Can I Open an LLC in California as a Sole Proprietor?
The state of California allows a single person to establish a limited liability company by filing the appropriate formation documents with the California secretary of state. Single individuals that operate as California sole proprietors do not experience the limited liability protection from business debts witnessed in an LLC. A single-member LLC in California needs to have a written operating agreement to protect the company's limited liability status. Without a written operating agreement, the courts may decide a California LLC owned by one person is nothing more than a sole proprietorship.
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Articles of Organization
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Articles of organization must be filed with the California secretary of state to open an LLC in California. The California secretary of state supplies fill-in-the-blank articles of organization that can be used to create the entity. The articles must provide information about the company such as the purpose for starting the company, as well as the name and location of the business. The name and physical address of the LLC's service agent for process must appear in the articles. The service agent for process address indicates the address where the California LLC's legal documents are delivered. The articles must include a statement indicating whether the company is managed by its single member or if nonmembers will be hired to manage the California LLC's day-to-day affairs. A description of the company's business activities must be included in the articles of organization. At the time of publication, it costs $70 to submit articles of organization to the California secretary of state. The articles must be delivered in person or by mail to the California secretary of state's office.
Statement of Information
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A statement of information must be filed with the California secretary of state to create an LLC in California. The California secretary of state provides a fill-in-the-blank statement of information that can be filed in person or by mail. The statement of information contains the name and address of the company's single member, as well as the name and address of the company's service agent for process. The nature of the company's business activities must be described in the statement of information. At the time of publication, it costs $20 to file a statement of information with the California secretary of state. A statement of information must be filed within 90 days of filing the LLC's articles of organization with the California secretary of state.
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Operating Agreement
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Every LLC in California, regardless of size, needs to create a written operating agreement that describes the policies and procedures for operating the business. A California LLC's operating agreement exists as an internal document that is not filed with any government agency in the state. No guidelines exist as far as creating a written operating agreement for a California LLC. The operating agreement may include provisions for accepting new members, the fiscal year of the company and banking procedures. The company's operating agreement needs to stay at the California LLC's main office location.
EIN
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The owner of a single-member LLC in California can use his social security number for business as opposed to getting an employer identification number from the Internal Revenue Service. However, a single-member LLC in California with employees has a requirement to acquire an EIN from the IRS. An LLC in California can acquire an EIN for immediate business use by applying online using the IRS website or by calling the IRS at 800-829-4933. The IRS requires information about the company such as the number of people that work for the LLC, as well as the name and location of the business. The lone member of the company must provide her name, address and social security number to secure an EIN for the business.
Form 8832
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Single-member LLCs in California can elect taxation as a sole proprietor by filing Form 8832 with the IRS. To complete Form 8832, information about the business must be provided such as the name and address of the business, as well as the California LLC's EIN. The signature of the company's lone member must appear on Form 8832. The box next to sole proprietor must be checked to indicate the company wants to be taxed as a sole proprietorship. Taxation as a sole proprietor allows the company's lone member to pass profits and losses directly to his personal income tax return.
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