Are you mulling over the idea of starting an LLC in California but need help figuring out where to start?
Filing for an LLC is a crucial step toward realizing your entrepreneurial dream. Dreaming is excellent, but you must act on it to become a reality. To run a successful business, you must register your company to become a recognized legal entity.
That's where an LLC comes in.
In this guide, I will cover everything you need to know about how to create an LLC in California.
Let's dive in.
What Is An LLC?
LLC means limited liability company. It is a business model that separates your personal assets from your business. If your company incurs debts in the future, you won't be personally held responsible as the business owner. This business type protects your assets.
An LLC is an excellent fit for solo entrepreneurs and small to medium businesses because of its flexible structure.
3 LLC In California Benefits
Why should you register your business in The Golden State, not elsewhere?
Starting an LLC in California has many benefits, including;
California is one of the largest and richest economies in the US and globally. No matter what product or service you sell, your California LLC will generate income from the millions of monied people there. They call it The Golden State for nothing!
Limited liability protection means you won't be held personally responsible if your LCC California company incurs debts or is involved in a lawsuit. Your personal assets, such as your bank accounts, house, car, and other properties, are safe.
An LLC California company allows you to structure your business in two ways.
A corporation doesn't offer this level of flexibility.
With the essentials out of the way, let's get into the intricacies of how to get an LLC in California.
How To Form An LLC In California In 8 Steps
Opening an LLC in California is simple. Here's how to establish an LLC in California in eight simple steps.
Come Up With A Name For Your California LLC
The first step to your applying for an LLC in California is naming your business.
Create a unique company name that distinguishes your brand from the countless businesses in California. While your name must be distinct, keep it simple. Also, make sure it's catchy and easy to say.
You don't have to brainstorm for a name from scratch. Use innovative AI-driven naming tools like Domain Wheel to generate tons of business name ideas instantly. You can also use similar tools to find and secure your company domain name.
Other considerations specifically for the state of California LLC names are;
Decide Who Will Register The LLC In California
There are two ways to get your California LLC registration.
First, you can register your company via a state-certified registration agent or service provider. With LLC filing services, you pay them, and they do all the heavy lifting. Agents charge anything from $100+ to register your company for you.
Remember that these charges exclude official LLC California costs and state fees you should pay as part of the registration process,e g. The California LLC annual fees.
Second, you can register your California LLC on your own. If you have more time than money, register the business yourself. But if you have more money than time, hire an LLC filing agent.
File The Articles Of Organization
Once you have an unforgettable company name, it's time to work on the paperwork-filing Articles Of Organization.
The Articles Of Organization is a legal document that contains essential details about your company structure and obligations.
To register your California LLC, you must draft Articles Of Organization and file them with the California Secretary Of State. Only then will your business be officially recognized.
Articles Of Organization include these vital details, among other things :
File An Initial Statement Of Information
Another requirement for LLC formation in California is the initial statement of information, aka the California certificate of formation or annual report.
It must include your LLC's owners/officers, business address, and a brief business description.
You must file your first Statement of Information within 90 days of the formation of your California LLC.
Create An Operating Agreement
Next, craft an operating agreement for your LLC. An operating agreement describes how your California LLC will conduct its business.
Your operating agreement spells out financial agreements and how your company will handle disputes that may arise in the future. Another important inclusion is the guidelines related to closing an LLC. The how to dissolve LLC in California clause should spell out clearly the conditions under which you will wind down operations.
You don't have to file it. But it must be available if the state needs it.
Get A Federal Employer Identification Number (EIN)
Another requirement when applying for an LLC in California is to get a federal employer identification number or EIN.
An EIN is a 9-digit number assigned by the Internal Revenue Service (IRS).
Your California LLC must pay taxes. An EIN facilitates that process. Also, an EIN comes in handy when you want to open a business account because some banks demand it.Applying for an official EIN or Tax ID is easy. You can do it in a few minutes on the IRS portal. Once you have registered, you are all set to start paying LLC taxes and stay on the right side of the law. Speaking of taxes, paying yourself from an LLC requires filing the Form W-9 with the IRS.
Pick A Registered Agent In California
LLC formation in California also requires that you appoint a registered agent for your business.
Formally, this person is known as an Agent for Service of Process.
The agent must be a California resident registered with the California Secretary Of State. Unlike California, when starting an LLC in Texas, you can hire an agent who doesn't live in the state or even hire an attorney instead of an agent.
If your business gets sued, incurs debts, or gets in legal trouble, your agent is the designated person to receive court papers on your behalf.
According to California law, you cannot be your own Agent for Service of Process. You can check this verified list on the Bizfile Online official government of California website to hire an agent.
Get Business Licenses And Permits
Some California LLC requirements demand licenses and permits for certain businesses. You need an LLC license or permit to operate these businesses:
These are just a few examples.Scour the California Governor's Office Of Business And Economic Development (GO-Biz) to see if you need to apply for an LLC California permit for your business to operate.
How Much Is An LLC In California?
We now move on to a crucial question: how much is an LLC in California?
The major cost for LLC formation in California is filing your LLC's Articles Of Organization virtually with the California Secretary Of State.
The online LLC filing fee in California is $70. By comparison, starting an LLC in Michigan costs $50.
Yes, you can file in person, but filing online is the most convenient method for most people.
Another cost related to opening an LLC in California is the annual fee.
An Overview Of LLC Annual Fees California
Any discussion on how to obtain a LLC in California is incomplete if it doesn’t cover the issue of fees.
California law requires that every LLC that does business in the state must pay an annual tax. The California LLC annual fee is $800.
Note that you must pay this annual tax even if your business isn't running. You only stop paying this fee after you cancel your LLC.
The good news is you can wait to pay the fee.
You have until the 15th day of the 4th month from the date you file with the SOS to pay your first-year annual tax. This gives you breathing space, so you must be reassured about the annual fee because applying for an LLC in California is not an immediate cost.If your company grosses over $250,000, you will pay an additional California LLC fee. Don’t like the high taxes? Creating an LLC in Florida would be a great option because taxes are much lower there.
How Long Does It Take To Form An LLC In California?
Having gone through all the intricate steps of how to form an LLC in California, may be asking yourself a question.
How long does LLC registration in California take? It's a pertinent question.
Here are the typical California LLC Processing times for different filing methods:
Online submissions will have priority over the drop-off and mail submissions. Note that these are estimated times. Registration might take longer if the office is swamped.
Eager to get started and can't wait this long? Then you can expedite the LLC formation California registration process in two ways:
You must personally deliver the required documents to the Secretary of State's Sacramento office to get these two services.
Let's look at each.
Below are California LLC's preclearance services and their fees.
You may request delivery of the preclearance response via customer pick up, email, fax, first class mail, or overnight courier (include a prepaid, pre-addressed overnight courier envelope).
Here are the different expedited filing services and their fee.
You may submit a business entity document for expedited filing, requesting completion in one of three of the above-specified time frames.
Applying For LLC In California: The Start Of A Fascinating Entrepreneurial Journey
That's a wrap of how to open an LLC in California.
Creating an LLC in California involves many steps. While it includes multiple stages and some work, the process is straightforward. It's all about getting the proper documentation and submitting it in the right places.
Having completed the entire LLC formation California process, it is time to look ahead. Relish the fact that you have finally registered your business. Then go full steam ahead and make a success of it.