Our picks for LLC formation services

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ZenBusiness
  • Starts at $0 plus state fees
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FAQs

Is it cheaper to form an LLC online or by mail in California?

Online filing is quicker and often cheaper (currently free during the temporary waiver), but mail filing can be slightly less expensive if you don’t mind the wait.

Do I need to pay California franchise tax for my LLC?

Most LLCs operating in California are subject to an $800 annual franchise tax, regardless of income. Additional fees may apply based on annual revenue.

Do I need to hold annual meetings for my California LLC?

There’s no legal requirement for annual meetings, but holding regular virtual or in-person meetings is recommended for communication and record-keeping, especially with multi-member LLCs.

What are the penalties for not complying with California LLC regulations?

Failure to file annual reports or update required information could lead to late fees and potential suspension of your LLC’s operating status.

Can I form an LLC in California if I'm not a resident?

Yes, non-residents can form and operate LLCs in California by appointing a California resident as the registered agent.

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For new LLCs, forming an LLC is often the best option as it is an uncomplicated business structure that affords small business owners legal protection by separating personal assets from business debts. Additionally, LLCs often enjoy a lower tax rate than corporations. However, forming an LLC can be a little complicated, and each U.S. state has a unique checklist for starting an LLC with minor procedural variations.

The process of forming an LLC in California does not deviate from the norm nor does it require LLC members to fulfill unusual obligations or pay excessive fees. As in most states, an LLC is created in California through the filing of Articles of Organization with the Secretary of State. The only major exception is that LLCs formed in California must pay higher-than-average franchise taxes relative to those formed in other states.

1. Select a name for your California LLC

Follow naming requirements

There are three major guidelines to follow when naming your LLC in the state of California:

  1. Your LLC’s name must be distinguishable from the names of existing business entities on file with the California Secretary of State.
  2. Your LLC’s name must end with the words “Limited Liability Company” or the abbreviations “LLC”, or “L.L.C.” The words “Limited” and Company” may be substituted with “Ltd.” and “Co.”, respectively.
  3. Your LLC’s name must not include the words trust, trustee, bank, incorporated, inc., corporation, corp., insurance company, insurer, or other words that relate to the insurance industry.

Need help coming up with a business name? Check out our free business name generator.

Reserve your LLC name with the Secretary of State

After selecting a name for your LLC, you can reserve it with the California Secretary of State.

First, check the availability of the name using the California Secretary of State business name database. If the name is available for use, you can file a Name Reservation Request form by mail or hand delivery to the California Secretary of State to reserve the name for up to 60 days. The fee is $10 for postal filing or $20 for in-person filing.

2. Designate a registered agent

As in every U.S. state, forming an LLC in California requires the appointment of a registered agent service to handle state and federal legal documents and service of process on the business’s behalf. The registered agent must either be a state resident or a business entity with a street address in California.

Check this list of private California-based registered agents supplied by the California Secretary of State for help in the selection process.

Our picks of the best registered agent services

  • Northwest Registered Agent: Starting a business requires a lot of state-mandated paperwork, which can be confusing for new business owners. Northwest offers business services that can help entrepreneurs find the right documentation, fill it out, and file it on time with the right government agency. In addition to helping you set up an LLC, Northwest has a host of additional services, like registered agent services, that new owners will find useful too.
  • ZenBusiness: There’s no need to stress about filing paperwork when you work with ZenBusiness. This company offers a great variety of LLC services, the focus of which is to ensure your business is set up correctly with the proper paperwork filled out and delivered to the right branch of your state government. Of course, ZenBusiness does charge for their services, but customers say they get the most bang for their buck.
  • Harbor Compliance is a great fit for organizations that register in multiple states and for those who don’t want to pay excessive service fees. With their network and electronic document delivery, they help ensure your business never misses a legal notification.

FAQs

Is it cheaper to form an LLC online or by mail in California?

Online filing is quicker and often cheaper (currently free during the temporary waiver), but mail filing can be slightly less expensive if you don’t mind the wait.

Do I need to pay California franchise tax for my LLC?

Most LLCs operating in California are subject to an $800 annual franchise tax, regardless of income. Additional fees may apply based on annual revenue.

Do I need to hold annual meetings for my California LLC?

There’s no legal requirement for annual meetings, but holding regular virtual or in-person meetings is recommended for communication and record-keeping, especially with multi-member LLCs.

What are the penalties for not complying with California LLC regulations?

Failure to file annual reports or update required information could lead to late fees and potential suspension of your LLC’s operating status.

Can I form an LLC in California if I'm not a resident?

Yes, non-residents can form and operate LLCs in California by appointing a California resident as the registered agent.

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3. File Articles of Organization

Once your LLC name is reserved and you have appointed a registered agent, you can form your LLC by filing Articles of Organization with the California Secretary of State. Your Articles of Organization can be filed online, through the mail, or via hand delivery to the Secretary of State’s office. The state’s filing fee is $70.

Your LLC’s Articles of Organization must include the following details:

  • LLC’s name
  • LLC’s principal address
  • LLC’s purpose
  • Registered agent’s name and address
  • Whether the LLC will be member-managed or managed by a specially designated manager
  • Signature of the person forming the LLC.

4. Create an operating agreement

Although not a legally mandated step for forming an LLC in California, drafting a comprehensive LLC operating agreement is strongly recommended for all nascent limited liability companies.

The operating agreement should do the following:

  1. Describe the LLC’s business structure
  2. Establish the individual responsibilities and obligations of LLC members
  3. Detail how the LLC will be run

Without an operating agreement clarifying the specific duties of its members, an LLC may face significant legal and operational difficulties.

5. Obtain an IRS Employer Identification Number (EIN)

All newly formed LLCs in the United States must acquire an Employer Identification Number (EIN) from the Internal Revenue Service (with the exception of single-member LLCs). The nine-digit EIN is like a social security number for a business and is necessary to pay income tax, file tax returns, open business bank accounts, and perform many other important functions.

You can apply for an EIN online on the IRS website without paying a filing fee.

6. Fulfill your legal obligations

Once an LLC is registered, its members must devote attention to fulfilling legal requirements that apply for the duration of the company’s existence.

File biennial reports

All California and foreign LLCs are required to file a Statement of Information (Form LLC-12) with the California Secretary of State in the 90 days following the submission of their Articles of Organization. After the initial Statement of Information is filed, LLCs must file additional statements every two years during the calendar month when their original Articles of Organization were filed, or within the five preceding months.

The Statement of Information can be filed online, by postal mail, or hand-delivered to the California Secretary of State’s office. The filing fee is $20.

Review necessary business licenses in California

  • Seller’s Permit: Nearly every California business must obtain a Seller’s Permit, which registers the business to collect and pay sales tax to the California Department of Tax & Fee Administration. The permit is free and valid for the life of the LLC.
  • Occupational licensing: California does not have a state-wide general business license required of all LLCs. Instead, they have occupational licensing requirements which may need to be obtained for certain professions and industries. For example, running a hair salon will require a license specifically for salon owners who provide beauty services. Applications will be run through individual agencies that pertain to their industry.
  • Check with the local government: Additionally, municipalities in California can set their own requirements for businesses that operate there. As an example, in Alpine County, a $29 registration and license is required for each year a business operates there. These municipalities can also require and distribute occupational licenses. Call your city or county clerk to learn more.

Check out Calgold, a handy tool provided by the California Office of Business and Economic Development that produces a list of permits and licenses a business needs based on its location and type of business.

Understand state taxes in California

Like in other states, California treats LLCs as a pass-through entity, and the owners may claim profits and losses on their personal income taxes at the end of the year.

  • Franchise tax: The California Franchise Tax Board requires all LLCs doing business in the state, including those formed in California and foreign LLCs, to pay a minimum franchise tax of $800 every year. However, LLCs that opt to be taxed as corporations should obey different tax rules. California franchise taxes are due on the 15th day of the 4th month after the end of an LLC’s taxable year. The tax is paid by filing Form 568, which can be found on the California Franchise Tax Board website.
  • California tax rates: As an LLC owner, you will continue to pay state income tax at a tax rate between 1% and 13% of net income. Remember that you will also pay federal taxes through the IRS, and additional taxes if you have any employees.

LLCs that report a net income over $250K are required to pay additional taxes based on their total income from that year.

Register with California taxing authorities

Certain California LLCs are required to register with California taxing authorities in order to pay state taxes related to their business. Here are two of the principal California taxing authorities along with the types of businesses that must register with them.

BOI reporting in California

All businesses should be aware of the new BOI (Beneficial Ownership Information) reporting requirement, which is overseen by the Financial Crimes Enforcement Network (FinCEN). Anyone who owns or controls at least 25% of the business or has significant influence over it is considered a beneficial owner.

  • Information required: Name, date of birth, address, and identifying information from a government-issued ID (passport or driver’s license) are necessary for BOI reporting in California for each beneficial owner.
  • File it once: Like the federal regulation, California does not need firms to file a BOI report annually; instead, they only have to file once, unless their provided information changes later.

The date of the company’s incorporation or registration determines the steps you need to take:

  • For companies registered prior to January 1, 2024, the report must be filed by January 1, 2025.
  • For companies registered in 2024, the report must be filed within ninety days after being notified of their registration or establishment.
  • After January 1, 2025, businesses have thirty calendar days from the date of notice to submit their first set of reports.

Learn more about BOI reporting.

LegalZoom can help you file a compliant and stress-free BOI Report for only $149.

FAQs

Is it cheaper to form an LLC online or by mail in California?

Online filing is quicker and often cheaper (currently free during the temporary waiver), but mail filing can be slightly less expensive if you don’t mind the wait.

Do I need to pay California franchise tax for my LLC?

Most LLCs operating in California are subject to an $800 annual franchise tax, regardless of income. Additional fees may apply based on annual revenue.

Do I need to hold annual meetings for my California LLC?

There’s no legal requirement for annual meetings, but holding regular virtual or in-person meetings is recommended for communication and record-keeping, especially with multi-member LLCs.

What are the penalties for not complying with California LLC regulations?

Failure to file annual reports or update required information could lead to late fees and potential suspension of your LLC’s operating status.

Can I form an LLC in California if I'm not a resident?

Yes, non-residents can form and operate LLCs in California by appointing a California resident as the registered agent.

SHARE THIS POST

Post LLC tasks

Set up business bank accounts in California

Once you’ve established your LLC in California, setting up dedicated business bank accounts is a crucial step. These accounts ensure the separation of your business finances from personal ones, which is essential to maintain the limited personal liability protection offered by your LLC.

  • What you need to open an account: To open a business bank account, you will typically need to provide your LLC’s Articles of Organization, an Employer Identification Number (EIN) obtained from the IRS, and any necessary business licenses or permits.
  • Consider business-friendly banks: Many banks offer services aimed specifically at new LLC owners and other entrepreneurs. These options may have less fees and more flexibility than traditional, large banking institutions. One example is Relay, which focuses on transparency and offers real-time expense tracking and other digital tools. Similar options may include Found, Relay, and Mercury.

Obtain a Certificate of Good Standing in California

To prove your LLC’s legal compliance and good standing with the state, you may choose to obtain a Certificate of Good Standing, also called a Certificate of Status in California.

This certificate is frequently needed for making business transactions, obtaining finance, or signing contracts. Here’s what you should know:

  • The California Secretary of State’s office is where you can obtain a copy of the Certificate of Good Standing.
  • The fee for the certificate is $25.
  • It may expire after a set amount of time, so you must renew it as needed.

Building a website for your California LLC

While not every business will have an online storefront or offer online services, having a website is a very beneficial step to take early on. This will allow new customers to understand what you offer, learn where to find out and reach out to you as needed.

You don’t need coding experience to get a website up and running, simply follow these directions:

  1. Search for and purchase a domain name.
  2. Sign up for web hosting.
  3. Pick a web builder like Domain.com or GoDaddy to create a site with no coding experience necessary.
  4. Tailor your site to your customers, adding appropriate pages, content, and images.
  5. If you’re selling goods, add an e-commerce section to your site.
  6. Review, test, and publish your site.

Benefits of a website

A well-designed and informative website will help you:

  • Look professional and help engender trust with your future customers.
  • Showcase your offerings 24/7, providing accessibility beyond regular business hours
  • Engage with customers through various means, such as blog posts, newsletters, and contact forms, fostering better communication and building lasting relationships.

Costs to start your LLC in California

Average cost to start an LLC in California: $110-$310

Starting an LLC in California involves a range of costs, both mandatory and optional, depending on your preferences and specific requirements. Let’s explore the mandatory set-up fees.

  • Incorporation fees: To legally establish a business in California, you must file Articles of Organization with the California Secretary of State and pay the $70 filing fee.
  • Statement of Information filing fees: Within 90 days of forming your LLC, you must file a Statement of Information, which has a filing fee of $20. If you require expedited processing for a faster business formation process, you can opt for 24-hour processing at a cost of $350 or same-day processing, which comes with a more substantial fee of $750. After the initial Statement of Information is filed, owners must file the same report every two years and pay the filing fee again.
  • Registered agent service fees (optional): Every California LLC must list a registered agent on its formation documents. While some owners take on the role themselves, you can opt to hire a professional service to receive documents for your business. If you do so, expect to pay $50 to $200 a year.

Foreign LLCs

LLCs formed outside of California that intend to do business in the state must also register with the California Secretary of State.

Follow these steps to register your foreign LLC in California:

  1. Comply with California LLC naming guidelines and confirm that your LLC name is available for use in the state by checking the California Secretary of State business name database.
  2. Appoint a California registered agent to handle service of process.
  3. Obtain a Certificate of Good standing from your home state
  4. File an Application to Register a Foreign Limited Liability Company by postal mail or online. The filing fee is $70.

FAQs

Is it cheaper to form an LLC online or by mail in California?

Online filing is quicker and often cheaper (currently free during the temporary waiver), but mail filing can be slightly less expensive if you don’t mind the wait.

Do I need to pay California franchise tax for my LLC?

Most LLCs operating in California are subject to an $800 annual franchise tax, regardless of income. Additional fees may apply based on annual revenue.

Do I need to hold annual meetings for my California LLC?

There’s no legal requirement for annual meetings, but holding regular virtual or in-person meetings is recommended for communication and record-keeping, especially with multi-member LLCs.

What are the penalties for not complying with California LLC regulations?

Failure to file annual reports or update required information could lead to late fees and potential suspension of your LLC’s operating status.

Can I form an LLC in California if I'm not a resident?

Yes, non-residents can form and operate LLCs in California by appointing a California resident as the registered agent.

SHARE THIS POST