Starting an LLC in California
A California LLC (limited liability company) is a type of business with a versatile management structure, liability protection, and the option to be taxed as either a pass-through entity or a corporation. To officially form your LLC in California, you must submit a form called Articles of Organization to the California Secretary of State. Below, we’ll take you through each step required to start your California LLC.
Now is a great time to start a California LLC because the state dropped its standard filing fee to $0 until June 30, 2023! That means your state filing fees will only include the $20 fee for the required Initial Statement of Information for your LLC and any state fees for optional items (such as a name reservation or expedited processing) that you choose.
Ready to Start an LLC in California?Get Started
Name Your LLC
Designate a Registered Agent
Submit LLC Articles of Organization
File Statement of Information
Write an LLC Operating Agreement
Get an EIN
Open a Bank Account
Fund the LLC
1. Name Your LLC
If you’ve been planning to start a business for a while, you probably already have an idea of what you want to name it. But you should check out California’s name requirements—listed in CA Corp Code § 17701.08—before you try to file. In layman’s terms, your LLC name must not:
- Be reserved or in use by any other California LLC.
- Contain words that could mislead people into thinking your business is a financial institution or insurance company (i.e. “bank,” “trust,” insurer,” etc.)
- Contain the words “corporation,” “incorporated,” or an abbreviation thereof.
In addition, your LLC name must contain the words “limited liability company” or an abbreviation such as “LLC.”
Already have a business name? Check to see if it’s available.
Can I reserve a business name in California?
Yes. If you want to reserve a business name before you actually file your LLC, you can reserve a name for up to 60 days by submitting a Name Reservation Request form with the $10 name reservation fee to the California Secretary of State.
What’s the difference between my LLC’s name and an assumed business name?
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.
2. Designate a Registered Agent
A registered agent (also called an “agent for service of process”) is someone appointed by a business to accept important legal mail (including potential lawsuits) on the business’s behalf. You could be your own registered agent, or you could designate another individual or a registered agent service to do this job. Per CA Corp Code § 17701.13, all California LLCs are required to maintain a registered agent. You will need to provide information about your registered agent on the Articles of Organization.
Learn why the pros use a registered agent service.
What does a registered agent do?
A California Registered Agent can provide a range of services to businesses, but at the bare minimum, your registered agent must:
- Have a physical address (not a P.O. box or virtual office) in the state of California.
- Be reachable at this address during normal business hours.
- Accept service of process and other important legal notices on behalf of your business and send them to you fast.
Can you be your own registered agent in California?
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.
Can I change my registered agent after I start an LLC?
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.
3. Submit LLC Articles of Organization
To make your LLC official, you must file Articles of Organization with the California Secretary of State. You can submit your paperwork online, by mail, or in person.
Note: All of the information on this form will become part of the public record.
Here is the information you will need to provide on the Articles of Organization:
- Company name. Must include “limited liability company” or an abbreviation.
- Principal office. Must be an actual street address in California.
- Mailing address. This could be a P.O. box.
- Registered agent. Whoever will be in charge of accepting service of process on behalf of your business.
- Registered agent address. Must be a physical street address. Corporate registered agents can skip.
- Management structure. Whether your LLC is member-managed or manager-managed.
- Purpose statement. You don’t need to do anything here. The California Secretary of State has written your purpose statement for you, and you can’t alter it.
- Organizer. The name and signature of whoever forms your LLC. This can be someone outside of your LLC.
If you want to, you can provide contact information for your business on the Submission Cover Sheet, so that the Secretary of State’s office can contact you if there’s an issue with your filing. The Submission Cover Sheet is optional and does not become part of the public record.
How can I keep my personal information off the public record?
Nobody likes junk mail, and if you share your own address on public documents, you’re likely to get a lot of it.
The best way to protect your privacy is to hire a registered agent company that will put its address on business filings instead of yours whenever possible.
What’s the difference between a member-managed and manager-managed LLC?
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.
How do I file the California Articles of Organization?
You can file your California Articles of Organization online, by mail, or in person.
Secretary of State
Business Programs Division – Business Entities
1500 11th Street
Sacramento, CA 95814
Secretary of State
Business Entities Filings
P.O. Box 944260
Sacramento, CA 94244-2600
California Secretary of State
4. Submit Initial LLC Statement of Information
Once the California Secretary of State has approved your LLC filing, you have 90 days to submit an initial Statement of Information form. This is the same form you need to submit if you need to change your registered agent or principal office. And you will also need to submit this form every two years after you form your LLC. The filing fee for the Statement of Information is $20. In California, you’ll also need to pay an annual LLC Franchise Tax for the privilege of doing business in the state.
Worried you’ll forget? Let us file your California Statement of Information for you.
When is the California Statement of Information due?
In California you have to file an Initial Statement of Information within 90 days after forming your LLC. After that, a Periodic Statement of Information is due every two years at the end of the anniversary month of your business formation. So if you formed your LLC in December 2021, you would need to file a Periodic Statement of Information by December 31st, 2023. California charges a hefty $250 late fee for LLCs that are more than 60 days late in filing their Statement of Information.
What is the California LLC Franchise Tax?
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.
What if I don’t pay the California Franchise Tax?
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.
What is the California Annual LLC fee?
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).
What else do I need to know about California LLC taxes?
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.
5. Write an LLC Operating Agreement
Your LLC’s operating agreement governs the way your LLC is structured and how it functions. It covers everything from how much each member invested to how you’ll distribute the profits to how you’ll settle disagreements. Your operating agreement is crucial for maintaining limited liability status, opening a business bank account, and resolving conflicts between members.
Contact a lawyer or check out our California Operating Agreement Template.
Does California require an LLC to have an operating agreement?
California law doesn’t require you to have an operating agreement. According to CA Corp Code § 17701.02 (s), an operating agreement could be “oral, in a record, or implied,” but adopting one is not explicitly required.
However, if you don’t have an operating agreement, any legal disputes or questions will be decided by California’s state statutes. For this reason, drafting a written operating agreement allows you more control over your LLC. Plus, you’ll likely need an operating agreement to set up your business bank account.
What should be included in an operating agreement?
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
Does a single-member LLC need an operating agreement?
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.
6. Get an EIN
An Employer Identification Number (EIN) is a tax identification number assigned to businesses by the IRS. You can think of it as a social security number for your business. It’s free to get an EIN directly from the IRS. The fastest way to get an EIN is online, but you’ll need to use the mail form if you don’t have a social security number.
Do I need an EIN for my California LLC?
Yes. While technically only LLCs that have employees or have corporation tax status are required to have an EIN, almost all banks require an EIN to open a company bank account. Additionally, having an EIN protects you from having to give out your social security number to people you do business with.
What To Do After Forming Your California LLC
7. Open a Bank Account
Once you’ve received an EIN from the IRS, you’re ready to open a business bank account. This is a crucial step because you need a business bank account to maintain your LLC’s limited liability status. LLCs have limited liability because they are considered legally separate from their owners. If you mix business and personal finances, you risk losing your limited liability protection.
Here’s what you need to bring to the bank:
- California LLC Articles of Organization (a copy is fine)
- the LLC’s operating agreement
- the LLC’s EIN
- an LLC Resolution to Open a Bank Account (if your LLC has more than one member).
If your LLC has more than one member, use our free LLC Resolution to Open a Bank Account.
8. Fund the LLC
The next step to get your business up and running is to fund your LLC. All of your members need to make an initial contribution to buy their membership interest. This is usually done by writing a check to the business bank account. However, in some cases members contribute property or services to the LLC instead. Just keep in mind that contributions in the form of property or services are likely to cause a tax event.
What is LLC membership interest?
LLC membership interest is a member’s ownership stake in the LLC. Usually, the amount each member invests determines their membership interest. For example, if four members invest $1,000 each, and a fifth member invests $6,000, the first four members would each have 10% membership interest, and the fifth member would have 60% membership interest. Most of the time, the members with greater membership interest also have greater voting power in the LLC.