California LLC Formation Guide (April 2024)

This guide will help you set up an LLC in California. It includes step-by-step instructions for obtaining tax IDs and filing documents.

Overview

Because they are affordable to set up, offer flexibility for the owners and are simple to manage, LLCs are the most preferred business structure. Your LLC legalizes your business and limits your personal liability. It also allows you to have tax flexibility. As you go through this process, the following steps will guide you.

1. Name Your California LLC

Before you can register an LLC, you will need to choose a name for your articles.

California’s naming requirements must be met. These are the most important requirements you should keep in mind.

• Your business name should include the words Limited Liability Company (LLC), LLC, or L.L.C.
• Your name cannot be identical to an already existing business in the state. To determine if a specific business name is being used, you can search the website of Secretary of State. This link will show you the availability of California name options.
• The name of the business cannot include words that could be used to identify a government agency (e.g. State Department, CIA FBI, Treasury, Treasury, etc.).

• Some words are restricted (bank, lawyer or attorney, credit union, etc.). Additional documentation and licensure paperwork may be required.

View a complete list of California’s Naming Rules.

Additional considerations:

• URL availability. Even if you think you won’t need one, it’s likely that you will. You should at least reserve the possibility of purchasing a domain name in the future. It’s a good idea not to finalize your LLC name without checking if the URL is still available.
• You can reserve your name. California allows names to be reserved up to 60 days after payment of the fee and submission of the appropriate form to the state authority.

2. Select Your Agent

California law requires that you appoint an agent registered for your LLC.

A registered agents is an individual or entity that can receive service of process, official legal documents, and notices for your LLC. This person or entity will receive legal documents, tax forms, and notice of lawsuits on behalf of the LLC.

You can be a registered agent or an entity offering a registered agent service. These criteria must be met:

• Companies and entities must offer registered agent services.
• Agents must have a California address.
• The agent must be present on the spot and available during normal business hours to sign documents.

3. Prepare and file articles of organization

Agency:	California Secretary of State – Business Programs Division
Form:	Form LLC-1 – Articles of Organization of a Limited Liability Company
Instructions:	Filing Tips
Filing Method	You can mail, in person, or online.
Agency Fee:	$70 via mail/online, $85 in person
Turnaround:	Current State Processing Times or Pay for Preclearance and Expedited Services
Law:	California Corporations Code Title 2.6: Limited Liability Businesses

Articles of Organization are a document that establishes your LLC and provides basic information. California’s Articles of Organization are filed using Form LLC-1.

To properly register your California LLC, prepare Articles of Organization. Although it may sound daunting, it is actually quite easy. All you have to do is fill out an online form and submit it. It can also be sent by mail.

The following information is necessary to prepare your articles:

• Your address and name of your LLC
• The purpose of an LLC.
• Your registered agent’s name and address.
• Management structure: Will the LLC be managed by its members or managers?
• The Articles must be signed by the person who is forming the LLC.

The secretary of state will review your filing once you have filed your Articles. The LLC is legal if the articles are approved. California allows you to submit your application by regular mail, online or in person.

4. Get a Certificate from the State

After the LLC’s documents have been filed and approved, the state will issue a certificate confirming that the LLC is officially established. Online filing is the fastest way to get your certificate.

This certificate will enable the LLC to get an Employer Identification Number, business licenses and a business bank account.

5. Make an Operating Agreement

A operating agreement describes the business model of your LLC.

California law requires that an LLC have an operating agreement. However, it does not have to be filed. It should be easily accessible. It is useful for many reasons, including the resolution of disputes that could arise from financial agreements or other potential litigation. The courts will make decisions based on state law and not necessarily in the best interests of the LLC or its members if there is no agreement.

The following are examples of operating agreements that can be included in an operating agreement:

• Name and address of the principal office of an LLC
• The LLC’s duration
• Name and address for the registered agent
• Information about the Articles of Organization
• The purpose of the business
• Members and their contributions
• Profits and losses will be split in the following manner:
• The procedure for admitting new members and outgoing members
• Management of the LLC
• Clauses of indemnification and liability

6. Send a Statement of Information

California LLCs must file a Statement to Information with the California Secretary Of State within 90 days after forming their LLC.

The following information is included in a Statement of Information:

• Name of LLC and California Secretary Of State file number
• Name and address of the agent for LLC
• Address of the principal executive office of LLC
• Mailing address of LLC
• Name and complete address of the chief executive officer, or any manager, or if elected, the names and addresses of all members.
• Email address of LLC (if LLC opts to receive renewals by email rather than regular mail).
• The principal business activity of an LLC

7. Register for an Employer Identification Number

Agency:	Internal Revenue Service (IRS).
Form:	IRS Form S-4
Filing Method	You can send mail, phone, fax or online.
IRS fee	$0
Turnaround:	Online or over the phone, immediately. 4 business days via fax. 4-5 weeks via mail
Notes:	Only certain hours are available for the IRS website. Before closing your session, print your EIN. For more information, please refer to IRS Pub 1635 Understanding Your EIN.

To identify your LLC for tax purposes, the Internal Revenue Service assigns a nine-digit Employer ID Number (EIN). Your EIN can be obtained online or by mail through the IRS.

An EIN serves the following purposes:

• Filing and managing taxes at both the federal and state levels
• Register for a bank account in your business.
• Employ employees.

8. The Annual Franchise Tax must be paid

An LLC must pay a $800 franchise fee to do business in California. This fee is payable regardless of whether the business earns any income. It is due each year.

An additional annual fee will be required if your LLC’s annual gross revenue exceeds $250,000

For LLCs that were formed in California between 2021 and 2022 or 2023, there is an exemption. The new legislation exempts an LLC from California’s $800 annual minimum franchise tax. The LLC must pay $800 for the second taxable fiscal year.

Exceptions to the first year annual tax

For tax years beginning on or after January 1, 2021, and before January 1, 2024, LLCs that organize, register, or file with the Secretary of State to do business in California are not subject to the annual tax of $800 for their first tax year.

Next steps

Your LLC registration gives you legal basis to run your business. Keep your LLC in compliance and active on the state’s site.

Each LLC that transacts business in California must file a biennial Report (also known as a Statement of Information) and pay a fee to the Secretary of State. The report must be filed every two years within a “filing window” of six months. This filing window is determined by the month that the LLC was created.

Tax payments must be paid by the LLC. You must register your LLC with the California Employer Development Department to have them pay any applicable employer taxes. You must register your LLC with the California taxing authority if you plan to sell goods or collect sales tax. You must register with the California State Board of Equalization if you are collecting sales tax.

A registered agent is also required for your business.

You can also register your LLC to allow you to do these things:

• To operate your business, you will need permits and licenses . This includes health department permits , zoning permits home occupation permits, professional licenses, as well as licensing . To conduct sales, some states require a seller’s permit.
• Register your company with the state tax agency.
• Register for a bank account in your business.
• Apply for a Business Credit Card
• Get insurance for your business.
• A trademark can protect your logo and name.

How much does it cost to file an LLC in California

Here is a breakdown of the California LLC formation fees.

Reservation Fee

To reserve your LLC name, you can file a $10 reservation request for up to 60 days. While you don’t need to pay this fee to register your LLC or form it, it might be worth making a reservation to make sure you get the name you want.

Statement of Information Fee

All LLCs in California must file a statement within 90 day of registering their LLC. You can file this online, in person or by mail. It costs $20. You will be penalized if you fail to comply.

Every two years, a statement of information must filed. Each time, a $20 fee will be required.

Articles of Organization Fee

Most states require that you draft and file articles in order to create an LLC. The article of organization establishes your LLC and provides basic information about your company. For $70, you can file your Articles of Organization at the California Secretary of state

An LLC must pay a $800 franchise fee to do business in California. This fee is payable regardless of whether the business earns any income. It is due each year.

An additional annual fee will be required if your LLC’s annual gross revenue exceeds $250,000

For LLCs that were formed in California between 2021 and 2022 or 2023, there is an exemption. The new legislation exempts an LLC from California’s $800 annual minimum franchise tax. The LLC must pay $800 for the second taxable fiscal year.

California Costs for registering a foreign LLC

You will need to register as a foreign entity if you already have an LLC in another state, and you plan to expand your company in California.

Permits/Licenses for Business

You may need permits or licenses depending on the nature and location of your business.

How to amend your Articles of Organization

A $30 fee is charged for an amendment to the Articles of Organization.

How to obtain certified copies

Sometimes, it is necessary for business filings to be authenticated. California charges $1 per page for the first page, and $.50 each for each additional page. You will be charged a $5 certification fee and $10 handling fee if the documents are requested in person.