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If you’re looking to make your entrepreneurial dreams come true in the state of California, forming a Limited Liability Company (LLC) might just be the best way to get your business off the ground. LLC formation is a great way to gain credibility, enjoy tax flexibility, and keep your personal and business assets separate.
Additionally, California has a favorable business climate, with a large market, access to resources, and a vibrant entrepreneurial ecosystem, making it an attractive location for business growth and opportunities.
But let’s be clear: it’s not easy. Setting up an LLC involves multiple steps that require an understanding of California’s business laws, from filing the necessary paperwork to ongoing reporting requirements. And you don’t want to get these wrong. Non-compliance can lead to daunting legal and financial repercussions that could see your business dreams evaporating before your eyes.
The process, while feasible, is complex and requires meticulous attention to detail, and that’s why we’ve created this easy-to-follow guide. Let’s get started!
Short on Time? Here’s a Quick Guide To Forming an LLC in Any US State:
These are the bare minimum required steps to form an LLC in any state, district, or territory in the USA. Remember, these are generalized steps, and we’ve outlined more detailed requirements and the specific rules and regulations for California in our full guide below. Always consult with a legal advisor, California’s Secretary of State office, or one of our recommended LLC formation services for accurate, up-to-date information.
Select a business name. Choose a unique and compliant name for your LLC according to your state’s regulations.
Appoint a Registered Agent. Designate a person or entity to receive legal documents and official correspondence on behalf of your LLC. This can be you, a partner, or an LLC formation service like ZenBusiness1.
File Articles of Organization. Submit these documents to the Secretary of State or equivalent office in your state. These typically include your LLC’s name, address, and the name and contact details of the Registered Agent.
Obtain an Employer Identification Number (EIN) and register for business tax. Technically, these are optional, but you’ll probably have to apply for an EIN from the IRS, and register for various state and local taxes.
How To Form an LLC in California: a Comprehensive Guide
Before you begin, be sure to take note of the following important points:
The State of California charges LLCs a franchise tax of $800/year, but this will be waived for the first year if you file by the end of 2023.
If you apply on your own you will have to deliver your Name Reservation Request form by hand or by postal mail to the Secretary of State’s office in Sacramento.
Depending on the type of business you are conducting, you may need to acquire other local or state business licenses.
1. Choose a name for your LLC
Select a name that reflects your business and complies with California’s naming rules. The name must be unique, not be too similar to existing businesses, and include an LLC designator like “Limited Liability Company,” “LLC,” or “L.L.C.” Perform a name search on California’s Secretary of State website to ensure your chosen name is available.
You should also consider searching for and registering a domain name for your business website, which is included with an LLC formation plan from Tailor Brands1.
2. Appoint a Registered Agent
A Registered Agent is a person or entity responsible for receiving legal documents (e.g., lawsuits, summons) and official government correspondence on behalf of your LLC. The Registered Agent must have a physical address (not a P.O. box) in the state of California, and must be available during regular business hours.
You can choose a member of the LLC if it is a partnership, a friend, a professional Registered Agent service like ZenBusiness, or even yourself.
This foundational document needs to be filed with California’sSecretary of State office. This costs $70, and must include the following information, at minimum:
LLC name
Principal office address
Registered Agent’s name and address
Name and signature of the organizer(s)
4. Create an LLC Operating Agreement
An Operating Agreement is mandatory for LLCs in California. This is a legal document that outlines the ownership, management structure, and operating procedures of your LLC. It typically includes information on:
Members’ ownership percentages
Voting rights and responsibilities
Profit and loss allocation
Management structure (member-managed or manager-managed)
Procedures for adding or removing members
Creating an Operating Agreement helps avoid disputes among members and provides clarity on how the business should be run.
5. Obtain an Employer Identification Number (EIN)
An EIN is a unique nine-digit number assigned by the IRS to your LLC for tax purposes. It’s required for filing business taxes, hiring employees, and opening a business bank account, which you should also do to keep your personal and business finances separate.
However, if your LLC is a single-member LLC with no employees and is classified as a disregarded entity for tax purposes, you may be able to use your Social Security number (SSN) instead of an EIN for federal tax filing. But even in this case, it is generally recommended to obtain an EIN to separate business activities from personal ones and maintain the limited liability protection.
6. Register for state and local taxes
Depending on your business activities and location in the state of California, you may need to register for various state and local taxes, such as:
Sales and use tax
Payroll tax
Income tax withholding
Unemployment insurance tax
Workers’ compensation insurance
Consult the California Secretary of State website or a professional LLC formation service for more information on registration requirements in your local region.
7. Obtain necessary licenses and permits
Your LLC may require specific licenses or permits to operate legally in California, depending on the industry and location. Examples include:
Professional or occupational licenses
Health and safety permits
Zoning and land use permits
Sales tax licenses
Environmental permits
Visit the California Secretary of State and your local government websites for more information on required licenses and permits, or seek advice from ZenBusiness, which can come up with a plan to cover your exact requirements.
LLCs in California are subject to ongoing state requirements to remain in good standing. These requirements include:
Filing a Statement of Information. The State of California requires LLCs to submit a biennial Statement of Information, which updates the state on key information about your business, such as ownership, Registered Agent, and contact information. This costs $20.
Paying the annual franchise tax. The State of California charges a franchise tax of $800/year for maintaining your LLC, but first year will be waived if you file before the end of 2023.
Maintaining a Registered Agent. Ensure that your Registered Agent remains available and maintains a valid physical address in the state where your LLC is formed.
Complying with state and federal tax obligations. File your LLC’s tax returns and pay any taxes owed on time. This may include federal income tax, state income tax, sales and use tax, payroll tax, and any other taxes that may be relevant to your particular business.
Renewing licenses and permits. Keep all required licenses and permits up to date by renewing them as needed. Failure to maintain proper licenses and permits can lead to fines or legal trouble.
By staying informed and diligently meeting these ongoing requirements, you can keep your LLC in good standing and protect your limited liability status. The easiest way to do this is to employ one of the selected business service providers we’ve researched and reviewed below.
These Are the Top LLC Formation Services for California
There are a lot of LLC formation services out there. To come up with the best ones for California LLCs, we looked for the following features:
A free (minus state fees) plan that saves you the most money.
Feature-packed plans, regardless of cost, so you get the best value.
Unique features not offered by most of the competition, such as creative services, financial tools, or specialty consultations, to move you along.
Ease of use and user friendliness, because who needs a service they have trouble using?
Good customer support, if you need help or guidance getting started.
Customization of plans and services, because not all businesses are built alike.
Here are our top LLC formation services specifically to form an LLC in California.
ZenBusiness can offer you LLC formation services starting at $0 (plus state fees, of course)1ZenBusiness is a reputable LLC formation service that works for side hustles and big, ambitious enterprises alike. Its highly customizable plans and product bundles can help businesses with big or small budgets.
ZenBusiness offers a free plan1, and then two tiers of paid plans, Pro and Premium. The free plan includes a filing time of 2–3 weeks, but you can buy an add-on to speed this up. The Pro and Premium plans offer 1–2 days’ filing times. More importantly, all plans include a 100% Accuracy Guarantee, so you can rest assured that ZenBusiness won’t get the details wrong.
All ZenBusiness plans come with another bonus – ZenBusiness Money Essential – a free financial management tool for automatic expense tracking. You can also upgrade to its paid version, called ZenBusiness Money Pro, which helps you track expenses, income, invoicing, mileage, taxes, and more. If you’re not sure what you might need, you can sign up for a free 30-day trial of ZenBusiness Money Pro and compare.
Features
Tax consultations. Just for signing up, you’ll get a free 30-minute tax consultation through partner 1-800Accountant.
Mobile app. Access your account dashboard through an Android or iOS app in addition to desktop.
Website builder. ZenBusiness offers access to a proprietary website builder with the Premium plan. You also get a domain name and email address.
Full customization. You can modify your ZenBusiness plan so you get only the services you need – and you won’t be paying for anything you don’t.
Tailor Brands gets you started quickly and easily1The major benefit of Tailor Brands is its range of visual design and marketing tools and add-on services. You get a whole lot more than basic LLC formation, including graphic design, brand growth materials, social media tools, and website development.
One nice feature of Tailor Brands is its free “plan generator.” Provide a bit of info about you and your business, and Tailor Brands will build a checklist1 to get you from where you are now to fully launched and online. Of course, you’ll be encouraged to buy its plans and services along the way, but if you’re just moving from the idea phase to taking action in your business-building venture, it’s a good basic guideline to follow.
Features
Free logo maker. Tailor Brands provides a free logo maker available with all plans, as well as advanced features available with the Elite plan.
Zazzle partnership. Get started with printed merchandise for your LLC with an exclusive deal with Zazzle.
In-house website design. For an added fee, Tailor Brands offers a custom website design to help your business get seen.
Trademark support. Tailor Brands can help you file your trademark application as an add-on service.
Swyft Filings helps the beginner and veteran alike, by doing the paperwork for you1
If you’re a new business owner looking for a simple way to get started, Swyft Filing is another great option. Swyft Filings’s LLC filing process1 requires a minimum of easy-to-complete paperwork, making it ideal for beginners.
Signing up takes mere minutes, and Swyft Filings’s client account dashboard that you receive access to afterward is extremely user friendly.
Swyft Filings can help you keep things running smoothly, too. With every plan, you get a free 14-day trial of ComplianceGuard, which helps you maintain state business compliance by providing you with annual reports, meeting minutes, and notifications of when your filings are due. Swyft Filings stays by your side, all the way from raw beginner to established veteran.
Features
EIN application. With the Standard and Full Service plans, your EIN application is included for free.
Business license applications. Swyft Filings offers licensing and permit research and application services available as a paid add-on.
Specialty documents. With the Standard and Elite plans, you’ll gain access to specialty documents like Operating Agreements and banking resolutions.
Free Basic plan. If you don’t need all the bells and whistles, Swyft Filings offers a basic service that provides everything you need.
Forming an LLC can be a dream come true – but only after you’ve completed all the paperwork. Our top three featured company formation services take all the hassle and headache out of getting your LLC up and running.
No matter how big or small your LLC venture might be, ZenBusiness has a plan that will work for you1. Its plans pack a lot of value, including its free one. And its competitors don’t offer many of the features it includes for free, such as 100% Accuracy Guarantee and ZenBusiness Money Essential, with every plan.
If brand building is your main priority, consider Tailor Brands1. This provider is known for its creative and marketing services and tools. From your logo to your website, it has you covered.
Or, if you’re a newbie just starting out and want a lot of guidance along the way, go with Swyft Filings1. It offers a fast, intuitive signup process and an easy-to-use client dashboard.
Here are our top picks at a glance for California:
To form an LLC in California, you’ll need to follow all the requirements laid out by the Secretary of State. This includes choosing a unique name for your LLC, filing your Articles of Organization, and paying the required filing fee. You can do this on your own or use an LLC formation service to ensure you get everything filed properly.
What are the benefits of forming an LLC in California?
Forming an LLC in California allows you to separate your personal and business assets. It offers flexibility in management, allowing members to choose how the LLC is run and structured. Plus, California offers a large market, valuable resources, and a dynamic business environment, making it an ideal location for business expansion and opportunities.
How can I form an LLC in California for free?
No matter how you form your LLC, you’ll be required to pay the state fees charged by the Secretary of State. However, if you want to use an LLC formation service, we recommend ZenBusiness, as it offers a free basic plan to help you get started, as well as paid add-ons if you need them.
Which LLC formation service provides Registered Agent services?
Most LLC formation services offer Registered Agent services if you need them, but not all of them are free. BusinessAnywhere and Incfile both offer one year of Registered Agent services for free, while Northwest Registered Agent provides Corporate Guides in every state that can also act as your Registered Agent, for an additional fee.
Ashley Hague is a freelance writer with over five years of experience. She specializes in writing about credit card processing, fintech, e-commerce, and business formation services. She helps companies around the world start and maintain their businesses with helpful how-tos, guides, and more. When she’s not working, Ashley can be found working on creative film projects or trail running.
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