Starting an LLC in California

Your LLC’s official name is the one you write on the Articles of Organization. If your LLC does business under another name, that name is an assumed business name (also called a fictitious name or DBA).

For example, you might start a bookstore called Melinda Rae’s Rare Books, LLC. Then a year later you might add a cafe onto the bookstore and decide to change the name to Coffeehouse-Five. Melinda Rae’s Rare Books, LLC would be your LLC’s legal name, and Coffeehouse-Five would be an assumed business name.

In California, to use an assumed business name, you must file a fictitious business name statement with the Registrar-Recorder/County Clerk’s office in the county where your business is located.

Considering using an assumed business name? Learn How to Get a DBA.

Yes. If you decide to be your own registered agent, you will need to share your name and address on the public record. You will also need to keep regular business hours at this address and be able to accept service of process in person.

For these reasons, a lot of business owners hire a registered agent service that will put its business address on forms in place of your own to protect your privacy. Hiring a registered agent service also protects you from the potential embarrassment of being served with a lawsuit in front of customers or missing important legal mail while you’re on vacation.

Yes. To change your registered agent in California, you will need to submit a Statement of Information form to the Secretary of State. There is no fee if you submit an updated Statement of Information outside of the regular filing period. However, if you update your registered agent during your regular filing period, you’ll need to pay the $20 fee.

A member-managed LLC, as you might guess, is run by its members (owners). In contrast, a manager-managed LLC is run by one or more managers whom the members have hired. Whoever managers your LLC will have the power to sign contracts, hire and fire employees, and open business bank accounts, among other things.

For help with deciding which management structure will work for you, see our page on LLC Member Vs Manager.

You can file your California Articles of Organization online, by mail, or in person.

In person:
Secretary of State
Business Programs Division – Business Entities
1500 11th Street
Sacramento, CA 95814

By mail:
Secretary of State
Business Entities Filings
P.O. Box 944260
Sacramento, CA 94244-2600

Online:
California Secretary of State

The California Franchise tax is a tax for the privilege of doing business in California. LLCs have to pay a California Franchise Tax of at least $800 per year. LLCs with default tax status just pay the flat $800 fee, but for LLCs that are taxed as corporations, $800 is the minimum. LLCs with S-Corp status need to pay an additional 1.5% tax on net income, and LLCs with C-Corp status need to pay an additional 8.84% tax on net income.

This tax is due on the fifteenth day of the fourth month after you file your Articles of Organization. So if you form your LLC in December 2021, the tax would be due by March 15th, 2022. After the first year, the annual tax will be due by the 15th day of the fourth month of your taxable year, which is generally April 15th.

The only exception to the annual tax is if your LLC’s tax year was fifteen days or fewer and you did not conduct business during this time. Otherwise, you will have to pay this tax every year until you officially dissolve your business.

Note: Thanks to California Assembly Bill 85, California LLCs, LPs, and LLPs formed between January 1st 2021 and January 1st 2024 are exempt from the California Franchise tax during their first taxable year in business.

In recent years, California has cracked down on businesses that fail to pay franchise taxes. If your business doesn’t pay this annual tax by the due date, you’ll be charged a late fee of $18 per member per month for the first year. After the first year, the fee will be increased until it reaches a maximum of 25% of the original tax owed. If your business continues to neglect paying franchise taxes, the California Tax Board will eventually suspend your LLC. And you will need to pay a $2,000 penalty—plus all of your overdue taxes—to get your business reinstated. Ouch.

If your LLC makes more than $250,000 a year, you will need to pay the Annual LLC fee: a flat fee of either $900, $2,500, $6,000, or $11,790, depending on your LLC’s income. This fee is due by the 15th day of the sixth month of the tax year (usually June 15th).

By default, LLCs are taxed as pass-through entities. This means that the revenue “passes through” the business to the owners, who then report the revenue as income on their personal tax returns. LLC revenue is subject to the federal self-employment tax rate (15.3%). LLCs can also elect for S-Corp or C-Corp tax status.

Learn more about S-Corp Vs LLC tax designation.

Ideally, your operating agreement will cover every major issue your LLC is likely to face, including the allocation of profits and losses, voting procedures, and even how to dissolve the business. Here are some of the topics operating agreements should include:

• initial investments
• profits, losses, and distributions
• voting rights, decision-making powers, and management
• transfer of membership interest
• dissolution

Yes. While it might seem unnecessary to write out an agreement with yourself, a single-member LLC will still need an operating agreement to open a business bank account. Plus, an operating agreement could be crucial to maintaining your limited liability protection if you ever face a lawsuit. Since your operating agreement documents the rules and procedures your LLC follows, it can be used to show that your business is its own legal entity with liability protection.