California LLC Formation Checklist
Name Your LLC
Once you’ve decided to start a new business, choosing a name is the first step.
There are several things to keep in mind when naming your business:
Your name must be unique and it will need to meet California naming requirements, which include:
- Your name must include the phrase “limited liability company” or one of its abbreviations (LLC or L.L.C.).
- Your name cannot include words that could confuse your LLC with a government agency (e.g., FBI, Treasury, State Department, etc.)
- The name must be distinguishable from any other LLC registered with the Secretary of State.
You can complete a California LLC name search to learn if your business name is unique and distinguishable.
If your business name is available as a web domain, that’s a big plus. However, there are often creative alternatives if the domain isn't available.
You want your name to be easy to market. This can mean different things for different businesses.
Learn more in our How to Name a Business in California guide.
Choose an Agent for Service of Process
California requires LLCs to have a registered agent, known as an agent for service of process in California. An agent for service of process is an individual or business entity that accepts tax and legal documents on behalf of your business.
You have to elect your agent for service of process when you complete your LLC’s Articles of Organization, which is the main LLC formation document in California.
A member of the LLC or other individual in the company can be the LLC’s agent for service of process as long as they meet the following requirements:
- Is 18 years or older
- Has a physical address in the state where the business is formed
- Is available (in person) during normal business hours
However, it is usually a good idea to hire a registered agent service. There are a few advantages to hiring a registered agent service:
- Compliance with the law
- Peace of mind
Check out our Best Registered Agent Services guide for help picking the best registered agent for your LLC.
File Formation Documents
In this document, you’ll list some of the basic information about the company. This includes its address, registered agent, whether it is member-managed or manager-managed, and its business purpose.
The California Articles of Organization filing fee is $70 online and by mail and $85 in person.
Our California Articles of Organization guide will help walk you through the process step by step.
If you want professional help, these Best LLC Services can file the Articles of Organization for you.
Draft an LLC Operating Agreement
An operating agreement is a legal document that outlines the ownership and member duties of your limited liability company.
California LLCs are legally required to have an operating agreement. An operating agreement can help prevent or resolve disputes between LLC owners. Even if your business is a single-member LLC, an operating agreement can bring the company credibility and ensure courts uphold its limited liability status.
Operating agreements usually have at least six main sections:
- Management and Voting
- Capital Contributions
- Membership Changes
For more information, check out our California LLC Operating Agreement guide.
Get an EIN
An Employer Identification Number (EIN) is like a Social Security number (SSN) for your LLC. It is sometimes called a Federal Employer Identification Number (FEIN) or Federal Tax Identification Number (FTIN).
Most banks will require an EIN to open your business bank account. You will also need an EIN if any of the following apply to your business:
- Your LLC has employees
- Your LLC is a multi-member LLC
- Your LLC files excise taxes
- Your LLC withholds taxes for nonwage income paid to a nonresident alien
But even if you own a single-member LLC with no employees, getting an EIN is a good idea. Most banks require that your LLC have one to open a business bank account. Check out our 7 Benefits of Getting an EIN article to better understand why your LLC should have one.
After Forming a California LLC
After forming an LLC, there are some important things you should do that will help ensure that you comply with any relevant local, state, and federal regulations, keep your liability protection intact, maintain accurate financial records, and attract customers to your business.
Register for Taxes
If you are selling a physical product, you’ll typically need to register for a seller's permit through the Department of Tax and Fee Administration. This certificate allows a business to collect sales tax on taxable sales.
If you have employees in California, you will have to register for employer taxes through the California Employment Development Department.
You can learn more about LLC taxes with our guide.
Get an Accountant
Many small business owners think they can do their own accounting and are looking to avoid paying for a professional service. However, hiring an accountant can save you money, stress, and potentially legal troubles in the long run.
If you want to keep track of your LLC’s finances yourself, check out our guide to the best accounting software.
Research and Apply for Business Licenses
Getting the right LLC business licenses and permits is one of the most important things to do after forming an LLC.
The main state-level permit or license in California is the sales tax permit, also known as a seller’s permit.
Visit the Department of Tax and Fee Administration to obtain a seller’s permit.
Additionally, businesses in certain professions or industries need specific state licenses or permits. The CalGold website will tell you which licenses and permits your business needs. The California Business Portal also provides information on professional licensing.
In California, most businesses also need to obtain a business license at the county or city level for tax purposes. An exception to this is some unincorporated areas of counties.
In addition, you may need other licenses or permits from your local government, depending on your business activity or location.
If your business has locations in multiple cities or counties, then you may need a business license in your primary location and a business tax certificate in any other counties where you do business.
The CalGold website will tell you which types of licenses and permits you need depending on your location.
Open a Business Bank Account
Opening a business bank account is an essential part of maintaining your LLC’s corporate veil and its limited liability protection. You’ll need to keep your personal financial accounts separate from the LLC’s accounts and never make business purchases with your personal bank account or credit card.
Every LLC should have some type (or types) of business insurance.
At a minimum, your LLC should have general liability insurance, which is a broad insurance policy that protects your business from lawsuits. Other insurance policies an LLC may need depend on the type of business, if you have employees or not, and other factors.
Before you decide on which business insurance to get for your LLC, check out our review of the 7 Best Small Business Insurance Companies.
Establish a Web Presence
All businesses should have an internet presence. This includes having:
- A website
- Social media accounts
- A YouTube channel
If you don’t feel comfortable making your own website, there are a lot of tools and website builders that can help you create your own business website.
Publish a Press Release
One easy and inexpensive way to promote your new business is by issuing a press release. A press release is an official statement by a business that is given to the press for public knowledge. Press releases are typically short and to the point.
Read our review of the best press release distribution services to help you get the word out about your new LLC.
How to Form an LLC
Forming an LLC is easy. There are two options for forming your LLC. You can hire a service for a small fee or use our free Form an LLC guides.
California LLC Checklist FAQ
What are the steps to forming an LLC in California?
The steps to forming an LLC in California are: naming your LLC, choosing an agent for service of process, filing the Articles of Organization, filing the initial Statement of Information, creating an operating agreement, and getting an EIN. Our step-by-step How to Start an LLC in California guide can help you through the process.
How fast can I form an LLC in California?
How fast you can form an LLC in California varies depending on how many documents the state is processing. California provides current processing dates for submitted business documents. Online filings are given priority and processed sooner.
Do you have to pay the $800 California LLC fee the first year?
Yes, California LLCs need to pay the $800 annual LLC tax in their first year. They have until the 15th day of the fourth month from their filing date to pay this tax.
How do owners of LLC get paid?
Owners of an LLC get paid in a couple different ways: either a distribution that passes through to your individual tax return or a reasonable salary and distribution if the LLC elects to be taxed as an S corporation (S corp).
Why are California LLCs so expensive?
While it only costs about $70 to form a California LLC, there is also an $800 annual tax, which makes California LLCs more expensive than LLCs in most other states. LLCs that make more than $250,000 in a year must also pay an LLC fee of at least $900.
Does an LLC need a business license in California?
Yes, most LLCs need at least some type of business license in California. The main state-level permit or license in California is the sales tax permit, also known as a seller’s permit. Additionally, businesses in certain professions or industries need specific state licenses or permits. The CalGold website will tell you which licenses and permits your business needs.
California Franchise Tax Board:
California Secretary of State:
CalGold Business Permit System:
California Tax Service Center:
California Employee Development Department:
IRS - Limited Liability Company (LLC):
SBA - Choose a Business Structure: