A limited liability company (LLC) is a versatile business structure in the U.S. that combines liability protection with operational simplicity. It shields the personal assets of its owners, called members, from the company’s debts and legal issues. In the event of financial trouble or lawsuits, members typically risk only losing their investment in the company, not personal assets like homes or savings.
LLCs offer flexibility in management and taxation. They have adaptable management structures, allowing members to self-manage or appoint managers. Additionally, they benefit from pass-through taxation, meaning business profits and losses pass through to individual members without first being taxed at the business level, simplifying taxes and potentially offering tax advantages. Overall, a limited liability company provides entrepreneurs and business owners with a protective and flexible framework that suits various needs.
Want to learn how to start an LLC in California to launch your business? With millions of residents and a wide range of potential industries, the Golden State presents many opportunities to ambitious entrepreneurs. In 2021, WalletHub ranked California as number three among its 10 best states to start a business. Some reasons for this high ranking include access to resources and availability of human capital.
Starting a business as an LLC is a smart way to give your company security. This type of business entity can protect your personal assets, give you flexibility in running your business, and identify your company with the state of California. An LLC can also help add perceived legitimacy to your business idea.
That said, forming an LLC in California can seem trickier than trying to merge lanes in bumper-to-bumper L.A. traffic. But don’t worry. This guide will walk you through the entire process, step-by-step, for forming your California LLC. We’ll also show you how our professional services help you cut through the red tape so you can focus on running and growing your business.
Starting a CA LLC begins with choosing a name. You’ll need to check that the name you want isn’t already registered to another business owner. Your name must also follow all state guidelines. For example, LLC names can’t be vulgar or include words that might mislead the public.
Next, you’ll need to find an agent for service of process and fill out paperwork, such as your Articles of Organization and Statement of Information. These forms 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 LLC entity operating agreement, which details how your business will be run.
Finally, you’ll get set up with the IRS and apply for any business licenses, permits, or insurance policies that are required by your industry.
Below, we’ll cover how to form a California limited liability company in six simple steps. We’ll also include some other helpful information to set up your LLC for success.
Note that these guidelines are for starting a domestic LLC, which is one started within the state you’re residing in. A foreign LLC is one that originated in a different state. To register a foreign LLC, you would complete a registration statement for a foreign LLC and follow a different process.
The first step to starting your business is to name your California LLC. Unlike a sole proprietorship (which typically has the same name as the person who runs it), LLCs often opt for branded company names.
Your name plays a huge part in how the public views and perceives your brand. So, it’s important to make a great choice.
When forming an LLC, California requires the words “Limited Liability Company” or the abbreviations “L.L.C.” or “LLC” in your formal name. You may also abbreviate “Limited” to “Ltd.” and “Company” to “Co.”
Read up on the state’s naming guidelines to ensure you’re following all the rules. A few of the general guidelines include:
It’s important to make sure 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 Articles of Organization with the state of California, you can reserve it.
Next, you may want to consider a California FBN name. Some businesses use an FBN (or “fictitious business name”) when they register under a different moniker. This is also known as a “doing business as” or DBA name in most other states.
There are multiple reasons a company will use a DBA name, such as introducing a new product line. Some examples of when a DBA name would be used include:
By filing for fictitious names, you can avoid having to re-establish your company with the state of California each time you want to do business under a different moniker.
In California, FBNs aren’t registered with the California SOS office, but at the local level. You must file in the county where your business is, and you’ll need to get the necessary forms from your county clerk.
Registering a trademark in California can help 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 helps protect your intellectual property and provides you with standing ground in the event of copyright infringement.
When starting your LLC, intellectual property includes things like:
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 can’t have the same name as yours.
You can learn more about California’s guidelines on the Secretary of 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’s available, you can apply to register it on the USPTO website. 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 of $70 per “classification code.” You can fill out the “Trademark/Service Mark – Application for Registration” (Form TM-100) online, in person, or by mail via the California Secretary of State. Online and in-person drop-offs are marked with the time and date that they are received. Mail submissions are marked at 5 p.m. of the day they’re delivered.
Once approved, you will receive a free copy. You can also request a certified copy for a fee. Learn more about trademarks on our trademark vs. copyright page.
Secure a website domain name to help potential customers find you online. You can conduct a quick online domain name search to make sure the domain name you want is available, and then have us register that domain for you.
In addition to considering general business name availability for your California LLC, you also need to think about whether your desired name is available as a URL. Finding a business name that can also be used as a web domain means your website will be easier to find and remember for your customers (or potential customers).
Use our domain name search tool to see if your preferred business name is available as a URL. If the domain you want is still available, you might even want to reserve it before someone else does.
You can also check to see if your desired social media handles are available. Social media platforms such as X (formerly Twitter), Facebook, and Instagram are huge avenues for marketing today’s businesses. Getting the right social media names can be an important factor in your branding strategy.
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The next step is to appoint a California agent for service of process. In other states, this is more commonly referred to as a registered agent. The agent for service of process is a person or business entity assigned to receive legal notices (such as subpoenas) and official correspondence on behalf of your business.
The California requirements for an agent for service of process include:
You can appoint yourself, another member of the company, or someone else to be your agent, or you can hire an outside source to serve in this position.
An agent for service of process:
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:
For help with your California agent for service of process, contact us and learn about our affordable registered agent service. Our professional registered agent services can help keep your company well-organized and compliant with the government.
If the state is unable to make contact when sending you legal notifications, your business could fall out of compliance. That’s why it’s so important to maintain an up-to-date agent for service of process.
A few instances in which failure to make contact could happen easily include:
Failing to maintain an agent for service of process (also called a registered agent in other states) could mean that the state will dissolve your LLC. This would also result in you losing your liability protection in California (which was likely the main reason you started an LLC in the first place).
Not keeping your agent for service of process information (such as the physical address) up to date could also lead to a process server being unable to notify you of an impending lawsuit. In that scenario, a court case against you could go forward without your knowledge.
A great way to avoid any issues related to your agent for service of process is to use a professional registered agent service. Our registered agent services mean that there will always be someone available to receive important legal, tax, and other notices from the state.
Not only will this keep you in compliance, but it eliminates the risk that you could be served papers for a lawsuit in front of clients.
Our services also help you stay organized. When you get important documents, we will quickly inform you and keep them together in your online “dashboard.” You can then view, download, and/or print them whenever you want. No more digging through piles of papers to try to find misplaced critical documents.
Next, you need to file your California Articles of Organization. This form explains things such as who’s involved in your LLC and their contact information. Articles of Organization are required for any 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 step for you and make sure it’s done correctly the first time.
Unlike many other states, California requires two separate forms to be filed in order to form your LLC. First, there are the aforementioned Articles of Organization. Next, is the Statement of Information (which we’ll cover in the following step).
California LLC Articles of Organization should include:
Most LLCs choose member-managed, meaning the members (owners) all share in the running and management of the business. In a manager-managed LLC, the owners appoint one or more managers to manage the company. These appointees can be an owner of the LLC or someone hired from outside.
The process of filing an LLC in California can vary in terms of duration depending on the method chosen and whether you opt for expedited processing. Here’s an overview of the different options and their associated timeframes:
In summary, the time it takes to file an LLC in California can range from a day with expedited online filing to several weeks with standard postal mail submissions. The cost of expedited processing varies depending on the level of urgency, with same-day processing being the most expensive option. When considering the method and speed of filing, it’s essential to factor in the associated fees and your business’s specific needs to make an informed decision on how to proceed with your California LLC formation.
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. This is 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 limited liability company, you’ll want to keep it in a safe location along with your other important documents, such as your LLC operating agreement, member certificates, contracts, compliance checklists, transfer ledger, legal documents, etc. We offer a customized business kit to help you keep these important documents organized and looking professional.
A crucial step when starting an LLC is determining your new business’s management structure. Will your LLC be managed by the members/owners (member-managed) or by an appointed or hired manager (manager-managed)?
Many LLCs opt for member-management because they only have a few owners or just one. In those cases, it often makes sense for the LLC owner(s) to select member-management because they’re running the day-to-day business operations themselves. All of the owners are sharing in running the business and making decisions for it.
Other LLCs prefer to appoint or hire a manager instead. In the manager-managed option, one or more LLC members can be appointed to make management decisions, or someone from outside the LLC can be hired to manage the company.
Manager-management can be helpful when some of the owners only wish to be investors in the company as opposed to running the business and making decisions about it. LLCs that have many owners also sometimes find it easier to have a manager because it’s difficult to get all the owners together to make decisions.
One of the biggest reasons new entrepreneurs choose to delay their LLC filing date is to avoid taxes and costs for a little longer. In this case, they delay their filing until January 1 of the following year.
When doing so, they can avoid having to pay taxes on an LLC in the current year. This is especially true if the future LLC owners don’t need to establish the company right away and want to avoid that $800 California franchise tax fee for a little longer.
Ordinarily, if the California Secretary of State approves your filing, the filing effective date will be the date you submitted it. This is true even if it takes longer than that for the state to examine it and mark it as filed. In other words, if you submit your filing on July 1, but the state doesn’t approve it until July 30, your LLC effective date would still be July 1.
But you also have the option to tell the state that you want your effective date to be at a later time. You can choose to have your LLC’s effective date be up to 90 days past the date you submit the filing.
This is something else we can help you with. When you form your LLC with us, we give you the option of paying an extra fee to have your LLC’s effective date delayed. (This service is only offered from October to January.)
Next, you’ll submit your California 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 filing the Articles of Organization.
Your Statement of Information has to be filed within 90 days of formation to retain your LLC name and status with the state. The Statement of Information is also filed with the California Secretary of State and can be done in person or online. There’s an accompanying filing fee.
Because each entity can be updated on the California Secretary of State webpage, 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.
You’ll also need to renew the Statement of Information every two years, as long as you continue to operate and remain in business. This type of reporting is known as an LLC Annual Report or Biennial Report in other states.
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.
According to the state of California’s business webpage, there’s a large portion of applications that can’t be processed due to typographical errors, issues with their LLC 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 the following tips provided by the state.
As mentioned earlier, check to ensure that your business name has not already been registered. A name that is in use will cause your application to be denied and force you to start the process over with a new name. Check your preferred business name before filing so that this simple mistake won’t slow you down.
The state of California has very clear guidelines as to what constitutes a legal digital signature. While typing your name in as a signature on an electronic device is acceptable, you’ll also need paperwork confirming the use of electronic signatures and that all parties are signing digitally. In addition, the Secretary of State website advises: “Electronic signatures on filings submitted through the Secretary of State 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 can’t 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 a requirement, especially when dealing with owners who live far apart. The state’s Sacramento office only accepts paper copies. These can be mailed if you’re not local or within driving distance from the Secretary of State location.
Your California operating agreement outlines the rules and operating procedures for the management of the LLC, much like the bylaws required by corporations. Your operating agreement should include information such as:
Unlike some other states, California law actually requires LLCs to have an operating agreement. Aside from just being a legal requirement, your California operating agreement is a great resource to look back on in a time of need. Keep it on file and update it as your business changes.
Although it’s a requirement to have an operating agreement, you don’t need to file it with any government agency. Just keep it in a safe place with your LLC’s other important documents.
Most states do not require LLC operating agreements, but California does. Your company can benefit from an operating agreement for many reasons:
Even single-member LLC businesses are required to have this document in California.
Although an operating agreement is required by the state of California, you’re 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 owners or a change in industry standards, the operating agreement will be looked upon for guidance.
Not sure how to create an operating agreement for your California limited liability company? We offer an operating agreement template to help you get started.
While it’s true that operating agreements can help you avoid disputes among LLC owners, that’s not the only reason for having one. In fact, even single-member LLCs can benefit from this internal document.
For one, they are required for all LLCs in California. Additionally, potential investors, future business partners, and others may want to see your operating agreement.
Furthermore, many banks won’t let you open a business bank account without one. Your operating agreement can also spell out what you want to happen to the business if you die or become incapacitated.
Occasionally, someone will take an LLC owner to court to try to prove that the owner and the LLC are the same entity so that they can go after the owner’s personal assets. If that happens, having an entity operating agreement in place is one more thing to further demonstrate to the court that the owner and the LLC truly are separate.
An Employer Identification Number (EIN) is the tax ID number for your LLC. This number is also commonly referred to as a Federal Employer Identification Number (FEIN).
Your EIN identifies your company to the Internal Revenue Service (IRS) much like your Social Security number identifies you with the federal government. Just as you use your Social Security Number to file personal taxes, you’ll use your EIN to file business taxes.
An EIN also allows you to open a business bank account and is a requirement for hiring employees.
You can get your California limited liability company’s EIN through the IRS website, by mail, or by fax. Don’t want to deal with the government agency yourself? No worries, 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 business bank account for your LLC. Separating your business accounts from your personal banking is critical. By doing so, you avoid commingling funds and get a better handle on your finances for tax time. You can also get a business credit card. By using a business credit card for company expenses, you start building a credit history for your business.
In addition to making tax filing more difficult, commingling funds could also be used against you. If someone takes you to court to challenge whether you and your LLC are truly separate entities (that is, 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.
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.
Also, check out ZenBusiness Money. It can help you receive payments, create invoices, track tax deductions, and manage everything to do with your business finances in one place.
LLCs are one of the most common types of business structures thanks in large part to the flexibility they offer. One of those flexibilities comes in how you can choose to have your LLC taxed.
An LLC is taxed as a sole proprietorship by default if it has only one member. And the default tax status for LLCs with multiple members is a partnership. This means LLCs avoid the “double taxation” faced by many corporations, in which a business pays tax at both the business level and again when the income is paid to the individual owners. But some LLCs opt to be taxed as a C corporation or an S corporation because it works to their advantage.
Being taxed as a C corporation does mean you get double taxation. That said, for certain LLCs, the pros can sometimes outweigh the cons. C corporations have the widest range of tax deductions, which could be an advantage in some scenarios. For example, insurance premiums can be written off as business expenses.
S corp is short for “Subchapter S Corporation,” and is geared toward small businesses. Having your LLC taxed as an S corp has pass-through taxation like a standard LLC, but there’s another potential advantage: It could save you money on self-employment tax.
It does this by allowing you to be an “employee-owner,” and split your income into your salary and your share of the company’s profits. In this way, you pay self-employment tax on your salary, but not your profits. That said, while most states don’t make S corps pay state income tax, California is an exception. All California LLCs that choose S corp as their tax filing classification must pay a 1.5% state franchise tax on their net income.
The other drawback is that the IRS scrutinizes S corps very closely, meaning you’re more likely to get audited. S corps are also harder to qualify for.
While it’s possible that one of the above options could work better for your LLC, we don’t need to tell you that taxes are very complicated. They’re also very specific to your situation. That’s why you really need to consult a tax professional to see which taxing method works best for your California business.
The California Franchise Tax Board requires all businesses to pay an annual franchise tax of $800. Under Form FTB 3522, LLC owners must file with the state and pay their annual tax to the Franchise Tax Board by the 15th day of the 4th month following their business’s formation. Even though it can take a month for filing to process, this counts as the first month.
This tax payment are due for all California LLCs, regardless of annual income or annual revenue. 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 remain in business. For example, if you opened your LLC in November, the franchise tax 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 don’t have an income for the calendar year. Dissolving the business is the only way to free your business of California franchise tax.
The only exceptions to the California franchise tax law are as follows. LLCs are not subject to pay the annual fee if both of the following statements are true:
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.
Another exception occurs if you cancel your LLC within one year of forming. In this case, you can file a Short Form Cancellation SOS Form LLC-4/8 with the Secretary of State. Your LLC will not be liable for paying the $800 franchise tax for its first tax year.
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 LLC toward the end of a calendar year, you could potentially save funds by waiting to file all necessary paperwork until after the 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.
At ZenBusiness, we believe every aspiring entrepreneur should have the tools and support necessary to create a business, which is why we’ve made it easy with our free LLC service. We handle the complexities of starting an LLC in California, while you focus on your business. Along with LLC formation, we provide worry-free compliance services and more to keep your business in good standing. With expert support on hand every step of the way, we have everything you need to run and grow your business effortlessly.
Great job on forming your Californian LLC! Now, to make sure your venture thrives in the Golden State, follow these steps:
Every region in California has its regulations. Whether you’re opening a trendy coffee shop in San Francisco or a boutique design studio in L.A., ensure you have the right health, food, or business permits to operate smoothly.
Planning to sell products? Register with the California Department of Tax and Fee Administration for a seller’s permit. This lets you legally collect sales tax from your customers.
In California, some insurances are more than a safety net — they’re a requirement.
Keep your LLC in California’s good books. Remember to submit your Statement of Information each year, and stay on top of any other yearly compliance needs.
California’s dynamic business landscape, from the innovative hubs of Silicon Valley to Napa Valley’s elegant wineries, is always changing. Joining local business organizations or chambers of commerce keeps you connected and informed.
California, with its boundless opportunities and thriving economy, is the perfect place to make your business dreams come true. Keep these steps in mind, and there’s no stopping your LLC from reaching its peak!
The Golden State isn’t just a hotspot for surfers and celebrities. It’s a burgeoning landscape for businesses, too. If you’re considering setting up an LLC in California, you’re on the brink of many benefits. Let’s explore them:
The charm of an LLC starts with its name: limited liability company. By choosing this structure, you’re essentially drawing a line in the sand between your personal assets and business liabilities. So if your LLC gets into debt or faces a lawsuit, your personal assets usually remain untouched.
While the Californian sun is pretty hot, the tax system for LLCs is considerably cooler. Unlike corporations that face double taxation (having profits taxed at both the business and personal levels), LLCs avoid this. Instead, profits and losses pass through to individual members, which can offer significant savings. Plus, while California does levy a state income tax, the absence of double taxation is a saving grace for many.
If you want your business to be the talk of Tinseltown, having “LLC” at the end of your business name is a ticket to increased trust. It assures clients, suppliers, and partners of your commitment and can give your business the oomph it needs to attract bigger deals and partnerships.
Running an LLC is a bit like creating your own movie; you call the shots. There are fewer formalities and restrictions on decision-making than with a corporation, allowing you to adapt and innovate swiftly.
California, with its enticing blend of sun-kissed beaches and urban dynamism, is a beacon for budding entrepreneurs. As you embark on your business journey in the Golden State, it’s crucial to pick the right LLC type tailored to your unique aspirations and needs.
For those going solo on the Californian dream, a single-member LLC could be the way to go. Picture this: you, navigating the vast business waters of the state, harnessing all the advantages that an LLC brings. It’s like having your personal surfboard, catching the waves of opportunity, with the safety net of limited liability.
When you’re ready to assemble your team and take on the Californian market, a multi-member LLC could be a good fit. It’s perfect for partnerships, be it a dynamic duo or a collective of visionaries. This structure helps ensure that all members get a say, sharing the rewards and challenges and fostering an environment of collaborative growth.
Starting a Californian LLC involves various costs, among which the primary fee is for filing the Articles of Organization, priced at $70. However, there are additional costs that you may encounter depending on your specific needs and how quickly you want to get your LLC up and running. Here’s a breakdown of the costs associated with starting a California LLC:
Considering these costs is essential for a well-informed budget plan while forming your business. The expedited filing options, in particular, offer a spectrum of time frames to suit different urgencies, albeit at significantly varying costs.
If there’s one thing Californians are used to, it’s change (apologies to Raiders fans who now have to travel to Vegas for home games). The same is true for California filing fees. Because fees change over time, check the California Secretary of State website for the most recent fee schedule. Learn more about CA filing fees.
To aid you in navigating through the procedural and legal landscape of starting a California LLC, several government websites offer invaluable resources and information. Here’s a list of important government sites to explore:
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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.
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 limited liability company has all the business 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.
Along with the insurance policies required by law, other types of insurance coverage may help protect the investment you’ve made in your LLC. Talk to a qualified insurance agent to see what could benefit your business.
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.
For more information, visit our California business dissolution guide.
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 California 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.
Yes, California LLCs are allowed to file DBAs. A DBA name (also called an FBN or fictitious business name in California) is a filing option that allows people or businesses to use a varied form of their name while conducting business.
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.
An LLC is a business type, while S corp is a tax election. Learn more about the differences and compare California LLCs vs. S Corps.
Forming an LLC in California comes with its share of tax obligations that every entrepreneur should be well-versed with. Understanding these taxes is pivotal for compliance and smooth operation of your LLC. Here’s a breakdown of the primary taxes a California LLC is subject to:
Navigating through the tax landscape of California requires a diligent approach. It’s wise to consult a tax professional to understand the tax obligations specific to your LLC.
One of the pivotal steps in forming and maintaining an LLC in California is filing a Statement of Information with the California Secretary of State. This document provides crucial details about your business, which include:
The initial Statement of Information needs to be filed within 90 days after registering your LLC with the state. Subsequently, it must be filed every two years within the window of time allowed by the state.
The filing fee for the California Statement of Information is $20. It’s a nominal fee but a critical step in ensuring that your LLC remains compliant with state requirements. Filing the Statement of Information timely is crucial as failure to do so can result in penalties and even the suspension of your LLC. This document can be filed online or by mail, providing an accessible way to keep the state updated about your business operations and contacts.
A California Certificate of Status, also known as a Certificate of Good Standing, is an official document issued by the California Secretary of State. This certificate affirms that your LLC is legally registered and compliant with the state’s regulations up to the date the certificate is issued. It’s a testament to the fact that your LLC is in good standing with the state, has duly paid all required fees, and has filed all necessary documents.
This certificate can be invaluable in various situations. For instance, if you’re looking to do business outside California, the other states may require a Certificate of Status to register or qualify your LLC to do business there. It may also be requested by lenders when you’re seeking financing, or by potential investors, partners, or buyers if you’re looking to sell your business.
Obtaining a California Certificate of Status is straightforward. You’ll need to submit a request to the California Secretary of State, either by mail or in person, along with the requisite fee. As of the last update, the fee for a Certificate of Status is $5, and expedited service is available for an additional fee if you need the certificate in a hurry.
This certificate serves as a badge of credibility and legality, showcasing that your LLC is operating in compliance with California state requirements, thereby instilling confidence in those you do business with.
A single-member LLC (SMLLC) is a type of LLC that has only one owner, known as a member. Similar to other LLCs, a SMLLC provides its owner with personal liability protection, shielding the member’s personal assets from the business debts and liabilities. This business structure combines the ease of operation and pass-through taxation inherent in sole proprietorships with the liability protection that comes with corporations. In a SMLLC, the sole member has full control over the business operations, and the profits or losses of the business are reported on the member’s personal tax return, thereby avoiding double taxation.
An LLC can operate under two management structures: member-managed or manager-managed. In a member-managed LLC, all members (owners) actively participate in the business’s day-to-day decision-making and operations, making it a suitable and straightforward structure for smaller LLCs or those where members wish to be actively involved. On the other hand, a manager-managed LLC designates one or more managers to handle daily operations and make business decisions, providing a level of separation between management and membership. This structure is often chosen for larger LLCs or when some members prefer to be passive investors. The chosen management structure, which should be clearly outlined in the LLC’s operating agreement, significantly impacts who has the authority to make decisions and bind the LLC in agreements.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Written by Team ZenBusiness
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