Forming an LLC in California? Here’s how.
- Getting Started
- Business Tips
Finally ready to launch your LLC (Limited Liability Company) in the Golden State? Congrats. Here’s a checklist of what you’ll need to do to get your business in the books:
1. Check if your business name is available
First, make sure that another LLC in California hasn’t claimed your name. To do this, you’ll go to the Business Search at the California Secretary of State website. Since you want to start an LLC, select LP/LLC Name and enter the business name you want in the “Search Criteria” box. When you click “Search,” you’ll pull up a list of all the registered California businesses that have your search term. Depending on what name you’re searching for, you may find many entries. Be sure to look through all the pages to ensure your name hasn’t been registered already
Find a name that’s available? Great. Time to claim it before someone else does.
By the way, if you’re trying to decide between different names—or if you know what name you want but aren’t ready to register it—you can always file a Name Reservation Request Form, which will reserve your name for up to 60 days. It costs $10 per name reservation.
2. Claim your name
It’s time to officially start your LLC by filling out an Articles of Organization form (Form LLC-1) and filing it with the California Secretary of State. The base cost for this is $70. You can submit this by mail, at their Sacramento location (for an additional $15), or online.
When filing for your LLC, you’ll need to give the Secretary of State the street address where you’ll keep all the company documents and records. (No P.O. boxes allowed!) You’ll also need to name an “Agent for Service of Process,” an intimidating title for the lucky person who will receive legal documents on behalf of the company. If you’re the one starting a small business, that person is probably you.
Once you fill out the form and submit it to the Secretary of State, you’ll need to wait for their office to process it and get back to you. (You can find their current LLC-1 processing times here.)
3. Write your operating agreement
Quick disclaimer: Strictly speaking, you’re not required to have an operating agreement in the State of California. But it’s still a good idea. Why?
Well, one big reason is to protect your new business’ limited liability status. An operating agreement is an important legal formality for protecting you and any other members of your LLC from personal liability. Without it, you could be personally responsible for legal challenges to your business.
Another big reason is to solidify any verbal agreements you have with the other members of your LLC. When a business is new, it’s easy to assume that everyone is on the same page and that you’ll figure stuff out as you go along. In reality, things are rarely that easy. And unless you spell out important agreements in writing (think percentage of ownership, distribution of profits and losses, and buyout rules), you could find yourself in hot water down the road.
Want help writing your operating agreement? Here’s an example of an operating agreement for a multiple-member LLC. (Here’s another.) Really, we recommend hiring an attorney to help you with this one. It’s worth the investment to get right.
4. File your Statement of Information
Have you gotten all your LLC paperwork back? Good. Now it’s time to get your Statement of Information taken care of. To do this, you’ll fill out another form: the LLC-12. You need to do this within 90 days after your LLC goes live—but don’t file it until your LLC is officially active. If you’re not sure whether things are ready to go yet, you can check the status of your LLC here. (Yep, it’s the same site you used to search for a name at the beginning of the process.
Submitting the Statement of Information form costs $20. You can do it via regular mail or by going to the California Secretary of State’s website.
5. Pay your taxes
Depending on when you start your LLC, you probably won’t have to do this immediately. But you should be aware that LLCs doing business in California pay a minimum franchise tax of $800. To get an idea of any other taxes that might be due, take a look at this table of California LLC Taxes. (You can find any income tax forms that you might need at the Franchise Tax Board website.)
6. Wrap up other regulation and sales tax requirements
Every area has their own business regulations, and you may need to get a few other licenses to operate as an LLC where you are. To get a better idea of what might be required in your area, visit the California Office of Business and Economic Development website and enter your information.
If your LLC has more than one member, you’ll also need to get an Employee Identification Number (weirdly, this applies even if you’re all owners). You can do this online at the IRS website. Unlike most of the other forms, it doesn’t cost anything.
Hey, thanks for reading. Let us know if this was helpful. Also, if you’re ready to hire employees after forming your California LLC, here’s a friendly reminder: You have to get workers’ comp first. (Luckily, it only takes about 5 minutes with Huckleberry.)