How to form an LLC in California: File in Just 24 Hours
A Limited Liability Company (LLC) is a common business structure that reduces the owner(s) exposure to liability from company activities. One or more persons own a portion of a company. Profits earned by the LLC get passed through to its members. Unlike a corporation, an LLC does not file a separate tax return.
It’s quick and straightforward to form a Limited Liability Company. Just follow these steps:
1. Choose Your Company Name.
Your company’s name should be available in California. It can’t be a name that another business already has the right to use. You should check the USPTO website to make sure there are no registered trademarks on the name. For a reasonable fee, SunDoc can help you conduct your name search or reserve your LLC name.
2. Understand the LLC Organizer Requirement.
You need to name an LLC organizer on your Articles of Organization form. Anyone can be your organizer, even if they are not a member or manager of the LLC. Often, an attorney involved with the business formation becomes the organizer. If you choose SunDoc to file your Articles of Organization (which is a service we include in our Pro Package), then SunDoc can be named as your organizer.
3. Designate a Registered Agent.
You must also designate a registered agent on the Articles of Organizatoin form. The agent can be a person or a firm. Our article on Registered Agent Service has more information on registered agents and why you need one.
4. Decide Your Ownership and Management Structure.
Your California LLC can by managed by one manager, by multiple managers, or by all of the LLC’s members, and you have to include that information in the Articles of Organization form. We have created guides that explain the Member-Managed LLC and the Manager-Managed LLC to help you make a good decision about the best structure for your company.
5. Create an Operating Agreement.
In California, your LLC must have an Operating Agreement. This is the key document for your LLC, providing an outline of the financial and functional aspects of the business, including its rules, regulations, and provisions. The Operating Agreement governs the internal operations of the business, tailored to fit the specific needs of the business’s owner or owners.
The Operating Agreement is the legal engine that drives your business. It spells out the company’s governance structure, the way it manages its working capital, and how it pays out its profits. All the essential aspects of your business, including money, liability, and fiduciary constraints, are determined by the Agreement. SunDoc provides two guides -- Member-Managed LLC and Manager-Managed LLC -- that provide a good source of information, but you may also want to consult an attorney for guidance on this critical document.
6. File the Articles of Organization.
California requires that you file a form called the Articles of Organization with the State. The moment the State accepts your Articles of Organization is the moment your company is created.
To file the Articles of Organization, you will need to provide the name and address of your company, the nme of your LLC organizer and your registered agent, and your chosen method of management.
If you want to save time or would rather have a filing service handle your paperwork, SunDoc can file the Articles of Organization for you.
7. Obtain an EIN and Open a Business Bank Account.
Congratulations! If you have completed the above steps, you now have a registered California LLC. If your LLC has more than one member, you will need to get an Employer Identification Number, commonly called an EIN, from the IRS, even if you don’t have employees. You can apply for the EIN yourself directly from the IRS, or SunDoc would be glad to get that for you.
Most banks require an EIN to open a business account. This is a good time to set up your company’s fiscal management if you've been paying business expenses out of a personal account up until now. No matter what kind of account you are using, be sure to keep all receipts so that you can get reimbursed. At this time, you may also want to consult an accountant for advice on how to optimize your business finances.
8. Pay California State Taxes.
Your LLC may have to pay fees and taxes annually to the State. This may start as soon as your first year of operation. If you sell goods in California, you may be required to collect sales tax.
9. Determine Necessary Licenses and Permits.
In California, you have to get a business license or permit from the city or county where your business is located. The California Department of Tax and Fee Administration maintains a Permits & Licenses page that has information on the state’s requirements for businesses, and it provides a way to register online. You should check this page even if you think your business is exempt. You might be surprised to discover what’s required. Operating without the proper licenses or permits can result in expensive fines.
10. File a Statement of Information.
The Statement of Information is a simple form used to keep the State up-to-date on information about your company. Within 90 days after you form an LLC in California, you must file the Statement of Information with the State, and then you you will need to file an updated report every two years or when you make changes to your company.
All LLC forms, including the report form, can be found on the California business web site. Be sure that you file the Statement before the deadline. Filing late can cost you up to 10 times more than the regular filing fee. SunDoc can file your Statement of Information and other routine filings for you, if you prefer, so that you can be assured your filings will be done reliably and on time.
Important Notice: You should always consult a lawyer or an accountant if you have legal or financial questions. Nothing in this article should be construed as legal, accountanting, or tax advice or as advice relating to your insurance needs or relating to matters involving your employees.
Frequently Asked Questions
Do I need a lawyer to form an LLC?
No, you don’t have to have a lawyer to form an LLC. However, it may be useful to have an attorney review your Operating Agreement to make sure it is written in a way that best protects your interests. That’s especially true if you have an LLC with more than one member.
SunDoc can help you prepare your documents and file them with the California Secretary of State. We have an online system that walks you through all the steps required to form your LLC, to make it easy and to ensure that you don’t overlook any of the steps.
Can an LLC have a single member?
Yes. A single-member LLC is a good option for a sole proprietor who wants the protection offered by an LLC without having to deal with complicated paperwork. Also, with a California LLC, you can choose to pay your taxes as a sole proprietor, which is an easier option than paying corporate taxes.
You should be aware, though, that there are some legal questions about whether a single-member LLC offers true protection from liability. See our article Forming a Single Member LLC in California for an explanation of why that is the case and to find out what steps you can take to protect yourself.
Should I form an LLC or a Corporation?
Both forms of businesses offer protection from liablity, but there are important differences in the way they are managed, the way they treat income, and the way they pay taxes. Your choice will depend on how you want to operate your business.
Our guide LLC vs. Corporation: What are the Differences provides a good explanation of these differences, so that you can make an educated decision.
To dig deeper and learn more, see our LLC FAQs.
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Frequently Asked Questions
Do you need a lawyer to form an LLC?
No, you don’t need a lawyer to form an LLC. However, it may be useful to have an attorney review your LLC’s operating agreement to make sure your interests are being protected, especially in the case of an LLC with multiple members.
SunDoc Filings can help you prepare your LLC formation documents and file them with the California Secretary of State. Our online system can walk you through the steps required to form your LLC.
Can an LLC have a single member?
Yes. A single-member LLC is an attractive option for a sole proprietor who wants the protection offered by an LLC without complicated paperwork.
A California LLC can choose to be taxed as a sole proprietorship, which makes paying your taxes much easier.
But be aware that there are some legal questions as to whether a single-member LLC offers true liability protection. Our article Forming a Single Member LLC in California explains why and what steps you can take to protect yourself.
Should I form an LLC or a Corporation?
The answer really depends on how you want to operate your business. Both a limited liability company and a corporation offer liability protection. But these two types of business entities are very different in how they are managed, how they treat income, and how they pay taxes.
Our guide LLC vs. Corporation: What are the Differences give a good explanation of these differences.
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