How to create an LLC in California step by step

If you live in California and have decided to start your own business, congratulations! There are several ways to legalize your legal structure so that you can access loans and credits for small businesses. At this point you may be wondering which of all of them is the best. Although we cannot answer this, since it will depend a lot on the type of activity you want to carry out, what we can tell you is how to create an LLC in California, which is one of the most popular legal structures in the country.

Before we begin, we must make it clear that the process is quite simple. So much so that it won’t take long to complete it. But let’s take a closer look at each of the steps you’ll need to complete. to create your LLC in California and have it 100% operational.

1. Choose a unique name to create your LLC in California

Your LLC must have a unique name that is not similar (let alone the same) to any other that is already registered. This element is mandatory, since if two LLCs have the same name, this could cause confusion for the consumer. To check if the name you plan to use when creating your LLC is available, check the California Business Names Database.

If the name you want is available and you want to reserve it, you can do it for a period of 60 days and as long as you present a name reservation form. This form can be mailed or delivered in person to the California Secretary of State’s office.

Now, keep in mind that under California law, the name of your company must end with the denomination “Limited Liability Company” or with the abbreviations LLC or LLC. If you choose the first denomination, you will be able to use abbreviations for certain words: “Co.” for “Company” and “Ltd.” for “Limited”.

Note: California regulations relating to LLCs prohibit the use of the following words in the name:

  • bank
  • Trust
  • trustee
  • Incorporated
  • inc.
  • Corporation
  • Corp.
  • insurer
  • insurance company
  • Any other that suggests that the LLC is engaged in the banking, financial or insurance industry

Remember: If you want to know more about the availability of trade names, check the publication in PDF “Business Entity: Name Regulations & Additional Statutory Requirements and Restrictions”.

2. Present the Articles of Organization

The way to create an LLC in California is by filing the Articles of Organization, which is nothing more than an LLC-1 Registration Form. Where should you file this form? Before the California Secretary of State. Remember that the form must contain the name of the company with the LLC denomination that you have chosen and some important information related to your company, such as the type of administration, the address, the name, the address of the registered agents, etc.

To complete this step, just do it online or in person. If you choose this last method, you can submit the form in person at the office of the Secretary of State or also send it by mail.

Note: Please note that the filing fee to create an LLC in California is $70. In Sacramento, you can request a procedure of quick presentation if you pay extra fee.

3. Appoint a registered agent

To create an LLC in California you must have a registered agent who acts as your legal representative. It can be a natural person or a company that is authorized by the members to receive legal documents on behalf of the LLC, mainly, in case of lawsuits.

Remember: An LLC cannot act as your registered agent. For the designation to be formal, the legal representative must accept the appointment and provide written confirmation of their decision which is normally completed with your signature on the form.

To become a legal representative, this person must reside in California or, if a business, be licensed to do business in the state. The address of the legal representative must be different from that of the LLC. However, the representative does not have to be an external person: it can be one of the members of the LLC, a manager or an employee of the company.

Note: If you prefer to choose an external legal representative, we recommend that you review the list of companies that provides this service in California. The state has selected the most popular ones to help business owners find the right company.

4. Decide who will manage the LLC

Most small LLCs (even multimember) can be managed by themselves. However, if this form of administration does not convince you, you can also choose to appoint a manager or a small group of managers to manage it.

Managers are similar to a manager. They meet to decide key issues for the LLC – such as taking out a loan, buying real estate, or changing the business plan to raise profits, for example – and each of them votes to reach a consensus.

5. Draft and sign the operating agreement

In California, you do not need to write or sign an operating agreement. Nevertheless, experts always recommend that you do, even if the LLC has only one member. You can write this internal document yourself (following a specific format you find online, for example) or hire a lawyer to do it for you.

6. Submit the information return

Every state, out-of-state, or foreign LLC that wishes to do business in California must file an Information Statement, which is the Form LLC-12. Where should this form be submitted? At the California Secretary of State. The information return is filed within 90 days of submitting the registration form. Afterwards, you will only have to make a declaration every two years.

Now, what months does the information declaration include? Typically, the calendar month in which you filed the Articles of Organization and the previous five months.

This declaration can be delivered online or, if you prefer, in person, either by mail or in person. The filing fee for this return is $20. What should the information declaration contain? The next:

  • The LLC’s name and California Secretary of State filing number.
  • The name and address of the legal representative of the LLC.
  • The address of the principal executive office of the LLC.
  • The LLC’s mailing address, especially if it is different from its main office.
  • The name and business or residence addresses of any manager, chief executive officer, or member of the LLC.
  • A valid email address, especially if you choose to have the LLC receive online notices from the California Secretary of State.
  • The general type of business, which is the business activity that your LLC is engaged in.

7. Pay the taxes or taxes of your LLC

All LLCs (including California registered foreign LLCs) must pay their state taxes to the FTB (Franchise Tax Board), which is the California franchise tax board. LLCs that have this obligation must do the following:

  1. Be organized, registered, or doing business in California.
  2. Not have been taxed as a corporationie as a partnership or sole proprietorship, as this type of LLC must comply with state corporate tax rules.

However, What are the taxes or taxes that an LLC must comply with in California?

Additional taxes. LLCs that receive income greater than $250,000 must pay an additional fee that will depend on the amount of their registered sales.

Annual minimum tax. All LLCs doing business in California must pay a minimum annual tax of $800. To file this tax, you will need to fill out Form 3522, Limited Liability Company Tax Voucher.

Taxes or filing fees. All LLCs must file California Form 568, Limited Liability Company Return of Income by the 15th of the fourth month after the close of the company’s fiscal year, which is April 15, at least for most LLCs. You can find more information about this and the necessary forms on the California FTB website.

8. Meets other requirements, if any

LLCs in the state of California may have to comply with other requirements, generally tax. These obligations will depend, in essence, on the type of sector in which your LLC operates, its number of members, if it has employees, among others. The most common additional requirements that the state of California imposes on LLCs are the following:

  • Apply for an EIN with the IRS. If your LLC has more than one member, you must obtain an employer identification number, known as EIN, with the Internal Revenue Service (IRS). You will need to complete this step even if the LLC has no employees. If the LLC is made up of a single member, you do not need to process the EIN immediately, but when you start hire employees or once you choose to tax your LLC as a corporation, for example. To obtain the EIN, apply online at IRS website or physically submit Form SS-4. This procedure is free.
  • Process business licenses. Depending on the type of business you do with the LLC, you may also need to apply for a specific business license. These licenses can be local or state. To find out if you should start the process of obtaining a business license for your LLC, visit the CalGold website.
  • Enroll in a specific institution. In some cases, such as, for example, if the LLC will be engaged in the sale of goods and, therefore, the collection of sales taxes; or if the LLC has a certain number of employees; you may need to register the business with a tax authority. In the case of sales, you will have to file your LLC with the California State Board of Equalization (BOE). You have two ways to make this application: online or at any of the BOE offices. In order to withhold taxes on employee pay, you will need to register your LLC with the California Employment Development Department (EDD).

California LLC FAQs

Not sure if you can belong to a professional LLC in California? Do you have a foreign LLC and want to register it with the state? Check our FAQ section and find out what you will need to do it:

Special Rules for Being a California Professional LLC

Under California law, LLCs may not be formed to offer their professional services. What is considered a professional service? Anyone who requires the processing of a professional state license. If you don’t know if the services you offer fall into this group, check the appropriate section at the California Department of Consumer Affairs.

Note: As an alternative to LLCs, California offers professionals the ability to register a limited liability company (LLP).

All LLCs founded outside of the state of California must register with the Secretary of State in order to legally do business within the territory. To register, you’ll need to fill out and file Form LLC-5, plus pay a $70 fee.

The form can be submitted by mail or in person. Take into account that the presentation in person will have an additional surcharge. To complete the registration of the foreign or foreign LLC, you must designate a legal representative who resides in the state or who has permission to do business in California.

This designation must be accompanied by a certificate of good standing issued by the agency where you first registered your LLC.

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