How to Set Up a California LLC

Forming a small business in California is a relatively painless process.

A Limited Liability Corporation is similar to a corporation but is taxed differently. Corporations are taxed as individual entities, similar to a taxpayer, at the corporate tax rate. LLCs are not taxed directly at all; profits and losses "pass through" to the owners of the business. This helps the owner write off losses, which otherwise would be tangled up in the corporation's finances. As long as you know what you're doing, setting up an LLC in California is painless and costs under $100.

Things You'll Need

• Form LLC-1
• Form SS-4
• Form LLC-12
• $90

Instructions

1. Choose your business name. In California, all businesses organized as LLCs must have the abbreviation "LLC" as the last words in the name. (For example, "Jenny's Cookies" would have to be "Jenny's Cookies LLC.") Acceptable substitutions are "Limited Liability Company," "Ltd. Co.," or "L.L.C." The name of your business must be unique and not designed to closely mimic the name of any other business that operates in the state.

2. Fill out the Articles of Organization form available on the Secretary of State's webpage (sos.ca.gov/business/). The filing fee in California is $70 and should be paid by check. Mail the form along with the filing fee to:

   Secretary of State
   Document Filing Support Unit
   P.O. Box 944228
   Sacramento, CA 94244-2280

   Or deliver in person to:

   1500 11th St, 3rd Floor
   Sacramento, CA 95814

   Please note that documents delivered in person require an additional $15 fee, which must be paid by a separate check.

3. Create an operating agreement between the members of the LLC, even if you are the sole owner. This does not have to be filed with the state and there are no particular requirements for an operating agreement, but one is required under California Corporations Code § 17050(a).

4. File a Statement of Information with the Secretary of State within 90 days of organizing. The form can be found on the Secretary of State's web page and the associated fee is $20.

5. Obtain an EIN number from the IRS. This can be done by filling out and mailing form SS-4, or through the IRS's online application.

6. If you have employees working in California, you must pay employment taxes on them through the Employment Development Department and also carry Worker's Compensation Insurance through the Division of Worker's Compensation.

References

• Citizen Media Law Project: Forming an LLC in California
• California Secretary of State: Entity Types--Business Entities
• Find Law: Make Sure Your Proposed Business Name is Available
• LLC Made Easy: Corporate and LLC Taxation Compared

Resources

• IRS: Limited Liability Company
• IRS: Apply for an EIN Online
• State of California: Employment Development Department
• CA.gov: Division of Worker's Compensation
• IRS: Hiring Employees