STEP 1: Name your LLC


This is the first and most important step in starting your LLC. Do some research to make sure the name you choose is suited to your business venture and is easily searchable by potential clients.

  1. Follow the naming guidelines: Your entity name must contain the words Limited Liability Company or the abbreviation L.L.C. or LLC. Restricted words (e.g. Bank, Attorney, University) require additional paperwork and may require a licensed individual, such as a doctor or lawyer, to be part of the LLC. Prohibited words are those that would confuse the name of your LLC with a federal or state agency (e.g. FBI, Secret Service, Treasury etc.)
  2. Is the name available in California? Make sure the name isn't already taken by doing a name search on the State of California website.
  3. Is the URL available? Check to see if the name of your LLC is available so that you can reserve your domain name. Even if you don't plan to make a website today, you may want to buy the domain name in order to prevent others from acquiring it.

An email address is also something to consider when choosing a name. Get a professional email system (@yourcompany.com) with Google's G Suite, which also comes with business tools for word processing and spreadsheets, all with business-grade security - Try it for free

STEP 2: Choose a Registered Agent


You are required to nominate an Agent for the Service of Process for your California LLC. An Agent for the service of process is also known as a Registered Agent.

What is an Agent for the Service of Process? An Agent for the Service of Process is a person or business that agrees to send and receive legal papers on behalf of your LLC. Such papers include service of process of legal action (if you are sued) and state filings.

Who can be the Agent for the Service of Process? An Agent for the Service of Process must be a resident of California or a Company authorized to transact business. You may elect an individual in the company including yourself, but an LLC cannot be its own Agent for the Service of Process.

Click here to learn more about the role of a Agent for the Service of Process, and why you may wish to consider hiring a professional service.

* Recommended: INCFILE.COM provides free registered agent service for the first year as part of their LLC Packages.

STEP 3: File the Articles of Organization


To register your LLC, you will need to file the Articles of Organization with the State of California. This can be done by mail or in-person.

When filing the Articles of Organization in California you will need to decide if your LLC will be member managed or manager managed. Read our article on the topic to learn more.

File the Articles of Organization for a Domestic LLC.

Download PDF

Fee: Nonrefundable fee of $70, payable to Secretary of State. If you drop off the form, a separate $15 service fee must be included.

Follow the instructions on the PDF.

Important: If you're expanding your existing LLC to the State of California you are forming a Foreign LLC. Learn how.

STEP 4: File the Initial Statement of Information


California requires all LLCs to file an initial Statement of Information (Form LLC-12) with the California Secretary of State within 90 days of forming your LLC.

For LLCs the initial Statement of Information can be filed online, in-person, or by mail.

File the Initial Statement of Information .

Download PDF

- or -

File Online

Fee: Nonrefundable $20, payable to California Secretary of State

Follow the instructions on the PDF.

Mail to:
Secretary of State Statement of Information Unit P.O. Box 944230 Sacramento CA 94244-2300

Deliver in person:
Sacramento office 1500 11th Street
Sacramento
CA 95814

STEP 5: Create an Operating Agreement


An operating agreement is a requirement when forming an LLC in California. This may be a verbal or written agreement.

What is an Operating Agreement? An operating agreement is a legal document outlining the ownership and operating procedures of your LLC. Learn more about operating agreements here.

* Recommended: Check out our free sample operating agreement

STEP 6: Obtain an EIN


What is an EIN? The Employer Identification Number (EIN), or Federal Tax Identification Number, is used to identify a business entity. It is essentially a social security number for the company.

Why do I need an EIN? An EIN is required when filing state and federal taxes. In addition, banks may require an EIN to open a business checking account.

Where do I get an EIN? An EIN is obtained from the IRS (free of charge) by the business owner after forming the company. This can be done by one of two ways:

Click here to learn more about EINs and further details on how to register for one with the IRS.

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Six Key Steps
After Forming A Business

1. Separate Personal Assets from the LLC


Opening a business bank account is an important first step, as it:

  • Separates your personal assets from your company's assets, which is necessary for personal asset protection.
  • Makes accounting and tax filing easier.

Getting a business credit card allows you to:

  • Separate personal and business expenses.
  • Build your company's credit history, which can be useful to raise money for your company later.

2. Register Your LLC for California State Tax


You are required to register for State Taxes in California:

- If you hire Employees - You will need to register for the following payroll taxes:

- If you are selling taxable goods or services - You will need to register for:

In addition, all Businesses in California need to pay a Franchise Tax. Learn how to File and Pay California Franchise Tax.

*Recommended: Learn more about LLC taxes by reading TRUiC's LLC Tax Guide.

3. Accounting


Even if you haven’t officially opened for business – it’s critical to get your books in order. A well managed accounting system will help you:

  • Track your business finances, including bills, expenses and income.
  • Simplify your annual tax filings.

The right software makes accounting easy. Look for software that:

  • Syncs with your bank automatically.
  • Matches transactions to invoices, bills and purchase orders.
  • Can be accessed from your phone.

*Recommended: QuickBooks has all the accounting features your small business will need.
Try QuickBooks FREE.

4. Obtain Business Licenses & Permits


Do I need business licenses and permits?

To operate your LLC you must comply with federal, state, and local government regulations. For example, restaurants likely need health permits, building permits, signage permits, etc.

The details of business licenses and permits vary from state to state. Make sure you read carefully. Don't be surprised if there are short classes required as well.

Fees for business licenses and permits will vary depending on what sort of license you are seeking to obtain.

Find out how to obtain necessary licenses and permits for your business or have a professional service do it for you:

  • Federal: Use the U.S. Small Business Administration (SBA) guide to federal business licenses and permits.
  • State: Use the State of California's CalGold - an online resource to help you find the permits that you need for your LLC.
  • Local: Contact your local Chamber of Commerce and ask about local licenses and permits.

5. Get Insurance


What is Workers Compensation Insurance? This form of insurance is required for most businesses with employees, but varies by state. Click here to learn more.

What is General Liability Insurance? This is an important service, but is not required in most states. Click here to learn why.

How much will the right insurance cost you? Click here to find out.

6. Employee Hiring Compliance


When you decide to hire employees, you must follow these legal requirements:

Here is more information on hiring employees.

Recommended: A payroll service saves you time and makes it easier to follow these requirements.

Get 20% off payroll with ADP

How to Start a Business in California

5 easy steps to starting a business in California.
We have a far more detailed guide - How to Start a Business which will go over the points in more details.

Identify a suitable business idea that works for you - Check out our Business Ideas Tool.

Critically analyze your idea with our Lean Business Model Canvas Tool. You can then go on to create a full business plan with our Free Online Business Plan Tool.

Formally organize your Business into a company. An LLC is the most popular way to structure your business. Learn how to Form your LLC in California.

Build your website and develop your brand.

How to Maintain Your LLC

To maintain a California LLC, it is necessary to make periodic filings with the State of California including a Biennial Report and paying Franchise Tax. Learn how to keep your LLC in good standing and avoid penalties.

Biennial Report


California requires LLCs to file a biennial report, also known as a Statement of Information, with the Secretary of State. This must be submitted on paper, by mail or in person (drop off).

File a Biennial Report in the State of California

If none of your business information has changed since the last time you filed a report, submit form LLC-12NC (no change):

If some of your business information has changed since the last time you filed a report, submit form LLC-12:

Fee: $20 for initial statement filing. $20 for each biennial statement.

Due Date: An initial report (initial statement) is due within 90 days of forming your LLC. Thereafter, a new report (biennial statement) must be submitted every second year by the end of the month in which an LLC is formed.

Late Filings: California charges a $250 penalty for failure to file on time.

Mail to:
Secretary of State Statement of Information Unit P.O. Box 944230 Sacramento CA 94244-2300

Deliver in person:
Sacramento office 1500 11th Street
Sacramento
CA 95814

Franchise Tax


California LLCs are required to pay an annual Franchise Tax.

File the Annual Franchise Tax with the State of California

- or -

Tax Calculation: $800 for LLCs with annual revenues less than $250,000. LLCs with revenues exceeding $250,000 pay an additional, graduated fee called the "estimated fee" that ranges from $900 all the way to $11,790 for LLCs with income over $5,000,000.

Due Date: The LLCs filing is due on the 15th day of the fourth month after the beginning of an LLC’s tax year. The estimated fee is due on the 15th day of the 6th month of the taxable year.

Late Filing:

The penalty for late filing is $18 per month per member or partner, up to 12 months. Additionally, a 25% penalty is incurred on the amount due.

Underpayment of the tax return will result in a 5% penalty on the amount of tax unpaid, plus an additional 0.5% for each month it is left unpaid, up to 25%.

Important: if an LLC fails to file and/or pay taxes due, its powers and rights can be suspended.

Underpayment (or non payment) of the estimated fee will incur a penalty of 10% of the unpaid amount. However, since this estimated fee is due half way through the taxable year (and is calculated from your expected earnings for that year), there is an exception you can take advantage of. If an LLC pays an estimated fee that was calculated using last year's revenue, they can not incur an underpayment penalty if they pay too little. This exception protects you from a penalty if you pay an estimated fee and end up earning more revenue than you expected during the second half of the year.

Discover more about California Franchise Tax

Income Reporting Requirements


The IRS treats all multi-member LLCs as partnerships, unless they choose to be taxed as a C-Corp or S-Corp. Therefore, most multi-member LLCs are required to report their income to the IRS using a Form 1065 Partnership Return.

Avoid Dissolution


Each year, thousands of LLCs are fined or unknowingly dissolved for missing an important state filing, such as an annual report. When this happens, LLC owners risk loss of limited liability protection. A registered agent service can help prevent this outcome by notifying you of upcoming filing deadlines and submitting reports on your behalf.

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Obtain a Certificate of Good Standing

A Certificate of Good Standing verifies that your LLC was legally formed and has been properly maintained. Several instances where you might need to get one include:

  • Seeking funding from banks or other lenders
  • Forming your business as a foreign LLC in another state
  • Obtaining or renewing specific business licenses or permits

To order a certificate of status in California, you must complete the Business Entities Records Request Form. You can submit this form either in person at the Secretary of State, or by mail.

Business Entities Records Request Form through the California Secretary of State

DOWNLOAD FORM

Fee: $5.00 Payable to the California Secretary of State


How to Dissolve an California LLC

If you no longer wish to conduct business with your LLC, it is important to officially dissolve it. Failure to do so in a timely fashion can result in tax liabilities and penalties, or even legal trouble. To dissolve your LLC, there are two broad steps:

  • Close your business tax accounts
  • File the Articles of Dissolution

Learn More Here


Foreign LLC in California

If you have an existing LLC and want to register to do business in California, you will need to form a foreign LLC.

File a Certificate of Registration in the State of California

Fee: $70 — Follow the instructions on the PDF.

Benefits of Forming a Foreign LLC
The major benefit of becoming a foreign corporation is that it allows your company to operate as one entity in many jurisdictions. For example, if you originally incorporate your LLC the State of Delaware, you can file your existing domestic LLC as a foreign corporation in other states.