How to File an LLC in California

Key Takeaways:

• Thanks to its high population, endless networking opportunities, and booming economy, California is one of the top states in the U.S. to register your business.

• An LLC offers flexibility and crucial personal asset protection, making it ideal for entrepreneurs who are just starting their businesses.

• To form a California LLC, choose your business name, fill out your Articles of Organization, hire a registered agent, file your Statement of Information, create an LLC Operating Agreement, and apply for an EIN from the IRS. 

There’s nothing quite like the freedom and autonomy of being an entrepreneur. So how do you get started? Once you have a vision for your business and have developed an airtight business plan, it’s time to register your company.

Because each state has different procedures for business formation, it’s essential to carefully consider which state your business will call home. Sometimes it’s just a matter of where you live; other times, you’re branching out and conducting business across state lines or all over the country. 

Because of its high population, endless networking opportunities, and booming economy, California is one of the top states in the US to register your business. If you’re ready to start your small business in California, look no further than this all-encompassing guide for how to form an LLC in the Golden State. 

There are, of course, many business structure options to consider when registering your business. You should weigh the pros and cons of each type of business entity, from a sole proprietorship, partnership, incorporation (S corp or C corp), and LLC (limited liability company). 

What Is an LLC?

First, let’s cover the basics — what exactly is an LLC, and what are the benefits? An LLC (limited liability company) is an excellent business structure for small business owners, as it requires minimal state fees for formation and is less complicated than other business structures (such as S corps and C corps). 

An LLC is a business entity that’s a good middle point between a sole proprietorship or partnership and a corporation, which makes it ideal for entrepreneurs who are just starting their small businesses. It offers the flexibility and ease of a sole proprietorship and crucial personal asset protection.

What does it mean when we say that an LLC offers personal asset liability protection? At its most fundamental level, in a lawsuit against your business, an LLC will protect your personal assets, and your company will take the hit instead of you personally. If your company gets sued, you won’t lose your house or car; your personal assets remain protected.

In addition to personal liability protection, one of the key benefits of starting an LLC is pass-through taxation. You won’t have to pay corporate taxes on your LLC. An LLC is considered a disregarded entity for tax purposes, meaning the business’s profits can be taxed on the individual level rather than the business itself. 

As an LLC owner, you won’t have to pay federal taxes on your business or fill out corporate tax forms; instead, you’ll report your business’s earnings directly as income on your personal 1040 tax form. The profits get passed through the business to the individual — hence the term pass-through taxation. This makes it much simpler when it comes to tax season for the LLC owner.

LLCs also offer flexible ownership models. You can run your business as the sole owner, appoint partners to help you run it, or have some third-party run your business entirely. This flexibility allows you to hire people outside the LLC to help run your business without officially becoming part of the LLC.

The relatively low cost of state filing and annual fees for an LLC make it an excellent option for small business owners. In California, though the standard filing fee is $70, it currently costs $0 to form your LLC until July 1, 2023. 

To keep your LLC in good standing with the state of California, you’ll also need to pay $800 in annual franchise tax fees each year your business runs. However, California is currently waiving the first year’s annual filing fees for LLCs organized, registered, or formed between 2021 and 2024.[1] This is a great boon for small business owners who are just getting things up and running.

To recap, the benefits of LLC formation are:

1. Minimal formalities and paperwork

2. Personal liability protection

3. Pass-through taxation

4. Flexible business ownership

5. Relative low filing fees

Step-By-Step Guide to Forming Your California LLC

Despite the relative ease of LLC formation, it can still be challenging to wrap your head around all the necessary steps to ensure you register your business correctly in your chosen state. Different states require different filing fees and paperwork, so you want to ensure you understand the process for forming an LLC in California.

So let’s break it down: we’ll cover a step-by-step guide for getting your LLC up and running in California from start to finish.

Step 1: Choose a Business Name for Your California LLC

The first step, of course, is choosing a business name for your LLC. You may already have a name you’ve been using for your business, but it’s essential to make sure no one else is using that name in California first and register that name once you’re sure it’s available.

There are a few naming convention requirements for LLCs in California. Specifically, your business name:

• Must be unique, meaning no one else is using it in the state.

• Must contain the words Limited Liability Company, LLC, or L.L.C.

• Cannot misleadingly refer to government agencies, such as State Department, FBI, etc.

• Cannot contain restricted words (such as bank, doctor, attorney, or credit union) without first supplying additional paperwork and licensure.

Once you’ve come up with a business name for your LLC, you’ll need to conduct a name search to ensure no one else is using it. You can visit the California Secretary of State’s website[2], and run a basic or advanced search. A basic search will return names of all active California businesses, while an advanced search will turn up inactive businesses and allow you to refine the search parameters.

Because internet searches and web presence are crucial to business promotion, you’ll likely want to ensure that a web domain matching your LLC name is available. Many sites online allow you to search for the availability of domain names. Here’s one that we like.

When you’ve settled on a suitable LLC name, it’s time to either reserve or register your business name and domain. If you’re not yet ready to register your LLC but want to make sure your name is available for when you are, name reservation is the way to go. You can file a name reservation form to reserve your California LLC name for 60 days.

You can visit the California Secretary of State website to file online or by mail for $10 or pay $20 for an in-person drop-off. You can find the name reservation form here.[3] If, after the initial 60 days, you’re still not ready to register your business, you can file a form to renew your name reservation for an additional 60 days, but after that, you’ll need to register.

You should also register your domain name at your earliest convenience. You can do so even if you’re not ready to register your business yet, just so that your domain is secured against anyone else who might want to use it. 

You can always set up your website later, but securing your domain is crucial. There’s usually just a small fee for claiming a domain name, and there are various sites where you can do so.

Finally, it’s a good idea to trademark your LLC name with the USPTO. While your business’s name will be secured within California upon LLC formation with the California Secretary of State, your name will not be protected outside of the state without registering a trademark.

A trademark allows for legal protection of your business or brand name across the country. This is especially important if you do business outside California, including through online sales. You can register a trademark for your business name using our partner site, Trademark Engine.

Step 2: Fill Out California Articles of Organization

If you’re ready to file your LLC now, you’ll need to fill out the California Articles of Organization. The California LLC Articles of Organization filing fee is $70. Additionally, every LLC doing business or organized in California must pay an annual tax of $800.

The California articles of organization is the legal document required for LLC formation in the state. You’ll need to gather some information to provide for the document, including:

• Name of your LLC

• Name of the registered agent

• Business address (must be a physical address located in California)

• Management structure (member-managed or manager-managed)

You cannot use a P.O. box for your business address, and it’s best to register the actual storefront or location where you’re doing business. If you’re running your LLC out of your home, you can also use your home address, but because this information will be public record, you may not want your personal address registered.

Your LLC’s management structure must be listed as manager-managed or member-managed. The application form lists these options as managed by one manager, more than one manager, or all LLC members. So how do you tell which applies to your business? 

If you’re a single owner running your company’s day-to-day business with or without additional members, you’ll likely want to register as member-managed (option 3). However, if you’ve hired a manager or multiple managers outside your LLC to help run your business, you’ll want to register as manager-managed (options 1 or 2).

The easiest and cheapest way to file your Articles of Organization online[4] is through the California Secretary of State website. You can also register by mail or in person (for expedited processing), though there may be additional fees for each process. If you need to print it out, you can find form LLC-1 for registering your California Articles of Organization here.[5]

Once you file your California LLC Articles of Organization, the state usually processes your application within five days of registration. However, this can vary based on the California Secretary of State’s workload, so it’s a good idea to check out the current processing dates here.[6]

After LLC formation, most states require an annual report to make sure your business information is up to date. However, in California, it’s a biennial report you’ll need to file. This means that 90 days after formation and every two years after that, California requires you to file a Statement of Information. We’ll cover the details of this document in step 4.

Again, because California is waiving the initial state fees for registration until summer 2023 and your first year’s annual franchise tax if registered before 2024, we encourage you to take advantage of this unique opportunity and register your business as soon as you can.

Step 3: Hire a California Registered Agent

In registering your LLC, you’ll need to hire a registered agent and supply their information and mailing address on your articles of organization. So what exactly is a registered agent, and what do they do for your business?

In basic terms, a registered agent is an individual or entity you’ll need to appoint to receive all vital tax and business documents on behalf of your LLC. Your California registered agent must have an address located in the state, and this will be the mailing address where all your LLC’s legal documents will be forwarded.

You can choose to appoint yourself as your own registered agent to avoid paying a registered agent fee, but it may not be the best idea. We heavily recommend hiring a designated registered agent, and here’s why.

First, because the registered agent’s address will be public record, it’s strongly advised not to use your personal address for the registered agent business communique. Doing so compromises your privacy and can lead to unwanted solicitation or worse. It’s better to hire an outside registered agent, preferably with a business address.

Additionally, receiving, processing, and responding to your LLC’s significant legal, tax, and business mail on your own is an overwhelming endeavor, especially when you’d be better off focusing on the day-to-day management and running of your business instead. If you’re the appointed registered agent yourself, crucial mail may get overlooked, leading to legal complications and more.

Hiring a designated registered agent whose sole job is to receive, respond to, and alert you of your LLC’s essential documents is a better option so that official correspondence doesn’t fall through the cracks. An excellent registered agent is experienced with handling such documents and can devote more time and energy to the job.

Furthermore, because registered agents are required to have regular business hours to receive service of process, hiring a registered agent who can devote designated hours to processing and responding to your business’s mail is crucial. It may not be realistic for you to accept all of that time responsibility yourself when running your business.

Another critical reason to appoint an outside registered agent is that if you’re planning on expanding your business to multiple states, you must have a specific registered agent in every state where you conduct business. These registered agents need to have a physical mailing address in each state your LLC business is operating, and because you can’t be in all states at once, it can’t all fall on you alone.

How do you go about hiring an excellent registered agent for your business? Swyft Filings offers a registered agent service so that you can appoint a registered agent in all 50 states. You can have peace of mind that your personal information remains private and that all official correspondence for your business is processed and responded to promptly.

Swyft Filing’s registered agent service makes finding a registered agent simple and starts at just $199 annually. You can get started registering for our service here.

Step 4: File Your Statement of Information

You’ll have to file your initial Statement of Information 90 days after your LLC formation in your first year and then every two years subsequently at the end of the calendar month in which you registered. This document takes the place of the typical LLC annual report required in some states and is unique to California.

California law requires your California Statement of Information for your LLC’s good standing. If you fail to file this document on time, you may be subject to a monetary penalty, and your business can face suspension or forfeiture. LLC revival is a time-consuming and costly endeavor, so you want to stay on top of filing on time.

The information necessary for your Statement of Information is:

• Your business address

• Names and addresses of all members and managers

• Registered agent address

• LLC identification number

• General business description or purpose

Additionally, suppose there are any changes to the required information on the Statement of Information, such as a change in business address. In that case, you’ll need to file the form at that time, in addition to the regularly appointed deadlines. Failure to do so will result in penalties, so staying on top of this is essential.

Because there are regular due dates for the Statement of Information, namely, by the last day of the month your LLC was organized every other year, it’s a good idea to set regular reminders on your calendar to keep up with deadlines. You can file your Statement of Information early, but the window for early submission is six months before the due date.

You can file your Statement of Information online for a $20 filing fee on the California Secretary of State website or file by mail or in person using form LLC-12.[7] Processing time is usually about five days from filing, though this varies based on the time of year and current processing load. You can review the current processing dates for various LLC documents here.[6]

Step 5: Create an LLC Operating Agreement

The next step in registering your business is creating an LLC operating agreement. This internal legal document outlines operational procedures and business organizational structure to minimize conflict between members or managers.

Your operating agreement is vital to ensuring all business owners are on the same page regarding how your business is supposed to operate. The information you should address in your LLC operating agreement includes but is not limited to:

• State of formation and business address

• Information listed in the Articles of Organization

• Business purpose or description

• Ownership (single-member or multiple-member) with members listed and how their ownership breaks down

• Management structure (manager-managed or member-managed) and how you’ll divide this management

• Voting operations (majority, super-majority, unanimous) for operational business decisions

• Profit, loss, and equity division

• Procedure for admitting or releasing members

• Liability and indemnity clauses

• Any business restrictions, including privacy clauses or prevention of members owning competing businesses

• Ownership of the business’s intellectual property

• Manner of dissolution if members decide to cease business operations

While the California Secretary of State does not require a comprehensive operating agreement to be filed (unlike some other states), they need a written operating agreement to be on hand and easily accessible. Without an operating agreement in place, in the event of a conflict between members or managers, California state law will determine the manner of resolution, which may not be in the LLC’s best interests.

You can easily set up a customized LLC operating agreement using Swyft Filings services (starting at just $35) here.

Step 6: Apply for an Employer Identification Number

Next, you’ll need to apply for a California Employer Identification Number (EIN). Your EIN is a nine-digit number assigned to your business by the Internal Revenue Service (IRS) to specify your type of business for tax purposes. An EIN acts as a social security number for businesses.

Your EIN is essential for hiring employees for your LLC and paying taxes at the federal and state levels. These include employment taxes, income taxes, sales taxes, and California LLC taxes. However, if you’re a single-member LLC without plans to hire any employees, you may not need an EIN and can use your SSN, but applying for one is a good idea.

Additionally, you’ll need to apply using your LLC business’s EIN for most business bank accounts. A business bank account is essential even for single-member LLCs to separate your business and personal expenses.

You’ll need to register your EIN with the California Secretary of State for California business permits and licenses. Permits and licenses, while not required at the California state level, are often mandated by certain cities to conduct business. The following cities in California have licensing requirements:

• Los Angeles

• San Diego

• San Jose

• Sacramento

• San Francisco

Applying for an EIN is simple and free. You can do so online on the IRS website[8] during operating hours — 7 am-10 pm, Monday-Friday. The application is quick and only takes about five minutes to complete. You can also apply by mail or fax using Form SS-4.[9] Upon completion of your application, they’ll assign you your EIN immediately. 

Let Us Handle Your LLC Paperwork

Registering your LLC in California requires numerous steps and stacks of paperwork. It’s easy to get overwhelmed at the prospect of doing it all yourself. Considering all that needs to get accomplished, it’s enough to make a small business owner’s head swim.

Luckily, California LLC formation doesn’t have to be complicated. Swyft Filings’ LLC filing service can take care of all that LLC paperwork for you. We’ll save you loads of time and headaches and complete your filing so you can get back to the work of being a successful entrepreneur sooner.

Our filing service is simple and easy to use. You supply us with your business information, and we’ll fill out the necessary paperwork. By letting our trusted professionals complete the paperwork for you, you can avoid costly errors and focus on running your business.

Swyft Filings also offers personalized customer support, so if you have any questions about the process, we’ll be available to help.

To register your California LLC in as little as 10 minutes, head to Swyft Filing’s LLC formation services application and get started today.

FAQs:

How much does it cost to set up an LLC in California?

The standard initial filing fee for LLC formation in California is $70. Every LLC doing business or organized in California must also pay an annual tax of $800.

How is an LLC taxed in California?

There are three types of taxes on businesses in California: corporate tax, income tax, and franchise tax. Because an LLC is considered a disregarded entity, it is not subject to the corporate tax rate and benefits from pass-through taxation. However, California LLCs are subject to the franchise tax.

The franchise tax is the price for “the privilege of doing business in California.” The minimum LLC tax is $800, plus a variable LLC fee that depends on your LLC’s income in a fiscal year. The rates for LLC taxes and fees based on income are as follows:

• Less than $250,000: $800 

• Between $250,000 and $499,999: $1700 ($800 LLC tax plus $900 LLC fee)

• Between $500,000 and $999,999: $3,300 ($800 LLC tax plus $2,500 LLC fee)

• Between $1,000,000 and $4,999,999: $6,800 ($800 LLC tax plus $6,000 LLC fee)

• More than $5,000,000: $12,590 ($800 LLC tax plus $11,790 LLC fee)

The LLC franchise tax is due within 75 days of filing and then every year after that.

What are the benefits of a California LLC?

There are many benefits to starting an LLC in California. These include:

• Personal liability protection: your personal assets are protected in the event of a lawsuit against your business

• Simplicity of filing paperwork: compared to other business structures, such as corporations, LLCs are relatively easy to register

• Pass-through taxation: because an LLC is considered a disregarded entity, you won’t need to pay corporate tax on your income

• Flexible business ownership: you can run your LLC as a member-owned business or hire an individual outside your LLC

• Low filing fees: most states offer lower filing fees for LLC formation compared to other business structures

Additionally, California is a wonderful location to start your LLC. The key benefits of forming an LLC in California are:

• Market: California’s diverse population and varied geography allow for a large market for your business

• Profitability: California is home to one of the largest economies in the US, which can bring in huge profits for your LLC

• Population: because of its large and diverse population, you’ll have access to some of the best labor force in the country

• Reduced filing fees: from now until July 2023, the California Secretary of State is waiving LLC formation filing fees, so it’s entirely free to register your LLC in the state

• First-year franchise tax waived: if you organize, form, or register your LLC between now and 2024, your franchise tax fee for your business’s first year will be waived by the California Secretary of State

How do you dissolve an LLC in California?

Dissolution of your LLC probably isn’t something you’re keen to think about too heavily when just starting your business, but it’s an important consideration. Ideally, you’ll have internal protocols for dissolving your LLC within your written operating agreement, but there is also a specific legal process for dissolving your LLC with the state.

LLC dissolution in California is a formal process that ends your LLC’s existence as a business entity. It’s essential to formally dissolve your LLC with the California Secretary of State so that you’ll be out of the clutches of creditors and tie up all legal loose ends. 

The first step in California LLC dissolution is ensuring your business is in good standing with the state. If your LLC is suspended (for example, due to failure to file your Statement of Information promptly), you’ll have to revive your business by:

• Filing past-due tax returns

• Paying past due taxes

• Filing a revivor request form (available by request only)

Next, you’ll want to consult your operating agreement and articles of organization for your LLC’s procedure for dissolving the company. You’ll need to follow all the detailed requirements in these documents, which usually include a majority member vote for dissolution.

If the vote for dissolution is unanimous, you can file a certificate of cancellation with the California Secretary of State. If the vote is not unanimous (but still a majority), you’ll have to file a certificate of dissolution first.

The certificate of dissolution requires your 12-digit entity number (assigned by the state once your LLC formation is processed), the name of your LLC, the circumstances that caused the dissolution, and a return mailing address. This form does not require a filing fee; you can fill it out online.

After filing your certificate of dissolution, you’ll need to wrap up all business items. This includes:

• Addressing and completing any legal procedures or actions

• Distribution of LLC assets among members

• Distribution or disposal of LLC property

• Notifying creditors or claimants

• Payment of outstanding taxes

Once you address these items, you can file your certificate of cancellation with the California Secretary of State. This form requires your LLC name, 12-digit entity number, and a tax liability statement that confirms final returns have or will be filed with the California Franchise Tax Board.

Because of the complicated procedures of California LLC dissolution, it’s a good idea to use Swyft Filing’s dissolution service, starting at $149. We’ll help you complete all necessary steps to ensure your business affairs are in order and file all the required paperwork.

Bibliography:

1. State of California Franchise Tax Board. Limited liability company. Accessed Feb 15. 2023

2. California Secretary of State. Business Search. Accessed Feb 15. 2023.

3. California Secretary of State, Shirley N. Weber, Ph.D. Limited Liability Companies – California (Domestic). Accessed on January, 12, 2023.

4. California Secretary of State. bizfile Online. Accessed on January 12, 2023

5. California Secretary of State. Articles of Organization (Form LLC-1). Accessed on January 13, 2023

6. California Secretary of State, Shirley N. Weber, Ph.D. Current Processing Dates. Accessed on January 13, 2023

7. California Secretary of State. Statement of Information No Change (Form LLC-12NC). Accessed on January 13, 2023

8. Internal Revenue Service. Apply for an Employer Identification Number (EIN) Online. Accessed on January 13, 2023

9. Internal Revenue Service. Form-SS4 Rev. December 2019. Accessed on January 13, 2023.