- Step 1. Naming Your California LLC
- Step 2. Appoint a Registered Agent
- Step 3. File Your Articles of Organization
- Step 4. Create an Operating Agreement
- Step 5. Get an EIN/Tax ID Number
- Step 6. Keeping Your LLC Running
- California LLC Resources
- California LLC FAQs
Step 1. Naming Your California LLC
One of the most important steps in creating an LLC is choosing a fitting name. The name that you select should be distinct from all other businesses in California in addition to following some important naming rules.
Legally Required Designation
In accordance with California LLC regulations, the name of your LLC must have the phrase “limited liability company” in it or contain one of the following approved abbreviations:
- Limited Co.
In order to ensure that the name you select for your LLC is unique and separate from all other businesses in the state, you can run a search of available names using the California Secretary of State’s business search tool.
If you see a name that you would like to use, you can file a Name Reservation Request with the Secretary of State’s office. This form will reserve your chosen LLC name for up to 60 days ahead of filing to establish your business. There is a $10 filing fee associated with the form, and it must be mailed to the address below or hand-delivered to the Los Angeles regional Secretary of State’s office. If you do choose to hand-deliver the form, you will also need to pay an extra $10 handling fee.
Secretary of State, Name Availability Unit
1500 11th Street, 3rd Floor
Sacramento, CA 95814
300 South Spring Street, Room 12513
Los Angeles, CA 90013
Additionally, when deciding on an LLC name, you may also want to perform an available domain name search. Even if you don’t plan on setting up a business website immediately, it can be helpful to purchase a matching domain name for your LLC ahead of time as it can save future stress when you do go to set up a business website.
As you decide on an LLC name, you should be careful not to include any words that may risk confusing your business with a state or federal government entity or any kind of bank or insurance company. This can include, but is not limited to, words like “Insurer,” “Treasury,” “IRS,” or “State Department.”
You also need to keep in mind that using words such as “bank,” “trust,” “attorney,” or other professional indicators may require the presence of a properly licensed individual in your LLC and additional paperwork. California does not provide for the creation of professional LLCs, but the state does allow professional partnerships or corporations. You can read more about this here.
Using a Trade Name
California LLC law does allow you to use a trade name or DBA (doing business as) name for your LLC in the state. This means that while you can continue using your legally registered LLC name on all official state and federal documents, you can use your DBA name when interacting directly with the public.
To register your trade name in the state, you will need to check with the County Clerk’s office in the area that your LLC will be operating. There, you can ensure that the fictitious name you are using is distinct from other businesses and can find out more information on filing requirements and applicable filing fees.
Step 2. Appoint a Registered Agent
California requires every LLC operating in the state to have a registered agent (also called an agent for service of process) appointed. Your registered agent will be responsible for receiving all legal documents, government communications, and tax documents for your LLC, essentially acting as a contact between your business and state or federal agencies. They will also be the responsible party that is contacted in the event of a lawsuit against your LLC.
You can appoint any California resident, including a member of your LLC, or a business that is authorized to conduct operations in the state as your registered agent. As long as your appointee has a valid California street address and is available during regular business hours, they are eligible to be your registered agent.
If you choose to use a registered agent service, you can check out this list of providers on the Secretary of State’s website
Step 3. File Your Articles of Organization
In order to legally establish your LLC in California, you will need to file your Articles of Organization with the Secretary of State’s office. This document will need to include important information about your business for the state to keep on file. A preview of these necessary items can be found below.
- Your LLC’s name
- Your LLC’s business purpose
- Whether your LLC is member-managed or manager-managed
- Your LLC’s principal office address
- Your LLC’s registered agent’s name and address
You can file your Articles of Organization online, through the mail, or in person. There is a $70 filing fee associated with the Articles of Organization, and it will take 3 to 4 weeks to fully process. If you are hand-delivering your Articles, you can choose to pay an additional expedited service fee.
Once you have filed your form, you will receive a copy of it. You can pay an additional $5 to have your copy certified by the Secretary of State’s office.
To file your Articles of Organization online, you will need to visit the online filing portal available through the California Secretary of State’s office. From there, you will be prompted to fill in the online form. Upon submittal, you will be asked to pay the $70 filing fee and given the option to pay for the $5 certified copy fee for your document.
If you are filing your Articles of Organization by the mail, you will need to place the completed form into a secure envelope along with a check for the $70 filing fee. Then, you can mail the sealed envelope to the address below.
Secretary of State
Business Entities Filings
P.O. Box 944228
Sacramento, CA 94244
To file your Articles of Organization in person, you will need to visit the Sacramento Secretary of State’s office at the address below. An additional $15 counter service fee is applied to hand-delivered documents, so your total filing cost will be $85. You may also choose to pay for expedited service when filing your Articles in person.
1500 11th St.
Sacramento, CA 95814
Monday through Friday, 8 a.m. to 5 p.m.
Step 4. Create an Operating Agreement
California does not require LLCs to create an operating agreement, but you may want to consider creating one anyway. An operating agreement will set clear guidelines for exactly how your LLC’s business is managed, define the rights of members and managers, and will give instructions on how to conduct any dissolution operations. It can also offer guidance for what to do if your LLC experiences a lawsuit.
Keep in mind that if you don’t set these guidelines ahead of time, California LLC law will determine how your business is handled in the case of disputes, and this might not be in your best interests.
Additionally, if you are applying for LLC financing, you will find that most business bank accounts, loan applications, and other business services will require you to send a copy of your operating agreement along with your application in order to demonstrate your LLC as a separately operating business entity.
Step 5. Get an EIN/Tax ID Number
After your Articles of Organization have been filed and processed, any LLC that has more than one member, or any single-member LLC that wants to either hire employees or be taxed as a corporation, needs to apply for a Tax ID number, also known as an EIN (Employer Identification Number). This number is obtained through the IRS, and it is completely free to apply for.
You will use your EIN to identify your business to the IRS on all tax documents and necessary government filings; the number acts much like a social security number for your LLC. If you want to hire employees, file federal taxes, open business bank or credit accounts or apply for business funding, you will need an EIN.
You can file the EIN application either online or by mailing it in. Keep in mind that if you are a foreign filer or do not have a social security number, you will need to file for your EIN through the mail.
The quickest and easiest way to apply for your EIN is online; you will receive your number once your application is completed. Visit the IRS website to apply for your EIN for free.
You will need to fill out this form when applying for your LLC by mail. If you are a foreign filer or do not have a social security number, leave section 7b blank. Mail the completed form to the address below. You can follow up on any questions with the IRS at (267) 941-1099.
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Step 6. Keeping Your LLC Running
Once your LLC is established in California, there are certain requirements you will need to meet on an ongoing basis to ensure that your business stays running smoothly.
File Biennial Reports/Statement of Information
Within 90 days of your LLC being established, you will need to file an initial Statement of Information with the California Secretary of State’s office. This document must include the information listed below.
- Your LLC’s name
- Your LLC’s California Secretary of State file number
- Your LLC’s registered agent’s name and address
- Your LLC’s principal office address
- The name and addresses of your LLC’s managers (or members if no manager has been appointed)
- A valid email address (this is optional and only used if you want electronic renewal notifications and communications for your LLC)
- Your LLC’s business type
Every two years after the initial Statement of Information, you will need to file another report. The report is due during the five months before your LLC’s official establishment date on the Articles of Organization. This filing schedule can help you better understand this.
There is a $20 filing fee for the Statement of Information, and the form can be filed online or mailed to the address on the form.
Separate Your Business Finances
California does not require LLCs to create separate bank accounts, but you may want to consider doing so anyway. A business credit or debit account can help keep your LLC’s finances separate from any personal ones, fully establishing your LLC as an independently operating business. This is especially helpful in the case of lawsuits or other legal issues surrounding your LLC.
When opening a debit or credit account for your LLC, you will most likely need to show your Articles of Organization, Operating Agreement, EIN, or other LLC documents. You should also make an effort to compare all of your banking options before making a choice on where to open an account; different banks will have varying minimum required balances or credit spending limits, and you want to be sure that you select something that is the best for your LLC’s needs.
Keep Up With Federal and State Taxes
It is very important to keep up with both federal and state tax requirements while running your LLC, as you want to avoid incurring any major tax penalties or fines.
Federal Tax Requirements
There are several different tax structures you can choose from for your LLC that can meet different company needs, as each tax structure comes with its own unique type of federal taxation requirements. This article can help you gain an in-depth understanding of the differences between each type of tax structure and help you decide which is best for you.
In general, most LLCs are taxed as sole proprietorships or partnerships. This means that you will be expected to file Schedule C along with your individual income tax return to declare any income that you receive through your LLC (your LLC is acting as a pass-through entity in this situation). When using this tax structure, you should keep in mind that you will most likely need to pay self-employment tax (which has a rate of 15.3%), in addition to any income tax. You may also need to make quarterly estimated tax payments to avoid any IRS fines; the IRS website gives more details on this.
If you want, you can choose to have your LLC taxed as a corporation, like an S Corporation or a C Corporation. You will need to fill out IRS Form 8832 and IRS Form 2553 to declare this. After these forms have been processed, your LLC will be treated as a corporation and expected to file a separate corporate tax return with the IRS.
California Business Taxes
Every LLC operating in California is required to pay taxes to the California Franchise Tax Board. However, there are slightly different taxation requirements depending on the tax structure your LLC has set up. LLCs that are being taxed as sole proprietors and partnerships are considered pass-through entities and will be liable for these taxes. LLCs taxed as S or C Corporations will be liable to follow California’s corporate taxation rules – more information about these can be found here.
All LLCs will be required to pay a minimum annual franchise tax of $800. This tax is filed with the Limited Liability Company Tax Voucher through the California Franchise Tax Board either online or through the mail. If your LLC has a net income of over $250,000, you may be liable to pay additional fees based on income range. More information on this is available on the Franchise Tax Board’s website.
Each year, your LLC’s taxes will be due by the 15th day of the fourth month after the end of your business’s fiscal year. For most LLCs, this is April 15th.
It is also important to note that any California LLC formed in 2021, 2022, or 2023 will be granted a one-year exemption from the minimum $800 franchise tax; the tax would instead be due for the first time during the LLC’s second year in business.
Sales and Use Taxes
If you will be selling goods and services with your LLC, you may be liable to pay sales and use taxes to the state. This tax is registered for and paid through the California Department of Tax and Fee Administration. More information on this can be found here.
State Employer Taxes
LLCs that have employees may be liable to pay both withholding taxes and unemployment insurance taxes. You may need to pay these on both a federal and state level, so be sure to double-check with a professional accountant or financial advisor if you aren’t sure what you will owe.
Withholding taxes are registered for and paid through the California Franchise Tax Board, while unemployment insurance taxes are registered for and paid through the California Employment Development Department.
Acquire Necessary Permits and Licenses
There is no general business license required for LLCs in California, but certain counties and cities may have requirements depending on the type of business your LLC is offering. You may also need to adhere to state professional licensing requirements.
More information about permits and licensing for your business can be found on the CalGold Business Permit System. This system provides information on obtaining and meeting licensing requirements in the state.
Additionally, your LLC may need to obtain permits or licenses on a federal level, though whether this is needed or not depends on the type of business you are running. For help determining if you need to meet additional federal requirements, you can use the licensing directory on the U.S. Small Business Administration’s website.
California LLC Resources
The below list of resources can help guide you through the full establishment of your LLC in California.
- Available LLC name search
- Reserve an LLC name
- Available domain name search
- Commercial registered agents in California
- Articles of Organization form
- Articles of Organization online file
- IRS EIN online application
- LLC Statement of Information
- Statement of Information online file
- Annual LLC franchise tax information
- California Department of Tax and Fee Administration
- California Franchise Tax Board
- California Employment Development Department
- CalGold Business Permit System
- S. Small Business Administration
California LLC FAQs
The answers to these frequently asked questions can help clear up any extra worries about starting your LLC in California.
In California, it will cost you $70 to file your Articles of Organization and $10 to reserve an LLC name ahead of time. You may also need to pay fees to register your DBA name in the county your LLC is located in or the additional $15 counter service fee if you choose to file your Articles of Organization in person.
The cheapest way to file your Articles of Organization is to file them through the mail without first reserving an LLC name or registering a DBA name. Doing this will only cost you $70 to get your LLC established.
In general, it will take between 3 and 4 weeks for your Articles of Organization to be processed, and your LLC formed. You may choose to pay for expedited services if you file your Articles of Organization in person.
After your initial Statement of Information (which is due within 90 days of your LLC being established), you will need to file reports every two years. There is a $20 filing fee for your Statement of Information, and it is due each year in the five months leading up to your LLC’s official establishment date.
If you are finished conducting business under your LLC, you will need to file a Certificate of Dissolution with the Secretary of State’s office. There is no fee for filing for termination of your LLC.
Additionally, if you have an operating agreement, you will need to consult it and proceed down the agreed-upon steps for LLC dissolution.