How to Start an LLC in California?

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Written by: LLCStars Team
Read 8 minLast updated on

Starting an LLC in California is a great way to protect a company's assets from lawsuits or other liabilities.

The state of California has very clear steps for starting an LLC. 

Applicants can go through the process themselves or hire a professional incorporation service to ensure an itch-free process.

They'll have to file LLC Articles of Organization with the California Secretary of State.

This document includes the LLC's name and address, the names of its members, and the name and address of its registered agent.

But that's not all.

This article will provide a step-by-step guide on how to start an LLC in California.

How to Start an LLC in California: Simple Steps

Interested entities can follow the steps below to start an LLC in California:

1. Choose an LLC Name

The first crucial step to starting a limited liability company is having a unique business name. 

The LLC's name must include "Limited" or "Ltd." 

Applicants can't use a name that's already in use or one that's too similar to an existing business. 

They'll have to search the business name database on the California Secretary of State website to ensure the chosen name is available. 

The name cannot contain confusing elements like punctuation, special characters, or numbers. It must end in LLC, Limited Liability Company, or some abbreviation of these words. 

The name must be available for the desired location, city, and state: In this case, this will be the state of California.

2. Appoint a Registered Agent 

Every LLC must have a registered agent in California. This person or business accepts legal documents and other official correspondence on behalf of the LLC.

The qualified LLC Service experts will provide fast responses, accurate paperwork, and top-level customer support.

It's very important to hire a professional service recommended by an attorney or other reliable agency. Northwest Registered Agent is a top-notch LLC formation company that offers cost-effective and reliable services.

They have knowledge and expertise in this field, so they know what to include in the document and what documents need to be completed independently by the applicant.

3. Prepare an LLC Articles of Organization 

The next step is to file an LLC's Articles of Organization with the California Secretary of State. 

The Articles of Organization are the official document establishing the LLC and names its members and registered office.

Applicants can file their LLC AO online, by mail, or in person. 

Mail Filing:

Secretary of State

Business Entities Filings

PO Box 944228

Sacramento, CA 94244

Online:

Applicants should visit https://llcbizfile.sos.ca.gov/registration to complete the online application. They'll need a credit card to pay the filing fee, which costs $70.

In-Person:

Business owners can visit their local Secretary of State Business Entities Filings office to complete their Articles of Organization. 

1500 11th St.

Sacramento, CA 95814

Mon-Fri. 8 a.m. to 5 p.m.

The cost of LLC filing in California is $70. Also, filing in person attracts an extra $15 as this offers priority processing over applications submitted by mail.

4. File an Initial Statement of Information

All LLCs in California must file an Initial Statement of Information (Form LLC-12) with the Secretary of State within 90 days of filing their Articles of Organization. 

This form provides information about the LLC's members, managers, and the company's registered agent.

The filing fee is $20.

5. Create an Operating Agreement

Although it's not required by law, it's a good idea for all LLCs to have an Operating Agreement. This document outlines the LLC's ownership structure, how it will be managed, and its financial procedures. 

An Operating Agreement can help prevent disagreements among members and keep a business running smoothly.

6. Apply For a Federal Employer Identification Number (EIN) 

When forming an LLC in California, applicants must apply for a Federal Employer Identification Number (EIN). 

This is a unique nine-digit number that the IRS issues to businesses. It serves as a tax ID. If LLC has employees, they'll need an EIN to report payroll to the government.

The IRS website makes it easy to apply for an EIN online or mail. It costs $0 to apply online and $0 by mail. 

It's best practice for all businesses to get their EINs as soon as possible before they start hiring employees or independent contractors.

 This can help prevent problems down the road with hiring and payroll reporting.

7. Register with the California Department of Tax and Fee Administration

LLCs in California must register with the California Department of Tax and Fee Administration (CDTFA). 

This includes registering for a Business License and paying applicable taxes. Entities can register online or by mail. The registration fee is $25.

8. Obtain Business Insurance

All businesses, including LLCs, should have general liability insurance. This type of insurance protects an organization from financial damages caused by accidents or injuries that occur on its property.

9. Comply With Other Business Licenses And permits

Depending on the type of business, owners may need to obtain other licenses and permits. 

For example, those selling food or alcohol will need the appropriate license from the CDTFA.

10. Open a Business Bank Account

Once an LLC is up and running, there'll be a need to open a business bank account. This will help keep personal, and business finances separate. Most banks will require that business owners have their Articles of Organization and EIN when opening an account.

FAQ

How much does it cost to start an LLC in California?

The filing fee for Articles of Organization is $70. The Initial Statement of Information filing fee is $20. There may be other fees depending on the specific situation.

Can a business change its name after filing?

Yes, firms can file an amendment with the Secretary of State at any time.

What happens if applicants miss their filing deadline?

Failure to file, or some other error in the Articles of Organization, can result in various penalties. A monthly penalty of 5% of the figure a company owns, up to a maximum of 25%(1).

Is an Operating Agreement required in California?

Although it's not required by law, most LLCs find it helpful to have an Operating Agreement. This document outlines the ownership structure and financial procedures of the LLC.

What is an EIN, and why do companies need one?

An Employer Identification Number (EIN) is a unique nine-digit number that the IRS issues to businesses. All LLCs in California are required to have one.

Conclusion

New businesses must follow the set rules to form an LLC in California. There are, however, many exceptions and unique challenges for small businesses. California's straightforward LLC formation process makes it the easiest state to start an LLC in the U.S.

For inquiries about starting an LLC in California, please feel free to reach out in the comments below.

References:

  1. Failure to File Penalty Retrieved from https://www.irs.gov/payments/failure-to-file-penalty

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