A California Single Member LLC is a limited liability company structure in the Golden State that has only one owner, offering legal protection and possible tax advantages. Dive deeper to uncover the benefits and intricacies of establishing your own Single Member LLC in California.
A single-member limited liability company (SMLLC or single-member LLC) is a limited liability company with only one member. “Member” is another name for an owner of an LLC.
Many California entrepreneurs decide it’s time to form an LLC because an LLC offers personal asset protection and a sole proprietorship doesn’t. Sole proprietors don’t have to file any formation paperwork with the state, but if they’re sued or default on a business debt, their personal assets are at risk. In contrast, an SMLLC is a separate legal entity from its owner; the owner’s assets usually won’t be taken if there’s legal trouble.
Starting a California LLC is a detailed process, but we’ve got a checklist to help guide your efforts. There are six essential steps to starting a California single-member LLC.
One quick note before we dive in: licensed professionals, such as doctors, dentists, and accountants, can’t form an LLC. California also doesn’t have a PLLC option, either. If you’re in a licensed field, you’ll probably need to form a professional corporation instead.
What will Californians call your single-member LLC? It’s time to find out. In the end, you want to create a business name you like that describes what you do. It should be memorable for your customers, too. But it’s also imperative that you comply with California naming laws. California law requires your LLC name to:
Ideally, your name should also match an available domain name so customers can easily find you online.
Already picked a name but feeling time-crunched? We can help you reserve your name (the state filing fee is $10) to buy yourself an extra 60 days. Our domain name service also starts out at just $25 a year.
Every SMLLC is required to appoint an “agent for service of process,” sometimes called a registered agent. This agent accepts service of process on your behalf plus certain other official state communications. It’s a vital role for protecting your business.
According to California law, your service of process agent may be a natural resident of the state or a corporation that has applied to serve as an agent. These agents must provide their registered office address, and they have to be present and available at that address during all regular business hours.
We can provide you with a California agent for service of process with our registered agent service.
Once you’ve picked a business name and agent, you’re all set to file your formation documents, the Articles of Organization. California lets you file by mail or online. Please note that everything listed on this document is part of the public record, but once it’s complete, your SMLLC is officially formed.
The state asks for a lot of important information on your Articles of Organization. You’ll list your business name, your mailing addresses, your agent’s information, and a few other basic details. California also asks who will manage the SMLLC (members or managers). The last section requires the signature of the organizer, the person submitting the Articles.
Not a fan of paperwork? Our zero-cost CA SMLLC formation service can take that stress off your plate.
Within 90 days of completing your Articles of Organization, you’ll need to submit a Statement of Information. This report essentially updates the state about any information that might have changed in the initial start-up process, such as your address or other contact information.
There’s a $20 filing fee that accompanies this initial statement. In the future, the statement of information will also act as your biennial report (an ongoing compliance requirement that we can help with).
An operating agreement is kind of like a charter or constitution for your SMLLC; it dictates exactly how your limited liability company will operate. Typically, the operating agreement explains the responsibilities of each member, how business profits will be distributed, how new members can be added, and more. California doesn’t require you to file your operating agreement; it’s an internal legal document.
Even though you aren’t a multi-member LLC, it’s a good idea to create an operating agreement. You never know how your business will grow in the future. Plus, having an operating agreement in place fortifies your personal liability protection because it’s another thing to demonstrate to the courts that you and your LLC are indeed separate legal entities (in case someone ever tries to challenge that in order to go after your personal assets).
If this process feels a little overwhelming to you, our chatbot can guide you through a customizable operating agreement template.
An EIN, or employer identification number, acts like a Social Security number for a business. You can apply for one for free with the IRS (or we can tackle this task for you, if you prefer).
If you plan to have any employees or want to get a separate business bank account, you’ll need an EIN. Some single-member LLC owners can technically avoid this step, but many will find it helpful to have one.
For federal income tax purposes, an SMLLC is called a “disregarded entity.” In disregarded entities, the business qualifies for pass-through taxation. The LLC itself doesn’t file a tax return; the business owner reports their business income on their personal income tax return and pays taxes accordingly.
In many states, this process repeats on the state level; California works a little differently. You’ll still pay state income taxes on your personal tax return, but your LLC will also be subject to the state’s Franchise Tax. This tax has a minimum fee of $800 that applies to almost all business entities in the state. It’s one reason that California is a pretty costly state to run an SMLLC.
Note: business taxes are very complicated. We highly recommend consulting with a tax attorney or CPA to get professional assistance.
Still wondering why you should form a California SMLLC? Here are some of the top benefits of starting a single-member LLC.
An LLC takes some legwork to start, but it’s pretty easy to run compliantly: file your biennial report, maintain your agent, pay your taxes, and stay up-to-date on business licenses. Compared to other business entities like corporations, the LLC is super easy to run.
As the sole owner of your LLC, you get to call the shots. You won’t have to answer to shareholders, other members, or investors. Multi-member limited liability companies require more teamwork and compromise.
Since the SMLLC is a separate legal entity, you usually can’t lose your personal property (think your car, your home, or your personal savings) if the business gets into trouble. Operating as a sole proprietor wouldn’t give you that protection.
Taxes in California aren’t cheap, but the luxury of an SMLLC is that you can choose how to be taxed. For both federal tax purposes and state ones, your default tax status is pass-through taxation. This lets you avoid the dreaded double taxation of a C corporation (the default form of corporation). That said, if you want to opt into corporate income taxes or elect S corporation status, you have that choice. Many LLCs opt to be taxed as S corporations in order to lower the amount of taxes they pay for Social Security and Medicare.
Running your business as a sole proprietor is perfectly legal, but some customers feel more comfortable interacting with a registered business. The designator “LLC” can add a lot of weight to your name.
Disclaimer: The content on this page is for informational 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.
Yes. California law requires every LLC to have at least one member; there’ is no requirement to have more than one member if you don’t want to.
If you form your SMLLC between now and January 1, 2024, then you will be exempt from the $800 minimum franchise tax for your first taxable year. After that first year, you’ll pay the tax annually.
The current filing fee for the Articles of Organization in California is $70. If you want to reserve your business name, you’ll pay an extra $10.
California Business Resources
Popular States to Form a Single Member LLC
Start an LLC in Your State
When it comes to compliance, costs, and other factors, these are popular states for forming an LLC.
Ready to Start Your California LLC?