A Limited Liability Company (LLC) in California is a legal business structure that protects your assets (like your home, car, and bank account) in case your company gets attacked.
An LLC in California can run a business or hold your assets, such as real estate, cars, boats, and planes.
It doesn’t have to be hard to figure out how to start an LLC in California. We’ll show you step-by-step how to do it.
A. LLC Name:
The first step in setting up an LLC is to ensure that the business name you want is available. Your California LLC name has to be different from the names of all the other businesses already listed in California. Do a business name search to ensure the name you want for your California business is still available.
Designator: The last part of the business name you want must be the correct designator.
The following names are allowed by California law:
* LLC (most popular)
* Liability Company
* Limited Liability Company
B. Agent of Record in California
When you make an LLC, you need to choose a California Registered Agent, which in California is called an Agent for Service of Process. A California Registered Agent is a person or company that agrees to get court papers (called “Service of Process”) on behalf of your LLC in case your business is sued.
A lawsuit, a summons, or a subpoena are all examples of things that can be served.
The address of the Registered Agent must be a street address. For the California
Registered Agent, you can’t use a P.O. Box. Also, they have to be in California.
Who in California can be your Registered Agent?
Note: As we talked about in our lesson on California Registered Agent, who you choose as the Registered Agent for your business will affect your privacy and which of your addresses will be listed in public records. In California, you can choose from three people to be the Registered Agent for your LLC:
* You can be your own Registrar of Voters.
* You can ask a friend or part of your family.
* Hire a Registered Agent Service if you want to avoid your home being public or don’t have a California address.
C. Statements of Purpose
Official Articles of Organization (Form LLC-1) is a form for a California LLC
The filing fee for a California LLC is $0.00. LLCs in California are free until June 2023, which is good news. See How Much Does an LLC Cost in California to find out about all the fees. z file online, by mail, or in person.
Online filing: Your California Articles of Organization can be filed online through BizFile.
Mail filing: You don’t need a check because it’s free to file right now. Just send your California Articles of Organization to: California Secretary of State Business Entities P.O. Box 944260 Sacramento, CA 94244-2600
The California Secretary of State will accept your LLC in 8 business days after they get your paperwork. If you start your LLC in California between December and January, which is when most people do it, approval can take a little longer. The state will send you an approved set of Articles of Organization and a Welcome Letter.
Professionals with licenses: Most businesses that give “professional services” are not allowed to run as an LLC under California law. Please look at the next page: Most workers who have a license in California can’t start an LLC
D. LLC Operating Agreement
The California Operating Agreement is a private agreement for your business. This means that you’ll just keep a copy of your business records. It doesn’t go to the Secretary of State of California or any other body.
Operating Agreements show the LLC Members (LLC Owners) and how much of the business each of them owns. This document also says how income and losses are split, how the LLC is run, and how taxes are paid.
Both California LLCs with one member and LLCs with more than one person should still have an Operating Agreement.
E. Federal Tax ID Number (EIN)
LLCs get a Federal Tax ID Number from the Internal Revenue Service (I.R.S.). This number is also called a California EIN Number.
An EIN is also called an EIN Number, a Federal Employer Identification Number, a Federal Tax ID Number, or a Federal Employer Identification Number. All of these have the same meaning.
You can think of the EIN Number as the “social security number” of your LLC It helps the I.R.S. figure out who your LLC is for tax and filing needs.
EINs are also used to start a bank account for your business, file income and employer taxes, and, if needed, handle payroll.
Please wait for the LLC to give its OK: Don’t apply for an EIN until your California LLC has been accepted.
Fee: $0. The I.R.S. doesn’t charge for EINs.
You can get an EIN for your LLC in three ways:
- You can apply for an EIN online if you have an SSN or an ITIN.
- If you try to get an EIN online and get an error message, you’ll need to use Form SS-4 instead.
- If you don’t have an SSN or ITIN, you can still get an EIN for your LLC: how to get an EIN if you don’t have an SSN or an ITIN
If you don’t live in the United States or don’t have a social security number,
Online, you can’t get an EIN But you can still get an EIN without a social security number if you send in your application by mail or fax (fax approval is faster). Fill out the SS-4 form and write “Foreign” on line 7b.
F. Statements of Information at the Start and Going
Within 90 days of being formed, all LLCs in California must file an Initial Statement of Information.
Statement of Information filing can be made online, by mail, or in person. The filing fee is $20, and the late fee is $250. If you don’t follow this rule, the state will shut down your LLC in the long run.
Online filing: Your LLC Statement of Information can be filed online through BizFile.
Mail filing: Download Form LLC-12 and send it with a check or money order for $20 to the state:
Statement of Information Unit
Office of the Secretary of State
P.O. Box 944230
Statement of Information on Going Filings: Every two years, you have to file a Statement of Information. They must be paid by the date that your LLC was approved. For more information, please look at our directions for the California LLC Statement of Information.
G. Franchise tax of $800 per year and estimated fee
No matter how much money or work they do, all LLCs in California must pay a $800 Franchise Tax fee every year.
Most of the time, this had to be done soon after the LLC was accepted. But because of California Assembly Bill 85, LLCs created between 2021 and 2024 do not have to pay the $800 franchise tax in their first year of business.
When it’s time to pay your franchise tax, you’ll send it to the California Franchise Tax Board, not the California Secretary of State.
Form 3522 is a tax ticket for a limited liability company. Form 3522 is used to pay the Annual Franchise Tax of $800. This ticket changes every year, so go to the Forms page on the Franchise Tax Board’s website to download Form 3522.
Click “Online” and choose the year you want to pay taxes for.
Next, click “Get Forms” and then “Limited Liability Companies.” Then look for the “Limited Liability Company Tax Voucher” (Form 3522) on the website.
Due date: Every year, on April 15, the $800 California LLC franchise tax is due (except for the year your LLC is formed).
Estimated Fee for LLCs, Form 3536
If your California LLC’s gross yearly receipts (total income) will be more than $250,000, you must also file Form 3536 and pay an Estimated Fee. The real form changes every year, just like Form 3522, so you’ll need to go to the Forms page on the Franchise Tax Board’s website to download it. If your LLC’s gross yearly receipts (total income) won’t be more than $250,000, you don’t need to file Form 3536.
H. Licenses and/or permits for a business
Depending on where your California LLC is located and what kind of business it does, you may need to get certain California Business Licenses and Permits.
For example, if you sell things in California, you may need to collect sales tax and have a sales tax license, also called a Seller’s Permit.
State license to do business
In California, no business needs to get a general business license from the state.
If your California LLC sells goods or services that would usually be taxed in a store, it will need to sign up for sales tax. The Seller’s Permit is the name for this registration.
In California, you can get a free Seller’s Permit for your LLC online.
Municipal license or permit
Depending on where your California LLC is and what it does, you may need business licenses or permits from the city, county, or other local government to officially run it.
There are too many cities and counties to put here, so if you need help, call your local government.
“Pass-through taxation” is how LLCs in California are taxed. Most of the time, you put your income or losses on a Schedule C and file it with your personal tax return.
The state and local taxes in California:
Your LLC also needs to sign up with the right California taxing authority and pay taxes. The California Franchise Tax Board (F.T.B.) and your local government (city, town, county, etc.) are two of these.
“Limited Liability Company Return of Income” Form 568 from the California Franchise Tax Board: Depending on how income is made, all LLCs in California will need to file Form 568 and other 568 Schedules and Forms with the F.T.B. Working with a business accountant is a must if you want to file your federal, state, and local taxes correctly.
Every tax year, Form 568 is different, so you’ll need to go to the Forms page on the F.T.B.’s website and choose the right form for the tax year you’re filing for. Form 568 is usually due by March 15 or April 15, but it depends on how the federal tax system treats your LLC
J. LLC Account for a business
Protect yourself from personal liability: By opening a different bank account for your California LLC, you can keep your personal assets separate from your business assets. This is a good way to protect your assets, and it also makes it easier to keep track of your finances and do your books.
Things you need to start an account:
Articles of Organization for a California LLC that have been approved EIN Confirmation Letter Driver’s License.
Compare prices: There are a small number of banks that don’t charge regular fees for LLC business checking accounts. You’ll need to call a few banks in your area and compare what they have to offer.
Business debit card: When you open a business bank account, the bank will give you a debit card.
You can also get a business credit card to earn points, miles, and other benefits.
K. Business Phone Number
You can buy a cheap “virtual business number” for your California LLC instead of using your home phone number or your cell phone. This virtual business phone can be set up to forward to your cell phone, use voice prompts, or be set up in any way you want.
State agencies in California Contact Details
916-653-3794 (LLC Unit) 213-897-3062 (L.A. Office)
8:00 am – 5:00 pm, M-F
The California Franchise Tax Board can be reached at 800-852-5711
8:00 am – 5:00 pm, M-F