How to Form a California LLC in 10 Steps
A Limited Liability Company (LLC) is a common business structure that allows one or more persons to own a portion of a company. Profits earned by the LLC are passed through to its members, and the LLC does not file a separate tax return the way a corporation does. An LLC also reduces the owner(s) exposure to liability from company activities.
Forming a Limited Liability Company is a straightforward process, but there are several steps you'll want to follow.
1. Choose Your Company Name.
You need a company name that no other business has the rights to use. See our SunDoc article Is My Business Name Available? for help conducting your own name search, or SunDoc can run your name search for a reasonable fee. At a minimum, your preferred name must be available in the State of California. It is also wise to check for a registered trademark on your perferred name through the USPTO website.
2. Understand the LLC Organizer Requirement.
You must name an LLC organizer on the Articles of Organization form. If you prepare and file your own Articles, by default you are the organizer. However, anyone can be named as organizer, not necessarily a member or manager of the LLC. For example, an attorney involved with the business formation often acts as organizer. If you choose SunDoc to file your Articles of Organization (included in our Pro Package), then SunDoc can be named as your organizer.
3. Designate a Registered Agent.
You must designate a registered agent, either a person or a firm. This is required for the Articles of Organization form (see #6). For more information on registered agents and why your company must have one, see our article on Registered Agent Service.
4. Decide Your Ownership and Management Structure.
The Articles of Organization form asks whether your California LLC will be managed by one manager, multiple managers, or all the members. You must decide whether you want to be a member-managed or a manager-managed LLC. To help you decide, we have created guides for each method: the Member-Managed LLC or the Manager-Managed LLC.
5. Create an Operating Agreement.
California does not require an LLC to have an Operating Agreement, an implied operating agreement is formed according to the default conditions specified in the law. However, you should determine if the default conditions are in your best interest.
If your LLC will be manager-managed, you must create an Operating Agreement for your company records. Current California law says that a manager-managed LLC is only valid when you declare it in both the Articles and Operating Agreement.
The Operating Agreement is the legal engine that drives your business, creating its governance, managing its working capital, and paying out its profits. Critical matters of money, voting, liability, and fiduciary constraints are at stake here. The SunDoc guides Member-Managed LLC and Manager-Managed LLC are a good source of information, but you may also wish to consult an attorney for advice. Download the Free California LLC Operating Agreement to study an attorney-drafted sample Operating Agreement.
6. File the Articles of Organization.
The State of California requires you to file a one-page form called the Articles of Organization, providing your company details. The acceptance of your Articles of Organization by the California Secretary of State is the moment of your company's creation.
In order to file your Articles of Organization, you will need the name and address of your company, your LLC organizer, your registered agent, and your management method. California does not require the member names to be filed, nor does it require any publication in a newspaper of record. The current filing fee is $70.
SunDoc can file this the Articles of Organization for you if time is an issue or if you'd prefer to have a filing service handle your paperwork. We are based in downtown Sacramento and we hand deliver filings to the Secretary of State offices several times a day. With SunDoc, typical LLC formation takes about 5 to 7 days, but we also provide next day rush service.
7. Obtain an EIN and Open a Business Bank Account.
Congratulations! You are now a registered California LLC. Any LLC with more than one member must file with the IRS for an EIN, Employer Identification Number, whether or not you have employees. You can file with the IRS yourself, or SunDoc can file for you.
An EIN is also required by most banks in order to open a business account. If you've been paying business expenses out of a personal account up until now, this is a good time to set up your company's fiscal management. Make sure you keep all receipts for reimbursement no matter the account you’ve used for payments. At this point you may also want to find an accountant for help with business matters.
8. Pay California State Taxes.
Each year your LLC must pay a minimum annual tax of $800 to California's Franchise Tax Board, including in your first year of operation. This is not an income tax, but rather a cost to do business in California. Also, if you sell goods in California, you are required to collect sales tax. You can find more state tax information on the State of California’s tax web site.
9. Determine Necessary Licenses and Permits.
Most California companies are required to have one or more licenses or permits to operate at the city or county level. Use California's one-stop resource CalGOLD to find the requirements for your business. It’s important to check CalGOLD even if you think your business is exempt. You may be surprised to discover what’s required. Operating without the proper license or permit can result in expensive fines.
10. File a Statement of Information WIthin 90 Days.
You must file a Statement of Information (SI, also known as the Annual Report) within 90 days of forming an LLC in California. After your initial SI filing, you then need to file an updated SI every two years. The Statement of Information is a simple form that keeps the state up to date on your company information. And down the road when you make changes to your company, it will invariably be one of the forms you’ll need to file with the state.
It is very important to file within the 90 days. It costs just $20 to file within 90 days, but after 90 days, the fee increases to $250. If you prefer, SunDoc can file your Statement of Information and other routine filings for you, reliably and on time. All LLC forms, including the SI form, can be found on the California Secretary of State web site.
Important Notice: It is beyond the scope of this article to discuss your potential insurance needs, or matters relating to employees. You should consult an attorney or accountant with any questions about legal or financial matters. Please note that nothing in this article can be construed as legal, tax or accounting advice.
For additional learning, please visit California LLC FAQs.
Helpful Links For California Businesses
California State Association of Counties To find information about building permits, business licenses, fictitious business names, zoning and other business entity activities, visit the county agency applicable to your business address.
Department of Consumer Affairs for information about licensing requirements.
Department of Corporations for information about the issuance and sale of securities, Franchise Investment Law, Personal Property Brokers Law and Escrow requirements.
Department of Industrial Relations, Division of Workers Compensation for information about workers comp requirements.
Employment Development Department for information about disability unemployment insurance tax.
Franchise Tax Board for information about franchise tax requirements.
State Board of Equalization for information about sales tax and/or use tax liability.
THE SUNDOC CALIFORNIA ADVANTAGE
- In Sacramento near Secretary of State office.
- Filings submitted same day with no extra fee.
- Rush filings by 3pm Pacific back to you next day.
- State Capitol proximity makes SunDoc faster.
- Experienced: thousands of filings since 1999.
LLC Formation with SunDoc
Easy. Affordable. Fast.
Packages start at $79 plus state fees
Ready to Form Your LLC?
ONE. Choose LLC name
Choose three names in order of preference and we will check availability.
TWO. Prepare or Upload your Articles
Our online form describes all required information.
THREE. Specify Service Level and Options
Select a filing package or choose from the menu options.
Routine: 5-7 Business Days
Rush: Next Day*
*SunDoc Rush Service files your LLC next day if received by 3pm Pacific. Important note: if the state rejects your LLC filing, the rush fee is not refunded.