How to Start an LLC in California – A New Business Guide

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If you are searching for information on how to start an LLC in California, this piece is for you. 

Forming an LLC in California is simple only if you know what to do and how to do it. 

A limited liability company (LLC) gives liability protection and tax advantages, plus other benefits to small businesses. 

If you have decided to start an LLC, there are some steps to follow and requirements that must be met. 

So, this article will guide you on the steps and requirements of how to start an LLC

How to Start An LLC in California

To start an LLC in California, you need to follow sole guiding rules and requirements to get your business running. 

Here are the steps to form your LLC in California. 

Name Your LLC

First and foremost, you have to decide and choose a name for your business. 

However, your name must comply with the California naming requirements. 

Here is what you need to take note of when choosing a name for your business. 

  • Your business name must include ability company” or its abbreviations (LLC or L.L.C.). 
  • Ensure that your name is distinguishable from any other California limited liability company, corporation, limited partnership, or registered limited liability partnership business name. 
  • Ensure the name you desire isn’t already taken by doing a Business Entity Search on the California Secretary of State’s website.
  • Your business name cannot contain words used to name a government agency (i.e., State Department, CIA, FBI, Treasury, etc.)
  • Also, it can’t contain certain restricted words like bank, lawyer, attorney, credit union, etc.
  • Ensure to Reserve the name once you find the availability: You must complete the Name Reservation Request for Domestic Entities form at least two weeks before registration or reserve your business name when completing the online LLC registration.
  • Consider if the URL is available: Check online to see if your business name is known as a web domain. If it is, you may want to buy the URL to prevent others from acquiring it.

Choose Your Registered Agent

All LLCs in California requires you to appoint a registered agent. 

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A registered agent is an individual or body authorized to receive service of process and other official legal documents and notices on behalf of your business.  

They will receive your legal documents, government correspondence, tax forms, and notice of lawsuits on behalf of your LLC.

A registered agent can be a person or an entity that offers a registered agent service and must meet the following criteria:

  • They must provide registered agent services.
  • They must have an address in California.
  • They must be on-site and available to accept documents during regular business hours.

Prepare and File Articles of Organization

The Articles of Organization is an official document establishing your LLC by laying out basic information about it. 

Articles of Organization can be filed with Form LLC-1 in California. 

You can prepare Articles of Organization and file them with the California Secretary of State to register your California LLC online. 

You can file it through the mail. 

Your articles of organizations must contain:

  • Your LLC name and address
  • Purpose of the LLC
  • Name and address of your registered agent.
  • Management structure

Therefore, the person forming the LLC is required to sign the Articles.

The secretary of state will review the filing, and your LLC will become a legal business entity if the articles are approved. 

However, you submit your application via regular mail, online, or in person. 

Obtain a Certificate From the State

Your state has to issue you a certificate that confirms that your LLC formerly exists.

This is after the LLC’s formation documents are filed and approved. 

Meanwhile, filing the documents online is the fastest way to receive your certificate.

This certificate will allow you to obtain an Employer Identification Number (EIN), business licenses, and business bank account.

Get an Operating Agreement

An operating agreement is a legal document summarizing how your LLC will operate. 

However, all LLCs in California must have an Operating Agreement that doesn’t have to be filed, but a written one saves you a lot of stress. 

Your operating agreement must include: 

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The LLC’s name and principal address

  • Duration of the LLC
  • Name and address of the registered agent
  • Information about the Articles of Organization
  • Purpose of the business
  • Members and their contribution
  • Profits and Losses sharing
  • Procedure for employing new members.
  • Management of the LLC
  • Indemnification and liability clauses

File a Statement of Information/ Biennial Report

All LLCs in California must file a Statement of Information with the California Secretary of State within 90 days of forming the LLC.

An LLC Statement of Information includes: 

LLC’s name

  • California Secretary of State file number
  • LLC’s agent name and address
  • LLC’s principal executive office address
  • LLC’s mailing address
  • Name and complete business 
  • LLC’s email address 
  • LLC’s main business activity

Get an Employer Identification Number

An Employer Identification Number is a nine-digit number assigned by the Internal Revenue Service to identify your LLC for taxes. 

You can also obtain your EIN by mail or online through the IRS.

The EIN is necessary to: 

  • File and manage taxes at the state and federal level
  • Open a business bank account.
  • Hire employees

Pay the Annual Franchise Tax

All LLCs must pay an $800 franchise tax fee to do a business in California. 

This is a compulsory fee that must be paid nonetheless of whether the business makes any income and is due every year.

However, there is an exemption for LLCs formed in California in 2021, 2022, or 2023 under the new legislation, but they must pay an $800 fee in the second taxable year. 

What To Do After Filing an LLC

There is a load of things to do after your LLC is formed and running, some of which are: 

Obtain operating permits or licenses for your business. ( health department permits, zoning permits, home occupation permits, professional licenses)

  • Register your business with the state’s tax agency.
  • Open a business bank account.
  • Apply for a business credit card.
  • Purchase insurance for your business.
  • Protect your name and logo with a trademark.

Cost to File an LLC in California

Having talked about how to start an LLC in California, let’s have a look at how much it costs to file an LLC in California. 

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Based on the request, here is the breakdown of all the required fees to form an LLC.

Reservation Fee

To reserve your name, you can file your LLC name at $10 for 60 days before registering it. 

Statement of Information Fee

In California, the cost of filing a statement of information is $20.

All LLCs must file a statement of information within 90 days of registering an LLC either online, in person, or via mail. However, the statement of information must be filed every two years with a required fee of $20. 

Articles of Organization Fee

You can file the Articles of Organization for $70 with the California Secretary of State. 

Also, an LLC must pay an $800 franchise tax fee to do a business in California.

Meanwhile, if your LLC’s annual gross revenues surpass $250,000, an additional yearly fee may be required.

Costs of Forming A Foreign LLC in California

If you have the plan to expand your business to another state like California, you have to pay to register as a foreign LLC at the cost of $70.

Business Permits/Licenses

As a foreign LLC in California, you may be required to obtain and license at the local and state level. This depends on the nature of your business and geographical location.

Filing an Amendment to Your Articles of Organization

To file an amendment to your Articles of Organization, you must pay $30.

You may have to visit the California Secretary of State’s website to find out more about how to start an LLC in California for a foreign business. 

Conclusion

This guide on how to start an LLC in California reveals all you need to know and put in place to form your LLC. 

For a start, you need to choose and reserve your business name following the tips above. 

You also need to file some documents like operating agreement, statement of information or biennial report, registered agent, and other requirements.

We wish you success as you form your LLC.

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