How to Start an LLC in California (2024 Guide) (2024)

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Still curious about how to get an LLC started? Our guide will walk you through it. Post-filing considerations and answers to frequently asked questions are included at the end for extra help.

The first step is the fun part: Name your LLC. California has a few requirements your business name needs to meet:

• Your name must be distinct from other active businesses in California
• It must include the phrase “limited liability company” or “LLC.” The words “limited” and “company” may be abbreviated to “Ltd.” and “Co.”
• It can’t include words that would confuse your business with a government entity, such as “treasury” or “state department”

Make sure your name is available by performing a California business name search on the California secretary of state’s website. If your name is already taken, you’ll need to choose a different one. Additionally, review California’s detailed list of naming regulations to help you choose an adequate name and to help you distinguish similar California LLC names.

LLC Name Reservation

If you’ve decided on an available name but aren’t ready to file the rest of your paperwork, you can reserve your California LLC name for up to 60 days through California’s online business filing system. That way, you can continue the planning process without worrying that someone else will take your name.

Trade Name and DBA Registration

Some businesses register under a formal LLC name and do business under a “trade name” or “DBA” (“DBA” stands for “doing business as”). This is essentially an alias for your business that doesn’t need to include the LLC designation. You can find out what other DBAs are in use with the same LLC lookup function on the CA secretary of state’s website.

What is a registered agent? For LLC purposes, a registered agent is also known as an “agent for service of process,” as they are called in California. This is an individual or business entity that accepts tax and legal documents on behalf of the business.

Your agent must be over the age of 18 and have a physical address (not a P.O. box) in California. The agent may be a member, manager, or officer of the LLC, but can also be unaffiliated with the company. The LLC can’t serve as its own registered agent.

Many business owners in opt to use a California registered agent service for an annual fee to keep track of these important documents and filings. This service will be available during normal business hours to receive service of process and other important documents so you can focus on your business. Some businesses also like to hire services so their private address doesn’t have to be public record.

Note that you can also pay for a virtual address for LLC mail and advertising, which is a physical street address where you can receive mail as you continue to work remotely. It allows you to display a local address without having to pay rent.

Most states require you to file one document — the articles of organization (sometimes called a certificate of formation) — to officially start your LLC. California law requires you to file two documents at two different times: The articles of organization and a statement of information. You will also have to pay state fees here.

File the Articles of Organization

You’ll first file your California articles of organization (also referred to as Form LLC-1). This form asks for the following information.

• LLC Name and business address
• Registered agent name and address
• Whether the members will collectively manage the LLC (a “member-managed” LLC) or the LLC will designate certain members or hire outside managers (a “manager-managed” LLC)

File the Statement of Information

Once the state accepts your articles of organization, you officially have an LLC! California also requires an initial “Statement of Information” to be filed with the state within 90 days of your LLC becoming official. You will need to renew the initial Statement of Information every two years, so long as you continue to operate your business in California. This is a type of annual reporting called a “Biennial Report” and can be done using Form LLC-12. This form must include the following:

• Your LLC’s name and California Secretary of State entity number
• The name and address of your agent for service of process
• A description of the type of business or services your LLC will provide
• The street address of the LLC’s principal executive office
• The LLC’s mailing address, if different from that of its principal executive office
• The name and addresses of any manager or chief executive officer (if no manager has been appointed, provide the name and business or residence address of each member)
• A valid email address if the LLC chooses to receive notices and notifications from the Secretary of State electronically

California is one of five states that requires businesses to create an operating agreement. LLC owners must have one either before or after formation, ideally in writing. This document outlines your business’s ownership structure and operational rules. It should detail important company information, such as powers and duties of members and managers, how profits and losses will be distributed, and buyout rules.

The operating agreement also serves a few important purposes that should make this document a priority for your new business:

• It provides written documentation that shows the intent of the members to limit their liability by forming the LLC — without an operating agreement, the structure of your business could be unclear or ambiguous to a third party
• It details and formalizes any agreements between the members (for example, the amount of money each member has contributed to the LLC), which can help prevent misunderstandings down the road and provide a solid foundation for resolving disagreements
• It ensures California will treat your business as an LLC

You don’t have to file this document with the state, but once an operating agreement is signed by the members of an LLC it acts as a binding contract. A signed copy of the agreement should be kept with other official records for the LLC.

Your operating agreement, for LLC purposes, needs to include specific information according to the California Revised Uniform Limited Liability Company Act:

• Relations among the members as members and between the members and the limited liability company
• The rights and duties under this title of a person in the capacity of manager
• The activities of the limited liability company and the conduct of those activities
• The means and conditions for amending the operating agreement

Part of doing business is paying taxes to the state and federal governments. You’ll likely need both a state and federal tax identification number for this reason.

California Business Entity Number

When the state accepts your LLC articles of organization, you’ll be given a 12-digit Secretary of State Business Entity number. You’ll use this number to verify your business’s identity with the state of California and meet annual filing obligations.

Federal Employer Identification Number (EIN)

You’ll also need a federal EIN if you have more than one member or plan to hire employees. An EIN is essentially a Social Security number for your business. This number is used to complete payroll, pay employment taxes and engage in other business activities like opening a business bank account or a business credit card for your LLC. Apply online for free through the Internal Revenue Service (IRS) website.

Even if you have a single-member LLC with no employees, you may still want to operate with an EIN. Otherwise, you may be asked to provide your personal Social Security number for business purposes, which could put you at risk of identity theft. An LLC formation service can obtain this number for you, often for a fee.

Golden State business owners who wish to create an LLC should prepare for steep expenditures. California charges new businesses fees and taxes that can pile up quickly.

The California Secretary of State charges $70 for the initial filing of an LLC. However, California’s annual franchise tax, which is at least $800, is the highest ongoing LLC cost. Even startup companies with no sales are subject to this minimum tax. Once earnings reach $250,000, further fees based on revenue begin to apply. Expect to spend for legal and accounting guidance in addition to state costs to ensure complete compliance with California’s intricate LLC requirements. It’s also important to account for the costs of creating an operating agreement and acquiring any required business licenses and permits.

What is The Cheapest Way To Start a California LLC?

One economical approach for starting an LLC in California is to handle the formation process on your own. The DIY approach entails researching the necessary steps, preparing and filing the required documents such as the Articles of Organization with the California Secretary of State and paying the state filing fee of $70.

Many online LLC formation services provide a basic formation package at $0 (plus the $70 state filing fee for California), handling the preparation and filing of the necessary paperwork on your behalf. Among these services, ZenBusiness is noted for offering substantial value at a low cost, even including a registered agent service in its basic package, which is crucial for maintaining your LLC’s compliance.

By marrying a do-it-yourself approach with the use of affordable or free online resources and considering the use of online LLC formation services for more complex aspects of the process, you can minimize the costs associated with starting your LLC in California.

You’ve made the decision to form your California LLC, congratulations! Before you dive into the formalities of filing paperwork with the Secretary of State’s office, it’s a good idea to do a little research and business planning to set yourself up for success.

• Do your market research. Look at similar businesses in your area so that you can create a solid roadmap to beat your competition
• Decide on a strategy. Set some benchmarks for when your company will reach profitability and create a strategy that will get you where you need to be
• Create a business plan. Put everything into practice with a business plan that includes information about market research, funding, marketing strategy and other important details that will help your new company be successful

LLC Requirements in California

In California, forming an LLC involves several steps, including preparing necessary documentation. Here are the key documents and a brief description of each:

• Articles of organization: This foundational document officially establishes your LLC in California. It includes basic information such as the name of the LLC, its purpose and the name and address of the registered agent.
• Operating agreement: While not mandatory in California, an operating agreement is highly recommended. It outlines the operating procedures and ownership structure of the LLC.
• Employer Identification Number (EIN): Obtained from the IRS, the EIN is essential for tax purposes and is required if the LLC has employees or multiple members.
• Statement of information: Filed with the California Secretary of State, this document provides updated contact and managerial information about the LLC.

Before filing these documents, you should ensure the chosen name of the LLC is unique and complies with California’s naming guidelines. It’s also crucial to appoint a registered agent for the LLC, who will be the official point of contact between the state and the LLC.

LLC vs Other California Business Entity Types

You likely know a limited liability company is the right business structure for you, but how does it stack up against other entities? The most common business entities are sole proprietorships, partnerships, LLCs and corporations. One LLC definition is that it is a hybrid of the other business entities, as it offers the liability protection and tax benefits of a corporation without the formalities (similar to a partnership).

Sole Proprietorships and General Partnerships

Sole proprietorships and general partnerships are the most informal type of business structures — you’re not required to file any paperwork with the state. They’re also known as “pass-through” entities for tax purposes, meaning business income isn’t taxed directly, but passes through to the members, or owners, and is taxed as personal income. These business structures don’t have liability protection in place, so your personal assets are at risk if the business fails.

LLCs, on the other hand, do require formal registration with the state but are still pass-through entities for tax purposes. By definition, they feature limited liability for the activities of the business.

Corporations

Corporations have more formation and maintenance requirements than LLCs, such as the requirement to be owned by shareholders and hold regular meetings. They are subject to “double taxation,” meaning the business pays corporate taxes and the owners still pay personal income tax. Owners of corporations enjoy limited liability as well. LLCs have fewer administrative requirements but more friendly tax treatment, however, LLCs can elect to be taxed as corporations.

For more information on a sole proprietorship vs. LLC, LLC vs. S-corp or corporation vs. LLC, check out our answers to the most frequently asked questions at the bottom of this article.

What is The Best Way to Form an LLC in California?

Making your Limited Liability Company (LLC) official is as simple as filing the correct form with the state — but this can require substantial planning and research. Depending on how expansive you envision your LLC to be, you may need a little help ensuring you file correctly the first time. Take our quiz at the top of this page to determine which of the three following formation methods is right for you.

Do it Yourself California LLC

For straightforward business plans that don’t require special licensure, multi-state authorization or dealing with investors, you can navigate the filing process without paying extra for help. Our guide will walk you through the filing process.

Insider’s Tip: LLC formation companies often offer free DIY help as well.

Best LLC Formation Service in California

Even owners of simple businesses may want a little help to take the stress out of filing correctly. An LLC formation company offers an array of services, from registered agents (to receive your important legal and tax documents) to tax advice and preparation. Many offer varying package levels and add-ons so you can customize the type of assistance you get. For example, Incfile, Northwest Registered Agent and LegalZoom LLC formation companies all allow you to customize your formation package.

Check out our comparison of the best LLC services in California below.

Hiring an Attorney

Maybe you want to expand your business to several states or you have concerns about licensure or management structure. An attorney can help you draft an effective operating agreement to ensure your business runs smoothly, avoid litigation by advising on complicated business matters and save you money in the long run by helping you set up your business soundly. Search online for “LLC lawyer near me” to explore local options.

Once you’ve completed the LLC application process, you’ll need to ensure your business complies with California’s tax rules. All LLCs must pay LLC taxes in California if they are organized, registered, or conduct business in the state, and if they have not elected to be taxed as a corporation. LLCs which are taxed as corporations must instead comply with California’s corporate tax rules. For more information on C-corp vs. LLC taxation, review our FAQ at the bottom of this article.

LLC Tax Requirements

California imposes fines when an LLC fails to file its tax return on time and when it fails to pay the full amount due at the proper time. Stay on top of filing deadlines and how much you owe to avoid paying more than you have to.

Annual Tax

In addition to yearly state taxes, the California Franchise Tax Board requires every California LLC to pay an annual franchise tax of $800, although there are certain exceptions. You have until the 15th day of the fourth month from your filing date to pay your first-year annual tax. For example, if you register your LLC on June 1, your first LLC tax payment will be due on Sept. 15. However, an LLC organized or registered in 2022 or 2023 is exempt from the annual tax for their first year. Submit your annual tax using Form 3522, LLC Tax Voucher.

Sales and Use Tax

What is LLC Sales and Use Tax? An LLC selling certain products or services will need to collect and pay sales tax and/or use taxes. More information about these taxes, how to obtain a seller’s permit, and other taxes and fees can be found online at the California Department of Tax and Fee Administration’s website.

Employer Tax

If your LLC has any employees, you’ll also have to pay employer taxes. For example, you’ll need to withhold and pay employee income taxes as well as state unemployment insurance taxes. See the California Employment Development Department for more information.

Annual California LLC Fee

If your LLC will make more than $250,000, you’ll have to pay an additional fee by the 15th day of the sixth month of the current tax year. The fee amounts are as follows (California LLC fee structure is as of 2022 and is subject to change.):

Business Licenses and Permits

Depending on what type of business your California LLC is involved in, you may need to obtain state and local business licenses or permits. You can explore statewide LLC requirements by visiting the CalGold website.

Check with the city and county governments where your LLC is located to determine their requirements. Some LLC services offer to research what LLC licenses you need and provide a report to you, and may even help you apply for LLC licensure.

Growth Considerations

The following activities aren’t required to start your business, but they are LLC business practices you should consider from the beginning. We’ll give you an idea of what to expect as you grow your business in California.

Hiring Employees

If you plan to hire employees for your business you’ll want to make sure you fulfill your responsibilities as an employer in the state. Depending on how many employees you hire and the type of business you have, some (or all) of the following may be applicable:

• Meet payroll taxes and wage withholding requirements
• Matching employer withholding requirements, and employee employment eligibility requirements
• State Disability (workers’ compensation) insurance and unemployment insurance
• Workplace safety and health regulations and equal employment opportunity.

Online Presence

We live in the internet age, so if your business isn’t on the internet it probably doesn’t exist to your customer base. Even if you’re not an I.T. guru, you probably have the tech know-how to set up a simple website or handful of social media accounts. To get a website for your LLC, search for a domain name to make sure your “dot com” is available.

Next, you’ll want to choose a company to host and build your website. If you want to build the website yourself, sites like Wix, Squarespace and GoDaddy are often recommended for beginners. Check out a few to see what works with your tech comfort level and what makes the most sense for your business. If building your own website sounds like less fun than filing your own taxes, consider hiring a web designer to make your online presence shine.

Business Insurance

What’s an LLC business insurance policy for, if you already enjoy limited liability? Protect your company’s assets from lawsuits by purchasing an insurance policy that protects against the basics for your industry. For example, if you run a brick-and-mortar shopfront you’ll probably want to consider liability insurance that protects against slips and falls. No one wants to lose their coffee shop over a spilled latte (and an injured customer)!

Marketing

Create an LLC brand to help your community know — and remember — you’re open for business. You don’t need a Mad Men-worthy campaign to leverage the power of advertising. Consider posting flyers in the community you serve, drafting a press release for publication in a local paper or pitching a spot on a local radio station for some air time. Get creative, and don’t give up!

Funding

You’re an official California LLC, you have a website, you’ve purchased business insurance for an LLC and have a solid marketing plan ready for action. But how do you fund your fledgling business? Starting an LLC from scratch is hard enough without worrying about where money will come from. Here are a few ideas to get you started:

• Small business loans
• General grants
• Specialized grants for underrepresented communities, such as Black-owned or woman-owned businesses
• Crowd-sourced funding through an online platform
• California also has several specialized programs to help you access capital needed for your business, including secured loans and bonds

California offers a variety of resources to assist small business owners in both the formation of an LLC and the subsequent growth of their business. From online portals providing step-by-step guidance on legal compliance to organizations offering financial and operational support, the state has a robust ecosystem to support entrepreneurship.This is why California is often included in the top states to start an LLC.

Additionally, the state’s official website and affiliated entities offer invaluable resources for understanding the regulatory landscape and accessing business development tools.

Here’s a list of helpful online state resources for those starting and growing a business in California:

• California Secretary of State’s Business Programs Division: The site provides information on business entities, registrations and compliance.
• California Business Entities Portal: A one-stop-shop for business owners looking for information on registering their business, state permits and regulations.
• Governor’s Office of Business and Economic Development (GO-Biz): Check out a range of services from permit assistance to financial assistance.
• California Small Business Development Centers (SBDCs): Find consulting, training and research assistance for small business owners.
• California Tax Service Center: Gather information on state taxes relevant to small businesses and provide resources for managing tax obligations.

Utilizing these resources can significantly ease the process of starting an LLC and navigating the business environment in California.

To provide consumers with objective and accurate information, our credentialed legal experts created a comprehensive rating system for Limited Liability Company (LLC) services. We researched five online LLC, registered agent and trademark registration services, including ZenBusiness, LegalZoom, Swyft Filings, Northwest Registered Agent and Bizee (formerly Incfile).

We conducted a survey in 2024 of 200 professionals who were currently using LLC services or had used LLC services within the past year. We analyzed the results of this survey to determine the following rating criteria:

• Features (20%)
• Value for Money (25%)
• Customer Service (20%)
• Usability (25%)
• Reputation and Credibility (10%)

Visit the full LLC methodology page for more details on our rating system.