HOW TO FORM AN LLC IN CALIFORNIA

california LLC business owner standing outside a cafe

Are you a business owner based in California? Do you want to form an LLC? Check out this simple step-by-step guide on how to form a Californina LLC. In eleven simple steps, we walk you through everything you need to know about forming an LLC in California.


HOW TO CREATE LLC IN CALIFORNIA

the golden gate bridge in san francisco, california

Are you a business owner? Do you want to form an LLC in California? You’re in the right place. Creating an LLC in California is easy. We’ve broken the process down into 11 easy steps. Just check out our guide below. We cover everything you need to know about registering an LLC in California.


1: CHOOSE A NAME

The first step to forming an LLC in California is to choose a name for your company. Your California LLC name must be unique and it cannot be similar to an existing company name in the state. And, your California LLC name cannot be misleading to the public.

You can check the California Secretary of State’s business name database online to see if your preferred name is available. You can reserve a name for 60 days by completing a Name Reservation Request form and paying a fee of $10.

See below for the most important regulations regarding the name of a California LLC.

• NAME MUST BE UNIQUE

Your company name must be unique and it cannot be easily confused with an existing registered company.

LLC IDENTIFIER

The name must include the words limited liability company or one of its identifiers – LLC, L.L.C., Limited, Company, or Co.

AVOID REFERENCES TO GOVERNMENT AGENCIES

You must avoid using any words that could lead the public to believe your company is a government agency. For example, you cannot include the terms State Department, Treasury, CIA, or FBI.

RESTRICTED WORDS

Certain words are restricted and cannot be included in a California LLC name. You cannot use the words bank, attorney, lawyer, university, or credit union.


2: CHOOSE A CALIFORNIA BASED REGISTERED AGENT

Every LLC in California must appoint a registered agent. A registered agent is an individual or business entity that agrees to receive official correspondence on behalf of your LLC.

llc business owner standing in a cafe

They are the point of contact for the state authorities and for any legal documents that need to be sent to the company. A registered agent in California is sometimes called a California Agent for Service of Process.

You cannot list the company as its own registered agent. However, you can nominate yourself or any other member of the LLC to the registered agent as long as they have an address in California, (not a PO address).

Your registered agent must be available to accept documents during regular business hours.  For more see – LLC Registered Agent.


3: DECIDE ON MEMBER OR MANAGER MANAGEMENT

You need to decide if your company is going to be run by its members, (owners), or if you are going to appoint a manager or group of managers to run the company. You will define the management structure in the articles of organization when you register the LLC with the California Secretary of State.

If your company is going to be run by a group of managers – these individuals will oversee the running of the company and have the power to vote on key issues and make strategic decisions. By default, all California LLC companies are registered as member-managed unless you define them as manager-managed in the articles of organization.


4: PREPARE & FILE CALIFORNIA ARTICLES OF ORGANIZATION

To form an LLC in the state of California you must file a California LLC Articles of Organization with the state authority.  To do this, you will need to complete form LLC-1 and submit to the California Secretary of State. This can be done online or via mail and you’ll have to pay a $70 fee.

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The articles of organization captures the most important details of your company. It officially lays out how the company will be structured and run, who its members are, and the contact details of its registered agent.

You can file your articles of organization yourself or you can hire a professional to do it for you.  If you want to hire a company to assist with the formation of your LLC, check out the Best LLC Formation Companies 2024.

Your Articles of Organization will capture the following company details.

  • LLC Company Name & Address
  • The Purpose of the LLC.Registered Agent Contact Details
  • Management Structure – Members or Manager Managed
  • Member & Manager Details

5: RECIEVE CALIFORNIA LLC FORMATION CERTIFICATE

Once your articles of organization have been submitted they will be reviewed by the Secretary of State. If everything is in order the application will be approved, your LLC will be formed, and your company is now officially a legal entity.

Once your LLC has been formed the California Secretary of State will issue you with an LLC formation certificate. This certificate confirms that your LLC has been filed and is officially recognized by the state of California. You can use this certificate to apply for an EIN (employer identification number), business bank account, and business license.


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6: FILE INITIAL STATEMENT OF INFORMATION

California LLC companies must file an Initial Statement of Information within 90 days of formation. This is done by filling out form LLC-12 and submitting it to the California Secretary of State. The form can be completed and submitted online, in person, or by regular mail. You will have to pay a $20 fee.

man working on laptop

Once you have filed your initial Statement of Information within 90 days of formation – you will then be required to file a Statement of Information every two years (biennial) for your California based LLC. A Statement of Information includes the following details.

  • LLC Name & Formation Number
  • Agent for Service of Process Details
  • LLC Principal Executive Office’s Address
  • LLC Mailing Address
  • Manager Names & Contact Details
  • Principle Business Activity
  • Valid eMail Address

7: CREATE LLC OPERATING AGREEMENT

An operating agreement is a document that defines how the company will be structured and managed. It includes all ownership details and lays out how profits or losses will be distributed. California requires each LLC to create an operating agreement but you do not have to file it with the state authorities.

When you form an LLC you should create an operating agreement from the outset. The document should be signed by all members. It then becomes a legally binding document that governs how the LLC will be owned and managed.

For more information on operating agreements, see – What Is An LLC Operating Agreement?  See below for some of the key points your California LLC operating agreement should cover.

  • LLC Name & Primary Address
  • Register Agent Contact Details
  • Type & Purpose of Business
  • Member Details
  • Member Contribution Details
  • Profit & Loss Distribution Details
  • New Member Admittance Procedure
  • Company Management Structure
  • Liability Clauses

8: GET YOUR EIN

When discussing How to Form a California LLC – we need to take a look at tax requirements. An EIN is a number used by the federal government to track your company for tax purposes. It stands for Employer Identification Number. The nine-digit number is assigned by the Internal Revenue Service.

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To get an EIN for your California LLC – just head over to the IRS website. There is no fee for obtaining an EIN and you will need one to open an LLC business bank account, hire employees, and file your state taxes. If you are converting from a sole proprietorship to an LLC you need to get a new EIN.


9: FILE COMPANY BIENNIAL REPORT

Once your company is up and running there are several regulatory requirements you will need to continue to take care of. First up is the LLC Biennial Report. As mentioned above, this is also known as a Statement of Information.

This document needs to be completed and submitted to the California Secretary of State every two years. For more information, see – Filing California LLC Statement of Information.


10: PAY CALIFORNIA ANNUAL FRANCHISE TAX

All Californian LLCs must pay an annual $800 franchise tax. The tax must be paid every year regardless of whether the company makes a profit or not. And, if your LLC makes a gross profit above $250,000 an additional annual fee will apply.

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However, an allowance has been made for any LLC formed in California in the years 2021, 2022, or 2023. If you form an LLC in one of these years your new LLC will be exempt from the $800 fee for its first year.


11: COMPLY WITH OTHER CALIFORNIA REQUIREMENTS

The last thing you need to look into is to make sure your business complies with all other regulatory requirements that apply to your specific business. The most common additional requirements are business licenses, sales tax, and employer tax.

BUSINESS LICENSES

Depending on the nature of your business and the industry you operate in, you may need to obtain a business license. Business licenses are an important consideration when discussing how to form a California LLC.

California business licenses can be applied for and obtained online. The three types of business licenses you may need to apply for are local, state, and federal licenses.  For more information see – Business Licenses for LLC.

SALES TAX

If you sell goods or services and collect a sales tax you will need to make sure you are sales tax compliant. To register for sales tax you need to get in contact with the California State Board of Equalization (BOE).

EMPLOYER TAX

If you plan to hire employees you will have to register for employer tax. This can be done online with the California Employment Development Department (EDD).


HOW MUCH DOES IT COST TO FORM AN LLC IN CALIFORNIA?

It costs $90 to form an LLC in California. This figure includes the filing fee for your Statement of Information and your Articles of Organisation. If you want to reserve a company name on the California Secretary of State’s website you will have to pay an additional $10.

business owner standing at premesis door

The cost of maintaining a California LLC is $800. This covers your Annual Franchise tax. This fee must be paid annually regardless of whether the company made any money or not. You will also have to file a Statement of Information every two years. This comes with a filing fee of $20.

CALIFORNIA LLC FORMATION FEES

  • Name Reservation Fee $10
  • Statement of Information Filing Fee $20
  • Articles of Organisation Filing Fee $70

CALIFORNIA LLC MAINTENANCE FEES

  • Annual Franchise Tax $800
  • Biennial Statement of Information Filing Fee $20

For more, check out our full guide to California LLC Costs.


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LLC FOR CALIFORNIA RESOURCES

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Here are some helpful resources you’ll need when forming an LLC in California.

CALIFORNIA SECRETARY OF STATE


HOW TO FORM A CALIFORNIA LLC FAQ

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HOW MUCH DOES IT COST TO SET UP AN LLC IN CALIFORNIA?

It costs $90 to set up an LLC in California. This includes a $20 Statement of Information Filing Fee and a $70 Articles of Organisation Fee. For more information see – LLC Formation and Maintenance Costs in California.

HOW DO I START AN LLC IN CALIFORNIA MYSELF?

You can start an LLC in California yourself by filing an ‘Articles of Organization form with the Secretary of State of California. This is the main step in forming a California LLC. However, there are several additional steps you will need to take to make sure your company is compliant. See the 11-step guide above for all you need to know.

DO YOU HAVE TO PAY THE $800 CALIFORNIA LLC FEE THE FIRST YEAR IN 2021?

All California LLC companies must pay an annual franchise tax of $800. This fee is mandatory and must be paid regardless of whether the company makes a profit. However, an allowance has been made for companies formed in 2021, 2022, and 2023. The fee will be waived for the first year for any LLC formed in California in these years.

DO YOU HAVE TO PAY THE $800 CALIFORNIA FEE EVERY YEAR?

Yes, you will have to pay the $800 California fee every year. All LLCs in California must pay an annual franchise tax of $800. The fee is applied to all LLC companies and must be paid every 12 months.


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ABOUT THE AUTHOR

Jennifer Matheis – LLC Formation Specialist

Jennifer is our in-house LLC formation specialist. She is a graduate of the Ross School of Business at the University of Michigan and holds a Master of Business Administration. Jennifer has worked as a business management consultant in an advisory role for many years.

Hailing from Buffalo New York, Jennifer is a firm believer in the ‘seize the day’ mantra. When she is not writing for My LLC Guide she is busy managing one of her many start-up ventures. She is a keen sports fan and regularly attends Madison Square Garden to support the New York Knicks.

HOW TO FORM AN LLC IN CALIFORNIA

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