Our Step By Step Guide

How to Form a limited liability company In California

Forming a limited liability company provides liability protection for any type of business, and should be among the first steps you take as a new business owner. Starting a limited liability company can help you protect your personal assets while adding legitimacy to your company. Follow our step by step guide or let us handle the paperwork on your behalf, ensuring your business is filed quickly and accurately.

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Why start your business in California?

The state of California is home to more than 4 million small businesses, which employ an estimated 7.1 million people across the state. Small businesses in California employ 48.8% of the state's workforce, making startups a vital part of The Golden State's economy. Thanks to its diverse and well-educated population, California offers small businesses an excellent source of skilled talent to tap into to create a successful business. Some of the world's largest companies have their roots in California, including Apple, Intel, Disney, The Gap, and Wells Fargo.

California also offer ample opportunities to seek outside business investors. With a robust business climate and highly skilled workforce, the promise of prosperity creates incentives for investment in California businesses.

Two Ways to Register Your Business

MyCorporation® can help you file all of the necessary documents to form your limited liability company in California.

File and submit the formation paperwork yourself

Our free guide provides you with all of the information you'll need to form your limited liability company in California. Bookmark this page as a reference so you can return easily as you complete each step of the process.

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See other business types

Are you looking for another entity type? We offer several other guides for the state of California.

One of the most important decisions you will make as a new business owner is deciding on which type of entity you will form for your business. While each business type offers its own benefits, forming a Corporation (also referred to as a general for-profit corporation or C Corp), is one of the most common entity types chosen by new businesses.

One of the main reasons for the growing popularity of the LLC is its simple setup and flexible structure. An LLC is also considered the easiest type of entity to maintain with the least number of annual requirements. Plus, income from the business is passed directly to its owners as regular income, making taxes much easier for an LLC, which can help you lowering your tax preparation costs each year.

The Benefits of an LLC

  • Protect your Personal Assets
    Starting a business designates your business as a separate legal entity, preventing you from being personally responsible for the debts of your business.
  • Build Credibility
    Establishing a professional identity provides the benefit of showing potential customers and investors that your business is legitimate and here to stay.
  • Simple Management
    Limited liability companies are less formal and require fewer annual / maintenance requirements than other common entity types, making it a popular choice for small business owners.

Compare the main entity types below

Entity Type
Liability
Taxation
Maintenance
Limited Liability Company Combines limited liability protection with a pass-through tax structure. IRS rules allow LLCs to choose between being taxed as partnership or corporation. The easiest entity to maintain with the least amount of formal annual requirements.
Corporation Owners / shareholders have limited personal liability for business related debts. Separate taxable entity, corporate profits among owners and corporation. Meetings are required to maintain corporate status. Stock may be sold to raise capital.
Non-Profit Corporation A corporation formed for a charitable, educational, religious, literary, or scientic purpose. Contributions to charitable corporation are tax-deductible. Can get tax exempt status with the IRS. Annual reports, minutes, meetings are required to maintain nonprofit / tax exempt status.
Tip: Try our free entity choice tool. Answer a few simple multiple choice questions about your business, and our tool can recommend the entity type that best fits the needs of your business.

The next step will be to decide on a name for your business. Choose a name that is memorable and unique, easy to understand and pronounce, and accurately represents your business. You'll want to search your name choices on the web to quickly find out if they are already taken. It's also best to jot down one or two alternatives, in case the name you settle on is not available for registration in California.

There are a few rules that California Limited Liability Companies must follow in order to register a name.

  1. First and foremost, the name you choose must be unique and not "confusingly similar" to the name of any other California business. This is to prevent fraud or misrepresentation and is a common rule in all 50 states. You can find out whether a name is available in California by searching the California Secretary of State business entity database for possible conflicts, but be sure to check variations or alternate spellings as well, otherwise your filing may be rejected. You can also use our business name search service, and we will do a more thorough search on your behalf and report back our findings. MyCorporation also include a business search for free when we complete your LLC filings for you.
  2. Secondly, consider including a corporate indicator along with the name of your business. A corporate indicator a representation of the type of business entity you have filed, tacked on to the end of your business name. Example indicators that you can use include LLC, L.L.C. and Limited Liability Company. You cannot misrepresent your entity, for example an LLC cannot have Inc. included in the business name.
  3. Your name can also not contain restricted words such as "bank", "trust", "trustee", "incorporated", "inc", "corporation", "corp", "insurer" or "insurance company".

You can learn more about business name entity rules and regulations in the business name guidelines and restrictions pdf provided by the California secretary of state.

Tip: A business name check is included with every one of our business formation packages. We check with the state to determine the availability of your business name automatically. You can also conduct a nationwide business name search here.

There are two options to choose from when it comes to setting up your limited liability company in California. "Member managed" or "manager managed". The first thing you need to know is that owners of any LLC are referred to as "members". A single member LLC has just one owner, while a multi-member LLC is an LLC owned by 2 or more members. Pretty simple, right?

Secondly, LLCs also must also designate one or more individuals to manage the day to day operations of the business. This can be handled by one of the members of the business (member managed, the most popular choice and the default in most states), or a professional manager appointed by the members to act on their behalf (manager managed).

While the differences are subtle, what you really need to know is that each member in a member managed LLC has the power to make decisions for the business. However, in a manager managed LLC, the members choose who will manage the business and relinquish all of the decision making to the manager chosen. The person chosen can be one of the members of the business as well, or it can be someone else entirely.

Most states require that you designate a registered agent for your business, and California is no exception. A registered agent acts as the state's means to communicate with a business and is responsible for receiving legal and official documents related to the business.

A registered agent can be anyone you wish, with one small caveat. The registered agent must have a physical address in California. In other words, a P.O. Box is not allowed as a registered agent address. This means a member of the limited liability company can act as the registered agent if desired, or a third-party registered agent service like MyCorporation can be used.

Why designate a third party to act as my registered agent?

One thing to note about the registered agent information is that it is publicly available. This can cause privacy concerns for business owners who do not wish to list their personal contact information on the internet for everyone to see. It is also common for the registered agent to become a target of spam or robocalls since this private information is relatively easy to obtain. Another issue that may arise is that in the case of a lawsuit, these documents would be hand delivered directly to the registered agent, and in the case that you used your business location for this purpose, this could occur in front of your customers. This is why many business owners opt for a third-party registered agent service such as MyCorporation to act as a registered agent on behalf of their business.

Tip: Our Deluxe and Premium formation packages include a full year of registered agent services for your business. We also offer standalone registered agent services which you can add to your business later.

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The state of California requires you to file Articles of Organization to order to form an LLC. The Articles of Organization is a simple one page form (Form LLC-1) that contains all of the basic information required to register your business. Once your Articles of Organization have been accepted by the California Secretary of State's office, your business is officially formed. A standard filing fee of $70 must be included along with your application.

What information should be included in the Articles of Organization?

The information required in the Articles of Organization is only the most basic details of the business, including the LLC's name, the principal business address, registered agent details, business purpose, and management type (Step 3).

Within 90 days of filing the Articles of Organization with the California Secretary of State, an LLC must also file an initial Statement of Information ( also referred to as an annual report ) using Form LLC-12.

The statement must include:

  • The name of the LLC and the California Secretary of State file number
  • The registered agents name and address
  • The address of the principal office of the business
  • The mailing address of the business ( if different from the principal office )
  • The names and addresses of the managers or members and the CEO of the business
  • The principal business activity ( such as retail store, advertiser, etc. )

Basically, only the contact details and the most general information about the business is required.

The Statement of Information is filed every two years after that, calculated from your incorporation date, with the same information. The purpose is simply to keep the business details up to date In the California Secretary of State's records. You will file with the same form when there are changes to your business (LLC-12) or, if the details remain unchanged, you can fill out a simpler version of the form. (Form LLC-12NC)

The state of California requires an LLC to create an operating agreement at the time of formation. The agreement can be oral or written, and should be kept with the company's records. In order to open a bank account for your business, you will often be required to submit both your operating agreement, as well as your EIN number.

What kind of information needs to be included in a California operating agreement?

Operating agreements while not required, are an import part to laying the foundations of a properly run business. An operating agreement sets guidelines for the way your business operates now and into the future. The most common details included with an operating agreement are:

  • Basic contact details: The name of the LLC, the address of the principal business location and often, the registered agent address.
  • The business purpose: This is a basic one sentence description of what kind of business your LLC will do, and is often a very general description, which creates a bit more flexibility as the business matures.
  • Tax structure: Often this indicates the way the LLC will choose to be taxed. The main options are to be taxed as a sole proprietor or a partnership ( both pass through options ) or to be taxed as a corporation ( requires an S Corp Election to be filed )
  • Ownership and management: This section lays out the general rules about how the business will operate day to day. This refers to step 3, where you determined whether your business would be "manager managed" or "member managed". As mentioned before, member managed is the default and the most common choice. If you are unsure, member managed is a pretty safe bet.
Tip: All of our formation packages include a sample operating agreement you can use directly, or modify to fit your needs. Start Now

In California, all businesses are required to file for a general business license (sometimes referred to as a business tax certificate). If you plan on operating your business in multiple cities, you will need to apply for a business license in each location. In addition to the general business license, some additional permits may be required, which may need to be filed with the county or the state. For example, you may be required get a seller's permit or a liquor license, depending on the service your business provides. You can find out about the specific licenses applicable to your business by checking with the city offices where you will be conduction business, or by using our business license compliance package, which will identify all of the licenses required by your business and provide you with all the information you need in order to file.

In a pinch, you can also check out CalGold. CalGold helps businesses find appropriate permit information. Keep in mind that they do not issue permits or licenses directly, but they do provide contact information that allows entrepreneurs to reach out to the appropriate agency contact for administering and issuing out permits. The tool can be difficult to get a firm answer in some cases but is often a good gauge of what will be required of your business.

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An EIN (also called a Federal Tax Id) is a nine-digit number that is issued by the IRS and used to uniquely identify your business for tax purposes. Think of it as a Social Security Number (SSN) for your business, except an EIN is far less sensitive. It is important to wait until the LLC has been approved by the state before applying, and for that reason, filing for an EIN is one of the last things to do when you are setting up a business.

Like a social security number, the EIN allows you to:

  • Open business checking, savings, or investment accounts
  • File taxes for the business
  • Complete payroll for employees if applicable
  • Obtain lines of credit and credit cards, as well as "build credit" for your business
  • Apply for applicable business licenses when required.

You only need a few pieces of information to file including your mailing address and legal business name. You can apply online with the IRS by downloading IRS Form SS-4, or work alongside a third party organization like MyCorporation to complete an EIN application.

If a California LLC pays more than $100 in wages to employees each calendar quarter, you'll need to obtain a State Employer Identification Number, or SEIN. In order to do this, you will need to register with the California Employment Development Department (EDD).

limited liability company Formation Packages

Save money and simplify the process of starting your business by bundling the services you need with our business formation packages.

BASICS
$99
  • Articles of Organization
  • Name Availability Search
  • Minutes & Membership Certificates
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STANDARD
$124
  • Articles of Organization
  • Name Availability Search
  • Minutes & Membership Certificates
  • Annual Report service
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DELUXE
$224
  • Articles of Organization
  • Name Availability Search
  • Minutes & Membership Certificates
  • Annual Report service
  • Registered Agent services
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Frequently asked questions

In California, business owners cannot form an LLC if the services they provide require a professional state license. This often includes doctors, lawyers, therapists, and other professions where state licensure is required. If you are unsure if your service requires a license in the state of California, you can check with the Department of consumer affairs or the Secretary of State.

For professionals licensed by the State of California, you will be required to form a Professional Corporation instead. A Professional Corporation (or "PC") is a special entity that provides the same benefits of a standard LLC, with the additional formation requirement of proving the business owner is currently licensed to practice. According to California's Professional Corporations Statute, a California PC can be formed to provide "any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code".

Generally, this can include the following professions:

  • Accounting
  • Acupuncture
  • Architecture
  • Chiropractic
  • Clinical social work
  • Dentistry
  • Law
  • Marriage, family, and child counseling
  • Medicine
  • Speech-language pathology and audiology
  • Nursing
  • Optometry
  • Osteopathy
  • Pharmacy
  • Physical therapy
  • Physician assistants
  • Podiatry
  • Psychology
  • Shorthand court reporters

There is an exception for lawyers and accountants. California's law does allow for the formation of LLPs (Limited `liability Partnerships ) which are seen as an alternate and equivalent to what other states provide as a PLLC. The main difference here is that in California only these two professions are allowed to form an LLP.

Currently, according to the California Secretary of State, the average processing time to incorporate a business should be completed within 18 days at the state level. This turnaround time is estimated and subject to change depending on certain factors including holidays or unexpected surges in corporation filings.

In order to keep your corporation in good standing, there are certain reoccurring requirements that must be met.

  • All corporations must file a Statement of Information with the Secretary of State each year.
  • Profitable California corporations must submit and pay required annual tax returns, and pay out estimated corporation taxes.
  • Corporations must hold an annual meeting of the directors logged with corporate minutes.
  • Corporations must hold an annual meeting of the shareholders.

The California franchise tax is a tax unique to the state and is imposed for the privilege of operating a business in California. Corporations need to file Form 100, Corporation Franchise or Income Tax Return by the 15th day of the third month after the close of their taxable year.

Corporations with taxable income are subject to California's state income tax of 8.84% of net income instead, derived only from business conducted in California. The corporations that are subject to the corporate income tax are not subject to the franchise tax. However, these same businesses are subject to a 6.65% alternative minimum tax, which prevents a corporation from lowering its effective tax rate below that threshold. If you are a new corporation, you are subject to the applicable tax rate with no minimum/franchise tax for the first year.

For example, if your corporation had a net income of $10,000, you would owe California corporate income tax in the amount of $884 but would not owe the franchise tax.

For details and forms, see the California Franchise Tax Board website.

Businesses organized in other states can foreign qualify to conduct business in the State of California. To register your business, you will first need to complete and submit an Application to Register a Foreign Limited Liability Company along with a $70 filing fee. You will also be required to have a registered agent with a mailing address in California. You can designate a member of the business or use our registered agent service. Lastly, you will need to submit a "Certificate of Good Standing" from the state where your business is organized, which proves that your business is operating in compliance with the state where you originally formed it.

In order to form a corporation in California, you will be required to pay various fees and taxes. The breakdown of the required fees is as follows:

  • Articles of Incorporation - $100
  • Statement of Information - $20
  • Minimum Franchise Taxes - $800
  • Registered agent - $120 per year (optional)

In total, expect to set aside $925 - $1045 to form a Corporation yourself in California.