Filling a Limited Liability Company (LLC) in California is a great business structure to choose if you’d like to protect your personal assets from any business losses. An LLC gives you the protection of a corporation while still being able to operate your business as a sole proprietorship.
Since you can form an LLC for under $70 and get it up and running within a week, it’s a quick and easy way to legitimize your company.
To file an LLC in California, follow these 5 steps:
How to Form an LLC in California – A Step by Step Guide
You can apply for your LLC on your own or through a professional service. While filing on your own isn’t complicated and doesn’t take too much time, you still want to make sure you complete each step as outlined below, ensuring your LLC is set up correctly the first time around.
If you’d rather not handle your business’s legal side, we suggest hiring experts to file all your business paperwork for you (a more worry-free approach).
Otherwise, if you’re a do-it-yourself kind of person, follow these 5 initial steps:
1. Name your California LLC
To form an LLC in California, you need to follow specific name requirements set by state law. Your business name needs to be unique, meaning no other company has a similar name.
Before checking to see if the business name you’d like is available, to abide by California LLC law, make sure the name of your company contains one of the following:
- Limited Liability Company
You can also shorten the word ‘Limited’ to “Ltd. and the word ‘Company’ to ‘Co.’ Your LLC name can be your business name, like Plumbing King L.L.C, or the name of one of your LLC’s members, such as Joe Smith LLC.
Check Name Availability
Once you’ve decided on your name, you need to check to see if it’s available and there’s no other company in California using it. The quick and easy way to do this is through a quick google search using your desired name.
If you don’t find any competing companies, you can move onto the next step – checking your business’s potential name through the California business name search.
If you find a name that you like but aren’t ready to file your LLC just yet, you can reserve the name by filing a ‘Name Reservation Request,’ and mail it to the Secretary of State. It costs $10 to file and lasts for 60 days. You must send your application to:
Secretary of State,
Name Availability Unit,
1500 11th Street, 3rd Floor, Sacramento,
Using a Fictitious Name
If you don’t want to use LLC in your business name, then you can add a fictitious name once your business is registered. Also known as DBA (“doing business as,”) or a trade name, a fictitious name allows you to run your business under a name that’s not the legal LLC registered name.
You can also use a fictitious name if you plan on running several different businesses under your LLC formation.
A fictitious name in California is called an ‘assumed name.’ To run a business under an assumed name, you need to register an ‘Assumed Name Certificate,’ with the California Secretary of State. It costs $25 and is good for 10 years.
Once you’ve figured out what your business name is and you’ve made sure it’s still available, the next step is to choose a registered agent who will help you with the legal side of your business.
2. Choose a California Agent for Service of Process
An agent for service of process (referred to as a registered agent in other states) is anyone who receives and sends legal documents on behalf of your company. They are the main point of contact between your company and the Secretary of State.
In California, an LLC must have an agent for service of process, who lives in California and has a valid street address (not a P.O. box).
An LLC agent for service of process can be:
- A family member or friend
- A Commercial Registered Agent
Why you should use a commercial registered agent as your agent for service of process
While the easier route seems to have yourself, or one of your LLC’s members, act as the registered agent, there are some benefits in hiring a professional.
A registered agent will ensure your business is always in good standing with the state, helping you stay organized and up-to-date. It also adds a layer of protection since they’ll help you in the case of a lawsuit or any penalties/fines.
Once you’ve decided who’s the best person to be your agent for service of process the next step is to submit your LLC application.
3. File a California LLC Articles of Organization
To form an LLC in California, you need to fill out and submit the ‘Articles of Organization’ to the California Secretary of State. It costs $70 to file and can be printed and mailed in or sent through the state’s business portal. It takes around 5 business days to get your LLC approved and up and running.
Be prepared to include the following information on your application:
- The name of your LLC
- The purpose of your LLC
- How your LLC will be managed (manager-managed or member-managed)
- The physical address of your LLC
- The name and address of your agent for service of process
What’s the difference between member-managed or manager-managed?
Member-managed is if you (and the other owners of your LLC) are responsible for everyday business activities. In contrast, manager-managed is if you decide to hire someone who is not a member to manage your business’s day-to-day activities.
Member-managed is more common for smaller businesses, while larger companies typically use manager-managed. You’d usually only choose manager-managed if you are a passive investor and aren’t involved much in the business.
Once you get approval, you can move onto step 4 – creating an LLC Operating Agreement. If you’re operating your LLC by yourself, skip to step 5.
4. Create a California LLC Operating Agreement
If your LLC has two or more members, it should have an operating agreement. Although it’s not required in California, we suggest creating one to outline how the business is structured and how it will operate among its members (and/or managers).
Some of the sections you’ll typically find covered in an operating agreement include:
- Capital distributions
Again, while this is not a necessary step, as you don’t have to mail it to the secretary of state, it is recommended if your LLC has more than 2 members. It helps clarify the rules of your LLC and makes sure they are legally documented.
After you’ve agreed and created an LLC Operating Agreement, the next step is to create your unique employer identification number.
5. Apply for your California LLC Employer Identification Number (EIN
Once your LLC is approved, you’ll need to get an employer identification number (EIN).
An EIN is a federal tax ID number that registers you with the Internal Revenue Service (IRS). This number identifies your company when filing taxes.
How to register for an EIN:
– Apply online or,
– fill out the Employer Identification Number form and fax it to 855-641-6935, or mail it to:
Internal Revenue Service,
Attn: EIN Operation,
If you apply online, you’ll get instant approval. If you apply by fax, it takes up to 4 business days, whereas mailing can take up to 4 weeks. Applying for your EIN is completely free!
California LLC Registration – Final Checklist & Summary
Ready to get started? Use this simple checklist to make sure you’ve dotted your i’s and crossed your t’s!
- Name your LLC – LLCs in California are required to have ‘Limited Liability Company’ or ‘Limited Company’ in their name, or the abbreviation(s): LLC, L.L.C. To make sure no other business is operating under your desired business name, you need to check California’s business name search to double-check that your name is still available.
- Choose a Registered Agent – A registered agent is a person who receives and sends legal documents on behalf of your company. It can be you, a friend or family member, or a commercial registered agent.
- File a California LLC Articles of Organization – To form an LLC, you need to fill out and submit the ‘Articles of Organization’’ to the California Secretary of State. Applications can be submitted online or by mail and cost $70. Be sure to submit all forms accurately so your LLC is set up correctly the first time around.
- Apply for your California LLC Employer Identification Number (EIN) & File your Tax Registration Form – Once you get approval for your LLC, you need to apply for an employer identification number (EIN) through the IRS. This number identities your company when filing taxes. You can apply online for free, and approval is instant.
- Create California LLC Operating Agreement – If your LLC has two or more members, you should create an LLC operating agreement that outlines how the business is structured, who is responsible for what, and how much of the LLC each person owns. You don’t have to send your operating agreement to the California state, but you should have one, so everything is documented and signed by all members.
Always double-check your LLC information is correct before submitting any paperwork. You want to avoid simple mistakes and ensure your business is set up correctly from the get-go.
If it’s within your budget, we recommend using a formation service to help form your LLC. They can act as your registered agent and make sure your company is always in good standing.
Just make sure you do your homework and choose one of the best LLC services for your business.
Our first recommendation is to go with ZenBusiness, an LLC creation service that holds your hand from start to finish. Packages start as low as $49.
How To Apply for a California LLC Online
Now that you know the exact steps on what’s needed to form your LLC, it’s time to start the application process. There are two ways of going about this:
1. Do it Yourself
Taking the DIY route is a good option if your budget is tight or you’ve previously opened an LLC and understand how it works.
2. Use an Online Formation Company
Using an online formation company is a better option if it’s your first time opening up an LLC and if it’s within your budget (formation services cost anywhere between $49 – $199). This is typically a better choice if you want to avoid headaches and have peace of mind knowing professionals handle everything for you.
If using a professional service is more up your alley, here are our top 3 recommendations:
ZenBusiness built its platform to meet the needs of your business throughout its lifetime. When you pay for their services, you’ll receive a personalized dashboard for your business to store documents, receive alerts, and manage your website.
ZenBusiness charges work on a tier system. There are three different tiers with pricing as follows:
- The Starter = $49 annually
- The Pro = $199 annually
- The Premium = $299 annually
IncFile provides you with a full suite offering startup services to best support your business formation.
Their pricing model also depends on the state you are filling. You can generate a personalized quote on their website by entering the necessary information about your business.
LegalZoom is an online legal service provider that helps you to be able to create legal documents without having to pay the expensive lawyer fees. Some of the services they provide assistance to includes business formation, copyrights, and trademarks.
LegalZoom has many different pricing options available. For their LLC service, pricing begins at $79 + the allotted state fee.
After Starting Your California LLC
You’re approved – now what?
The journey doesn’t stop here – there’s still a handful of things you need to do to get your business off the ground. We recommend ticking off the following items to make sure your LLC gets off on the right foot.
Purchase A Domain For Your Business
Even if your business is local, having an online presence is essential in creating trust, professionalism, and a way for people to find you. If you haven’t already thought about getting a website, now’s the time. In a tech-saturated world, you need a domain to not only attract new customers but help create a good first visual impression of what your business does and how it can help.
Get A Business Phone Number
Since your business is now an approved California LLC, you should think about getting a business phone number. Having a business number is a great way to show professionalism to your clients and customers. It makes you more serious and, more importantly – more trustworthy.
There are various online phone services you can go with, or you could go the traditional route and open an account through a local branch. You can get a local number or a 1-800; the options are endless!
Open Your California LLC Business Bank Account
You’ll want to open a business account that’s separate from your personal banking. This will not only make accounting easier, but you won’t have to worry about your finances mixing in with your business finances.
USA Business Bank Accounts
If you already have online banking, it might be easier to open a business account through your current bank, so all your banking (although in separate accounts) will be accessible in the same place. If you prefer to open something new, keep these checking accounts in mind:
Chase – Free checking account with no extra fees – as long as you keep a $1,500 minimum balance.
BlueVine – Free checking account with mobile banking and a debit MasterCard.
Bank Novo – Open a free checking account with Free transfers and free ATM fees.
California Business Bank – Open up a business checking account or a money market account and get easy business solutions, no matter how big or small your business is.
CBB Bank – Whether you’re just starting out or already an established company, CBB offers a range of banking solutions catered to your company.
Along with your business checking account, you should apply for a business credit card too.
Having a business credit card is an excellent way to establish your business credit score (which may help if you ever need a loan). It also makes it easier for online purchases, and again, it will keep your personal and business finances separate.
Find Accountant/Buy Accounting Software
Taxes get complicated fast and can be a burden to handle. We recommend getting an accountant or using accounting software to ensure all your spending actions are tracked (payroll, bills, invoices, receipts, etc.). Here are some popular options to look into:
Wave – Free invoicing & accounting software with credit card processing & payroll services.
Intuit Quickbooks – Online accounting software to track expenses, customize invoices, and run reports.
Freshbooks – Accounting software to send invoices, track time, manage receipts, expenses, and accept credit cards.
Directory of Federal Tax Return Preparers with Credential – If you want to use a local tax specialist, you can search for a certified public accountant (CPA) through the IRS online directory.
Having all of your business reports in one spot is highly beneficial, so you can keep an eye on your cash flow. To run a successful business, you will need to analyze how your business performs and narrow down what’s working or what isn’t working. Finding areas for growth will ensure success.
File a Biennial Report
Within 90 days of your LLC approval, you must send a ‘Statement of Information’ (Form LLC-12) to the state. After your intial report, you’re required to submit a ‘Statement of Information’ every two years before the anniversary of your LLC approval.
A Statement of Information keeps your LLC records up-to-date; keeping your LLC active. Each time your file a report, there’s a $20 filing fee. You can file your reports online or by mail.
Expect to include the following information on your statement of information:
- Your LLC’s name and California Secretary of State file number
- The name and address of the LLC’s agent for service of process
- The street address of the LLC’s principal office
- Your LLC’s mailing address (if different from the street address of its principal office)
- The name and complete addresses of any manager or managers and chief executive officer (if no manager has been elected, put down the name and business or residence address of each member)
- A valid email address
- The general type of business that your LLC conducts
If you forget to file a report, there’s a 60-day grace period. However, if you forget to file within the 60-day window, there’s a $250 fee. If you don’t pay the fee or choose not to submit any report, the state will dissolve your LLC.
Don’t Forget to Pay Your California Franchise Tax (form 3522 & 568)
Every LLC in California is required to pay taxes to the California Franchise Tax Board (FTB) if you fall under either of these categories:
- Registered in California
- Organized in California
- Conduct business in California
- Did not elect corporation taxation
The minimum required franchise tax in California is $800. To pay and submit the tax you must fill out Form 3522 and send it:
Franchise Tax Board
PO BOX 942857
If you form your California LLC in 2021, 2022, or 2023, you are eligible for a one-year exemption for your first taxable year from the $800 minimum annual franchise tax.
In addition, every California LLC must also file a ‘Limited Liability Company Return of Income (Form 568)’ by the 15th day of the 4th month after the closure of your taxable year (typically April 15th).
If your LLC has a net income greater than $250,000, you will have to pay additional fees based on your total revenue.
If you’re unsure of when to submit your taxes and if you’re required to submit additional fees, reach out to your accountant or your agent for service of process, and they’ll be able to steer you in the right direction based on your business’s history.
Notify California Of Any Changes You Make To Your LLC
If at any time you make changes to your LLC, you need to inform the state. If you’re using a registered agent, they can do this for you. If you’re going about this alone, you can update changes through California’s business portal or through your registered agent.
8 Benefits of Forming an LLC in California
Setting up an LLC in California makes sure your business finances stay separate from any personal finances and that each member’s personal possessions are safe.
It’s a great business entity for small, medium, or large businesses as it gives you the freedom of a sole proprietorship or partnership with the protection of a corporation. Best of all, it’s easy to get (approval is instant), and it won’t cost you an arm and a leg. Some of its major benefits include:
1. Protect Your Personal Assets
The LLC will have its liability that does not automatically extend to the owners, unlike a sole proprietor, where you are legally responsible for everything. That means California LLC protects the liabilities and debts incurred by the business. In most situations, your assets, such as your car, home, or savings, will never be at risk if your California LLC is faced with lawsuits or bankruptcy.
2. Benefit From Business Profit Taxation
In an LLC in California, your profits and losses can pass through to your income without having to have corporate taxation.
3. Simple to Create and Maintain
The formation of a California LLC requires minimal paperwork and requirements. They are known for being easy to start and simple to maintain.
4. Minimal Restrictions
Your business matters can be managed by more than one owner or member while still being one main business to the public. This means all decisions and transactions behind the scenes can be equitably distributed while presenting one entity as you move forward.
5. Heighten Your Credibility
As you move forward, your California LLC will continuously be recognized as an entity. People and other businesses prefer doing business with a legitimate entity because it shows your level of professionalism.
6. Gain Access to Business Loans
When you form your California LLC, you will obtain a DUNS number and build your business credit, helping you to further build upon your business.
7. Benefit From Flexible Profit Distribution
In an LLC, you are not required to spread the distribution of profits equally across the owners. You have complete control over profit distribution in your California LLC.
8. Good For Any Kind Of Business
An LLC business structure in California is an excellent choice for both medium and higher-risk level businesses. You might always want to consider opting to go with an LLC if you have a significant amount of personal assets to protect from your company. And lastly, LLCs are great for owners who are interested in paying lower tax rates than corporations.
Filing an LLC in California is an excellent way to structure your business as it allows you to operate as a small business but with legal protection.
Forming an LLC ensures your personal assets never interfere with your business assets, and if you ever are sued or get into legal problems, your finances will remain separate. It’s a good business structure for anyone who has savings, owns the property, or wants to legitimize their business.
Since an LLC is a legal entity, you should always double-check any paperwork before submitting anything to the state. Because there are annual taxes and reports to file for LLCs in California, we suggest using a formatting service, like ZenBusiness, to handle the entire legal side for you.
You’ll have peace of mind knowing your business is in good standing with the state and all your operations are legally protected.
Plus, it will free up your time so you can focus on launching your business and getting customers. So, what are you waiting for?
FAQ About Forming California LLC
There are several different steps you’ll need to take to form your LLC legally. It’s a lot of information to take in and can get confusing. To help out, we’ve compiled some answers to the most frequently asked questions
What are LLCs, and why are they important?
An LLC is a Limited Liability Company. It’s a business structure used to protect your assets, like your house, your car, or even your savings. No matter what happens to your business (lawsuits, bankruptcy, etc.) your assets are kept safe.
How much does it cost to start an LLC in California?
It costs $70 to submit the ‘Certificate of Formation’ that forms your LLC.
How long does it take to form an LLC in California?
It takes around 5 business days to get your LLC approved.
Can you start an LLC on your own?
Yes, you can start forming an LLC on your own by following the step-by-step instructions provided in this article. For additional help, look to hire an all-around service provider.
Do you need a lawyer to start an LLC in California?
No, you can start an LLC without a lawyer just be prepared to file and report everything on your own. If you’re not interested in getting a lawyer but want to make sure everything is filed correctly, use an online business formation service, like the ones listed in this article, with ZenBusiness as our #1 recommendation.
Does an LLC need to make money?
No, an LLC doesn’t need to make profits, but if you’re claiming tax deductions with no income, the IRS will likely audit your business.
What are the downsides to having an LLC?
There are pros and cons to forming an LLC. The pros are tax reductions, protecting your personal assets, and creating credibility for your business (and possible future business loans).
The main con of an LLC is you’re considered self-employed. This is a disadvantage as you’d be taxed under self-employment and responsible to pay Social Security and Medicare taxes. The amount you’d be required to pay depends on your business’s total net earnings.