, and leisure services sector have shown promising growth in a few years. More than 4 million small to big service provider businesses in the state have a considerable contribution of around $500 billion. Out of this huge value, only two universities, named the University of California and California, Los Angeles, contribute around $!29 billion, which is enormous.
The population of the Californian state is increasing day by day. In the past few years, the state’s people have doubled as people see more scope of earning money in the state. It is nearly impossible for every person to buy a new property, so they look for renting houses. If you are thinking of starting a new business, then renting a business is also great. A significant portion of renting business contribution is made by corporate sector renting.
There are some small business ideas also that you can consider if you have a low investment.
- Customized cake shops
- Catering business
- Gift shops
California LLC Formation Review
Time needed: 5 minutes.
Just to recap, here are the easy steps again when forming an LLC in California. Click on the steps in this list to read the full detail.
- Name your California LLC
The first thing you must do is to choose a company name, which should be unique, easy to find, and available in the state.
- Choose a Registered Agent
In California, it is mandatory to select a registered agent for your LLC. Get a professional Registered Agent from LLC formation services like NorthWest Registered Agent to get things done hassle-free.
- File a Formation Certificate
Filing a formation certificate is necessary when forming an LLC in California. Depending on the state, it could be called any of the following: Certificate of Formation, Articles of Organization, or Certificate of Organization.
- File Initial Statement of Information
In California, LLCs have to file the Initial Statement of Information after 90 days of LLC formation. It is a mandatory document.
- Create an Operating Agreement
An operating agreement is not a strict requirement in California but something encouraged when you start an LLC to avoid future conflicts.
- Get an EIN
The Employer Identification Number (EIN), also called Federal Tax Identification Number, serves to identify a business entity like a social security number but for a company.
How Fast Can I Form an LLC in California
California LLC formation takes up to 5 days both via mail or online. Additional payment to the state government can speed up the process.
How fast can I form an LLC in California? There are some common steps that you must take before filing the proper paperwork. The first step is to fill out the Articles of Organization. These documents can be completed online or by mailing them to the California Secretary of State. These documents must contain the name of the company, its address (postal or P.O. box), and the name of its registered agent (either a person or a corporation).
Once you have filed the necessary paperwork, you’ll need to close the seller’s permit. If you have credit cards or insurance policies in the name of the LLC, you’ll have to cancel these and transfer them to your name. You’ll also need to pay any outstanding tax deposits, and file final employment tax returns. You can find more information on closing the account in CDTFA publication 74. When closing your business, be sure to notify the IRS and California Employment Development Department of your decision.
You can expedite the process by preparing the articles of organization ahead of time. It is important to make sure the business name you want is available before you file the articles of organization. You can do this by searching the Secretary of State’s website for available business names, and include the word “LLC” in the name. Otherwise, you may have to file the articles of organization in the next few weeks, which will slow things down.
Moreover, you’ll need an Employer Identification Number (EIN) before filing the forms. You can get one for free from the IRS, or you can add it to your formation package. California’s franchise tax is a flat $800 tax that you’ll pay to the state. Typically, you’ll need to pay it on April 15th, or on the 15th day of the fourth month after you register your LLC.
When I file the articles, the state usually processes the documents within one week. If you don’t want to wait that long, you can use an online filing service such as ZenBusiness.com. Upon approval, your company will have a 12-digit identification number. Make sure to use this number in all subsequent paperwork with the state. When you file your articles, you must use the identification number to keep your company in good standing.
Another important step in forming an LLC is filing an operating agreement. The operating agreement describes the duties of each member and manager. A good operating agreement will include rules for every situation. While there are no laws that require writing operating agreements, you may want to write one anyway. And don’t forget to sign it. If you’ve ever heard of the California Corporation Code, you’ve probably come across it. It’s not a bad idea.
The next step is acquiring the necessary permits. An LLC in California needs a seller’s permit and a fictitious business name. You can learn more about these permits at the Governor’s Office of Business and Economic Development. When you’ve met the legal requirements, you can file your Articles of Organization in California. Filing the articles of organization online is faster, but you can also file them in person or by mail.
If you are a resident of California, then you can file your LLC by yourself. However, it is always worth having a professional than doing it yourself to handle legal complexities, paperwork, and other documentation.
Apart from the formation fee of $70 (domestic LLC) and $70 (foreign LLC), LLC costs in California include $20 for Biennial Reports every 2 years. LLCs are liable to pay sales tax of 7.25% and $800 Franchise Tax every year.
It takes 5 business days to get an LLC in California if you file it online or by mail. This process can be expedited by paying additional fees. If you hire a professional LLC service, then it might take less than that. We recommend Tailor Brands which has impeccable turnaround time.
Every year all the LLCs have to submit an Annual Report (Biennial Report) and pay $20 to the California Secretary of State and renew the LLC. It is mandatory to renew your LLC every 2 years.
Generally, for the LLCs, it is a default tax structure. Once you will obtain the EIN, you will get the various tax structure options to select. Sometimes LLCs choose S Corp to reduce federal tax burdens. Read more on the California Classification of LLC Tax.
LLCs are easier to establish than other business structures. Small businesses, especially start-ups can easily start their LLCs in California at a bare minimum cost. LLCs have a ‘pass-through taxation’ advantage for which they are excluded from certain taxes. The formation of limited liability companies requires much lesser documents and legal processes. Share your queries with us, and leave a comment below.