A limited liability company (LLC) is a smart and easy way to give your business security. An LLC can protect your personal assets, give you a lot of flexibility in how you run your business, and identify your company with the state of California. However you may be wondering how to create an LLC in California, read on.
Better yet, your California limited liability company is a way to add some weight to your business idea. If you’ve dreamed of starting a business or have a new idea for the next big thing, forming an LLC in California is a quick way to add legitimacy to your entrepreneurial idea.
As a new or upcoming business owner, you may want to consider starting a California LLC. We’ll walk you through the steps and show you how to start an LLC in California.
Filing paperwork with the state is necessary to start an LLC in California. We can handle this for you, but we’ll show you the process.
However, you’ll first choose a name and check that it has not already been registered to another business owner. The name must follow all state guidelines; California LLC names cannot include words that might mislead the public or are considered to be vulgar.
Next, you’ll need a registered agent and fill out paperwork, such as the Articles of Organization and Statement of Information. These files tell the state of California basic information about your company, such as who’s involved, where you’re located, and what type of business you’re in. Filing these forms will allow you to move forward with your new company. California also requires you to create an operating agreement, which details how your company will be run.
Finally, you’ll get set up with the IRS and apply for any licenses or insurance policies that are required by your industry. So lets get started with how to form an LLC in California.
Step 1: Name your California LLC
Naming your California LLC is the first step to starting your business. A name essentially signifies the birth of your brand; it’s important to make a great choice.
The words “Limited Liability Company” or the abbreviations “L.L.C.” or “LLC” must be included in your formal name. You may also abbreviate “Limited” to “Ltd.” and “Company” to “Co.”
Start by reading up on the state’s naming guidelines to ensure you’re following all the rules. Aside from avoiding profanities and not using an already registered moniker (check the section on “deceptively similar and substantially the same as”), you’ll have to avoid names that could mislead the public. Most notably, this refers to names that could make your brand sound like a government-run entity. Words like “police,” “county,” and “state” will be off-limits.
You will also want to check to ensure that your desired name hasn’t already been taken in the state of California. Our California business search page can help you with that. If you find that your name is available but you’re not yet ready to file your Articles of Organization with the state of California, you can reserve it. Our business name reservation service not only reserves the name for you but also does a search for your desired name to make sure it’s available.
Next, you may want to consider a California DBA name. Some businesses use a DBA — or “doing business as” — name when they are registered under a different moniker. There are many reasons a company will use a DBA name, such as introducing a new product line. They are not necessary but can be helpful if you want to avoid re-establishing your company with the state of California.
In California, DBA names are referred to as fictitious names and must be filed in the county where your business is located. You’ll need to get the necessary forms from your county clerk.
Registering a trademark in California can protect your business or DBA from being used by others in the state. A brand logo or company name trademark can be beneficial to your business, even as a new LLC. Placing a trademark on your name or brand’s design helps keep it from being copied or stolen by existing or upcoming businesses. It protects your intellectual property and provides you with standing ground in the event of copyright infringement.
When starting your California LLC, intellectual property includes things like:
- Your brand name
- Your logo
- Written or artistic work
Holding a trademark means that you “own” the right to use certain words or designs, and others are infringing on that ownership if they copy or repeat your work. Likewise, it means that another business cannot have the same name as your own.
You can learn more about California’s guidelines on the state website. Regardless of whether you want to apply for your own trademark, it’s wise to search the California trademark database to make sure your desired business name hasn’t already been trademarked in the state.
By the same token, you’ll want to check the U.S. Patent and Trademark Office (USPTO) database to make sure your name hasn’t been federally trademarked. If it is available, you can apply to register it on the USPTO website; however, please keep in mind that this process is not immediate but can provide broader protection if you plan on doing business outside of California.
In the state of California, you can file to register a trademark for a fee. You can fill out the request for a trademark online, by mail, or in person. Online and in-person drop-offs are marked with the time and date that they were received, while mailed submissions are marked at 5 p.m. of the day they were delivered.
Mail your trademark registration to:
Secretary of State
P.O. Box 942870
Sacramento, CA 94277
Once approved, you will receive a free copy. Certified copies can be requested for a small fee. Learn more about trademarks on our trademark vs. copyright page.
Another helpful step in naming your brand is securing a website domain name that will help potential customers find you online. You can conduct a quick online domain name search and then have us register that domain for you.
For help naming your business and other filing services, look to our online services. With a range of affordable options, we can help you with the paperwork to set up your business, which gives you time to focus on actually growing your company. Consider these comprehensive options to get your brand up and running.
Step 2: Appoint a California agent for service of process
Now, it’s time to appoint a California agent for service of process. In other states, this is more often referred to as a registered agent. The California agent for service of process for your LLC is the person assigned to receive legal notices (such as subpoenas) and official correspondence from the California Secretary of State.
Your agent for service of process must be either a resident of California or a corporation authorized to do business in California. The agent for service of process must have a physical address in California; a P.O. box is not sufficient. They also need to be over the age of 18. You can appoint yourself or another member of the company, or you can hire an outside source to serve in this position. An agent for service of process will have responsibilities, such as:
- Being notified if the business has been sued or has had legal action taken against it and relaying that information to the appropriate people at your LLC
- Always being available during normal business hours to receive service of process
- Accepting important government mail
By using a registered agent service, you can free up time to focus on your business since you won’t have to be available during regular business hours. Additional perks of hiring a registered agent service include:
- Private receipt of potentially embarrassing paperwork (for instance, legal action that’s taken against you)
- Ability to move your office location without having to update your registered agent address with the state
For help with your California agent for service of process, contact us and learn about our affordable registered agent service. Our services can help keep your company compliant with the government and organized.
Step 3: File California Articles of Organization
Now, it’s time to get down to the nitty-gritty. You’ll need a key piece to file with the state of California to show them that you mean business: the Articles of Organization. This form explains things such as who’s involved in your LLC and their contact information. It’s a legal requirement for operating an LLC in the state of California. Fortunately, we specialize in handling this kind of paperwork with our business formation plans, so we can take care of this for you and make sure it’s done correctly the first time.
California separates the above information into two forms, which is different from how many states request LLC filings. If you already own an LLC in another state or have previously opened an LLC outside of California, note this change. The second form, your Statement of Information, will be covered in the next step.
First, you’ll fill out and file your Articles of Organization. This can be done online or by mail. For mail, use the address below:
Secretary of State
Business Entities Filings
P.O. Box 944260
Sacramento, CA 94244-2600
The Articles of Organization should include:
- Your business name and address
- Contact information
- Your name and information for your agent for service of process
- Whether your LLC will be manager-managed or member-managed
- Signature of the organizer
Most LLCs elect to be member-managed, meaning the members (owners) all share in the running and managing of the business. In a manager-managed LLC, the members appoint one or more managers to manage the company. These appointees can be certain members of the LLC or someone hired from outside the ownership.
California charges a filing fee plus an additional fee when submitting paperwork in person. All in-person filings are considered to be expedited and will be processed faster than online or mail submissions. There are additional fees associated with in-person filings, as outlined below.
Choose to have your paperwork precleared and/or expedited to hit a specific timeline. Next-day approval services are available. This paperwork needs to be mailed or dropped off in person at the Sacramento office public counter. These services are not available at the Los Angeles Secretary of State location. We have a faster filing speed service to help you expedite the formation process.
Prepare your upcoming California LLC with applicable forms for pre-clearance and expedited services, respectively.
- Preclearance services: “Provide a customer with the option to submit a business entity document in person to the Secretary of State’s Sacramento office prior to filing to determine if the document conforms to law and to receive a preclearance response within a guaranteed time frame.”
- Expedited filing services: “Provide a customer with the opportunity to submit for filing a business entity document in person to the Secretary of State’s Sacramento office and to receive a filing confirmation or filing response within a guaranteed time frame.”
The expedited timelines are guaranteed and begin at the time that the paperwork is received; for example, if you file the 24-hour preclearance form Tuesday at noon, your preclearance will begin Wednesday at noon.
All expedited paperwork must include:
- The file you’re submitting. The file needs to be signed by all involved parties. This will be personally delivered to the Secretary of State’s office in Sacramento. Digital signatures are not viable or accepted by the state on paper copies.
- A copy of your preclearance response
- Your complete filing fee
- The complete expedited fee (this will need to be a separate check and will be deposited even if your request is rejected)
- A note and/or instructions on your requested class, as well as specific filing date, if applicable
- Notification on filing response (how do you want to be notified?)
- The name and phone number for a point of contact
Filing your Articles of Organization can be done on a quick schedule, as long as the proper protocol is followed. Consider this option if you are in need of a quick turnaround turn or have hard dates for opening your LLC.
The Articles of Organization are usually approved within seven business days without expedited or preclearance services.
If you have us handle filing your Articles of Organization, once the state of California approves your LLC, you can digitally store and organize your paperwork in your ZenBusiness dashboard, where you can keep it and other important paperwork digitally organized.
Once you get your physical paperwork back from the state approving your new California LLC, you’ll want to keep it in a safe location along with your other important documents, such as your operating agreement, member certificates, contracts, compliance checklists, transfer ledger, etc. We offer a customized business kit to help you keep these important documents organized and looking professional.
After supplying all this information for your Articles of Organization, it’ll become apparent how often owning a business means supplying an address for your new business. That can be unsettling for some business owners, especially those running their business from home. In instances where you’re not required to give the registered agent address or official principal address for your business, a virtual business address can come in handy.
With our virtual business address service, we supply you with a physical street address where you can have your mail sent without divulging your real address to more people than necessary.
Step 4: File California Statement of Information
Next, you’ll submit the initial Statement of Information. This is the second part of the initial paperwork in starting your LLC in the Golden State. Remember, this step is in addition to what is required in most states to form your LLC.
Your Statement of Information has to be filed within 90 days of filing the Articles of Organization to retain your LLC name and status with the state.
The Statement of Information is also filed with the Secretary of State and can be done in person or online. There’s an accompanying filing fee.
You can also mail the form to:
Secretary of State
Statement of Information Unit
P.O. Box 944230
Sacramento, CA 94244-2300
Because each entity can be updated on the California Secretary of State website, it’s important that you are dealing with your own LLC. Accidentally modifying the wrong business can lead to prosecution by the state.
Finally, when filing your Statement of Information, remember that this information will be open for public record.
When filing outside of the required filing period, there is no fee associated with the paperwork, for instance, if you update your Statement of Information or resubmit it with the Secretary of State’s office. Your Statement of Information will need to be renewed every two years, as long as you continue to operate and remain in business. When refiling within your intended time slot, there’s a fee for renewal on all California LLCs.
If you have more than one member within your LLC, you’ll need to add an attachment to the Statement of Information. This is added to the original paperwork with no additional charge.
Tips for Getting Your Application Approved
According to the state of California’s business website, there is a large portion of applications that cannot be processed due to typographical errors, issues with their business name, or omitted items in the applicant’s Articles of Organization. To avoid these errors, which could potentially slow down or halt your LLC completion process, check out these tips provided by the state.
- Name reservations. As mentioned earlier, check to ensure that your business name has not already been registered. A name that has already been used will cause your application to be denied and force you to start the process over, only with a new name. Check your preferred business name before filing so that this simple mistake won’t slow you down.
- Electronic signatures. The state of California has very clear guidelines as to what constitutes a legal digital signature. While typing in your name physically into a computer or other electronic device is accepted, there also needs to be paperwork advising that this type of signature can be used and that all parties are signing digitally. In addition, the state website advises: “Electronic signatures on filings submitted through the Secretary of State’s online process are the only electronic signatures that are acceptable for filings with the Secretary of State. Computer-generated signatures or fonts made to look like a signature printed on paper filings are not acceptable.”
This also means you cannot digitally sign paperwork and print it for expedited filing. When using paper copies of LLC forms, all paperwork should be signed in person. Keep this in mind when multiple signatures are needed, especially when dealing with members who live far apart. Paper copies are only accepted at the state’s Sacramento office. These can be mailed if you are not local or within driving distance from the Secretary of State location.
Step 5: Create an operating agreement
Much like the bylaws required by corporations, operating agreements outline the rules and operating procedures for the management of the LLC. Information like whether members have the right to admit additional members, an explanation of the terms and conditions, and the circumstances, if any, under which the cessation of membership of one or more members will result in the LLC’s dissolution may be included.
Aside from just being a legal requirement, an operating agreement for California is a great resource to look back on in a time of need. Keep it on file and update it as your business changes.
LLC operating agreements are not required by most states. However, as California requires this document, you can’t be in good standing without it for your LLC.
Your company can benefit from an operating agreement for many reasons:
- It helps uphold the limited liability aspect of your limited liability company in the eyes of the court if it’s ever questioned.
- It can settle disagreements between LLC members.
- It helps structure business ownership.
- It proves legitimacy with financial institutions, the state, and the federal government.
Even single-member LLC businesses need this document.
However, even though an operating agreement is required by the state of California, you are not required to file it. It should be kept on hand with your company’s files so it can be referred to in times of need. For instance, if there’s a dispute among LLC members or a change in industry standards, the operating agreement will be looked upon for guidance.
If you’re unsure as to how to create an operating agreement for your California LLC, we offer a California operating agreement template to help get you started.
Step 6: Apply for an EIN
An Employer Identification Number (EIN) is considered your tax ID number for your LLC. Receiving an EIN is a necessary process for most LLCs. Your EIN will identify your company to the IRS much like your social security number identifies you with the federal government. It will allow you to open a business bank account, and it’s required when hiring employees.
You can get your California LLC’s EIN through the IRS website, by mail, or by fax, but if you’re unfond of dealing with that particular government agency, we can get it for you. Our EIN service is quick and eliminates the hassle.
After you have your EIN, you’ll be able to open a bank account for your LLC. Keeping separate accounts for your business and your personal banking is critical for making sense of your finances at tax time and helps you avoid commingling funds. Commingling funds can not only make your taxes more difficult, but it could also be used against you. If someone takes you to court to challenge whether you and your LLC are truly separate entities (i.e., they’re trying to sue you for your personal funds, not just your business’s), having a separate bank account for the business helps establish to the court that your LLC is legitimate and separate from you.
In conjunction with LendingClub, we offer a discounted bank account for your new LLC. This allows for unlimited transactions, online banking, a debit card, and more. When you want to authorize others in your business to use the account, we offer a banking resolution template to simplify the process.
For further help managing your new business’s finances, try the ZenBusiness Money App. It can help you receive payments, create invoices, and transfer money all in one place.
Recurring Costs for Your California LLC
In the state of California, businesses must pay an annual franchise tax of $800. Under form 3522, business owners must file with the state and pay their annual fee, which is due four and a half months after your LLC has been approved. Even though it can take a month for filing to process, this counts as the first month.
These funds are due for all California LLCs, regardless of income or revenue that’s been collected throughout the year. The funds are due as long as the business is operational.
Businesses will owe the full amount per calendar year, no matter how many months they remained in business. For example, if you opened your California LLC in November, the franchise fee will be due Feb. 15 of the following year. (Because November counts as the first month, those fees will actually fall three and a half months after filing.)
Fees are due to all businesses still in operation with the state, even if they do not have an income for the calendar year. Dissolving the business is the only way to free your business of the California franchise fee.
However, businesses that are in their first year as an LLC and were open for fewer than 15 days do not need to pay the franchise tax fee. New LLCs that did not conduct business in the state are also exempt from this fee until the following calendar year.
From then on, your LLC will pay for the calendar year by April 15, or tax day, for that year. This payment will cover January to December of that year. Keep in mind that can mean two payments in short succession, depending on when the business LLC paperwork is filed.
Due to the nature of these payments, California is often busier filing LLC paperwork toward the beginning of the year. Keep in mind that it could take longer during this time to be approved and receive your paperwork.
Filing forms can also be post-dated, but not by more than 90 days. Therefore, if you open your California LLC toward the end of a calendar year, you could potentially save funds by waiting to file all necessary paperwork until after New Year.
Going forward, the annual franchise fee will always be due on April 15, eliminating the piggyback payments that can occur in your first year of filing.
This franchising fee is an additional fee that most states do not charge.
Your Statement of Information will also need to be renewed every other year, along with a fee.
California LLC FAQs
How much does it cost to start an LLC in California?
The state fees for forming an LLC in California can range from $90 to $115, depending on whether you file online, by mail, or in person. There’s an additional fee for the Statement of Information.
California LLCs that are filed in person are considered to be expedited over digital filings, so there’s an additional cost. If you need to file your business quickly, a hard paper file can speed up the process. California has some additional methods for expedited filings that can further increase your cost.
Because fees change over time, check the California Secretary of State website for the most recent fee schedule.
What are the benefits of an LLC in California?
Having your LLC in the state of California comes with many benefits. Aside from being your place of residence (for those who reside in the Golden State), it can be a thriving market. The benefits of forming a California LLC include:
- Legal security and proper standing with the government
- Limited personal liability
- Better tax options
- More business freedom, without more structure requirements
California also has many online resources available to LLC owners.
How is an LLC taxed in California?
Your California LLC will need to pay a wide variety of business taxes. These include the tax that’s payable to the California government, like California sales tax and California state tax. You will also need to pay federal, self-employment, and possibly payroll tax to the IRS, based on how much your LLC pulls in annually.
Unless they opt to be taxed as a C corporation, California LLC members only pay federal income tax on their personal tax returns, while the business itself is exempt from federal income taxes.
As of this writing, California LLCs must pay, at a minimum, $800 in annual franchise tax to the state government every year. For LLCs with more than $250,000 in annual income, this franchise tax stairsteps up.
California business owners carry a particularly heavy tax burden, so it’s a good idea to talk with an accountant or other tax professional to determine what you’ll owe to the federa, state, and local goverments.
What is the processing time to form my California LLC?
In general, it takes three to five business days to process your LLC in California. During the peak season, which lasts from December to January, this can take up to six to seven business days. Filing in person costs an additional fee and can expedite the process by cutting out transit time in the mail. California also offers 24-hour expedited filing for a heftier, non-refundable fee.
Do I need to file my operating agreement with the state of California?
No. While the state of California requires the existence of an operating agreement before an LLC can exist or remain in good standing with the state, it’s not necessary to file it.
What tax structure should I choose for my California LLC?
Choose the best tax structure for your California LLC by looking at all of your options and talking to a tax professional. Deciding the right fit will take some math and evaluation, especially as profits grow for your business.
Which licenses and insurance are required for an LLC in California?
Nearly all California businesses will require a business license to operate legally. These are issued at the local level rather than the state, so you’ll need to check with your county or city government. In addition to the business license, it’s your responsibility to research what federal, state, local, and/or industry-specific licenses and permits your company requires, or hire someone to research these for you.
If you don’t have the time or inclination to do all this research, or if you just want the peace of mind to know that your LLC has all the licenses and permits it’s legally required to have, our business license report service can do the work for you.
If you have employees, California requires you to carry workers’ compensation insurance. In addition, if your business owns any vehicles, they’re required to have commercial auto insurance.
In addition to the insurance policies required by law, other types of insurance policies may help protect the investment you’ve made in your LLC. Talk to a qualified insurance agent to see what policies could benefit your business.
How do I dissolve my California LLC?
To dissolve your LLC in California, you will need to file paperwork with the Secretary of State. Forms included are Certificate of Cancellation and Certificate of Dissolution. You will also need to send a notice to any creditors. Any business completed should still be filed with the IRS.
How do I remove a member from my LLC in California?
To remove a member from your LLC, you should first review the business’s operating agreement. The operating agreement should outline any steps that need to be taken to remove a member, such as notice, voting, or reallocating responsibilities. Next, you will fill out an updated Statement of Information form that should be submitted to the Secretary of State. This form incurs a fee and will replace your previous Statement of Information. Be sure to update all accounts or documents for the business with the new owner’s information so that there is a proper record for the California LLC.
How do I file a Statement of Information for an LLC in California?
In California, you can file your Statement of Information online at the Secretary of State’s website. There’s a filing fee, and you can pay via credit card. This can also be filed in person or by mail.
Can an LLC have a DBA in California?
Yes, California LLCs are allowed to file DBAs. A DBA name is a filing option that allows people or businesses to use a varied form of their name while conducting business.
Is an LLC fee tax-deductible in California?
Filing fees are considered normal business expenses and can be deducted from your state taxes. However, the annual franchise tax of $800 is not tax-deductible.