How to Start an LLC in California

A limited liability company (LLC), among other benefits, offers liability protection and tax benefits.

These eight steps will get your California LLC started if you have decided that an LLC is the best business structure for you.

1. Name your California LLC

Before you can register an LLC, you will need to choose a name for your articles.

California's naming requirements must be met. These are the most important requirements you should keep in mind.

• Your business name should include the words Limited Liability Company (LLC), LLC, or L.L.C.
• Your name cannot be identical to an already existing business in the state. To determine if a business name is being used, you can search the website of the Secretary of State.
• The name of the business cannot include words that could be used to identify a government agency (e.g. State Department, CIA FBI, Treasury, Treasury, etc.).
• Some words are restricted (bank, lawyer or attorney, credit union, etc.). Additional documentation and licensure paperwork may be required.

Additional considerations

• Visit the IRS and the small business administration for more information
• URL availability. Even if you think you won't need one, it's likely that you will. You should at least reserve the possibility of purchasing a domain name in the future. It's a good idea not to finalize your LLC name without checking if the URL is still available.
• You can reserve your name. California allows names to be reserved up to 60 days after payment of the fee and submission of the appropriate form to the state authority.

2. Select your registered agent

California law requires that you appoint an agent registered for your LLC.

A registered agent is an individual or entity that can receive service of process, official legal documents and notices for your LLC. This person or entity will receive legal documents, tax forms, and notice of lawsuits on behalf of the LLC.

You can be a registered agent or an entity offering a registered agent service. These criteria must be met:

• Companies and entities must offer registered agent services.
• Agents must have a California address.
• The agent must be present on the spot and available during normal business hours to sign documents.

3. Prepare and file articles for your organization

Articles of Organization are a document that establishes your LLC and provides basic information. California's Articles of Organization are filed using Form LLC-1.

To properly register California LLC, prepare Articles of Organization. Although it may sound daunting, it is actually quite easy. All you have to do is fill out an online form and submit it. It can also be sent by mail.

The following information is necessary to prepare your articles:

• Your address and name of your LLC
• The purpose of an LLC.
• Your registered agent's name and address.
• Management structure: Will the LLC be managed by its members or managers?
• The Articles must be signed by the person who is forming the LLC.

The secretary of state will review your filing once you have filed your Articles. The LLC is legal if the articles are approved. California allows you to submit your application by regular mail, online or in person.

4. Receive a certificate from your state

After the LLC's documents have been filed and approved, the state will issue a certificate confirming that the LLC is officially established. Online filing is the fastest way to get your certificate.

This certificate will enable the LLC to get an Employer Identification Number, business licenses and a business bank account.

5. Make an operating agreement

An operating agreement describes the business model of your LLC.

California law requires that an LLC have an operating agreement. However, it does not have to be filed. It should be easily accessible. It is useful for many reasons, including the resolution of disputes over financial agreements or other potential litigation. The courts will make decisions based on state law and not necessarily in the best interests of the LLC or its members if there is no agreement.

The following are examples of operating agreements that can be included in an operating agreement:

• Name and address of the principal office of an LLC
• The LLC's duration
• Name and address for the registered agent
• Information about the Articles of Organization
• The purpose of the business
• Members and their contributions
• Profits and losses will be split in the following manner:
• The procedure for admitting new members and outgoing members
• Management of the LLC
• Clauses of indemnification and liability

6. Send a statement of information

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

The following information is included in a Statement of Information:

• Name of LLC and California Secretary Of State file number
• Name and address of the agent for LLC
• Address of the principal executive office of LLC
• Mailing address of LLC
• Name and complete address of the chief executive officer, or any manager, or chief manager, or if none are elected, the name and address of each member.
• Email address of LLC (if LLC opts to receive renewals by email rather than regular mail).
• The principal business activity of an LLC

7. Register for an employer identification number

To identify your LLC for tax purposes, the Internal Revenue Service assigns a nine-digit Employer ID Number (EIN). Your EIN can be obtained online or by mail through the IRS.

An EIN serves the following purposes:

• Filing and managing taxes at both the federal and state levels
• Register for a bank account in your business.
• Employ employees.

8. Pay the annual franchise fee

An LLC must pay a $800 franchise fee to do business in California. This fee is payable regardless of whether the business earns any income. It is due each year.

An additional annual fee will be required if your LLC's annual gross revenue exceeds $250,000

For LLCs that were formed in California between 2021 and 2022 or 2023, there is an exemption. The new legislation exempts an LLC from California's $800 annual minimum franchise tax. The LLC must pay $800 for the second taxable fiscal year.

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