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How to Form an LLC in California

Almost any type of business can organize as a limited liability company, or LLC, which is similar yet distinct to both partnerships and corporations. In California, to form an LLC you must both file appropriate paperwork with the California Secretary of State and pay an annual minimum tax. However, while an LLC grants some of the benefits of a corporation, including a limitation of personal liability, the formation of an LLC in California is much simpler than incorporation.

Instructions

    • 1

      Choose a unique and unused business name for your LLC. The California Secretary of State website offers a tool where you can enter your LLC name and see if it is currently in use. You can only proceed with officially registering your LLC if you have picked a new name. Per California law, the name of your LLC must have "LLC" or "Limited Liability Company" in its name.

    • 2

      Draft and submit articles of incorporation. Your articles of incorporation are essentially the documents explicitly forming your company. While articles of incorporation can be lengthy or brief, the important information they carry includes the name and incorporation date of the company, the company's functioning purpose, the name of the registered agent, and any stock information for the company. In California, you must pay a filing fee of $70 with your articles of incorporation as of this publication.

    • 3

      Write an operating agreement. While the State of California does not require you to file an operating agreement when you form your LLC, it does require you to have one. An operating agreement, as the name would imply, simply spells out the day-to-day operational process for the LLC. Since you don't have to file the operating agreement with the state, there are no specific requirements for what your operating agreement should include. However, most operating agreements include items such as how and when meetings will occur, the interests and responsibilities of the LLC members, and rules regarding how shares and profits are to be distributed.

    • 4

      File your first Statement of Information (Form LLC-12). The Statement of Information is a California requirement for LLCs that is due within 90 days of your official LLC formation. The Statement of Information costs $20 to file and essentially lists the name and contact information for your LLC. After your initial filing, you must file Form LLC-12 every two years thereafter.

    • 5

      Check for local licensing requirements. Your individual municipality may require a separate business license if you form an LLC in California.

    • 6

      Get an Employer Identification Number. If you form an LLC in California, you must file for an EIN from the IRS, at no charge. (see Reference 4)

    • 7

      Pay your $800 franchise tax. Unlike some other states, California imposes an $800 minimum tax on LLCs in the state. While this can be used as an offset to your net tax liability, you will still owe the tax even if you do not earn any money through your LLC.

    • 8

      Keep up with additional requirements if you have employees. If you are filing a single-person LLC, your requirements may end after you make your initial filings and pay your fees. However, if you hire employees, you have additional requirements, including notifying the IRS and the State of California, getting workers' compensation insurance, and registering for employment taxes.

Tips & Warnings

  • Open a separate bank account for your LLC to keep your business records distinct from your personal finances.

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