We're supported by our users. We may earn a commission if you make a purchase from our links
How to Start an LLC in California
If you’re starting a business in California the first thing you’ll need to do is determine the business structure you’ll operate as. The go-to choice has become forming their business as an LLC for many small business owners.
In this guide, we’ll go over the 6 step process to start your business as an LLC in California, and the steps you should complete after your LLC is formed. If you want to learn more about LLCs’ basics, you can read our guide, What is an LLC and how does it work, where we go over the benefits an LLC can provide. You can also use the table of contents below to jump ahead to a specific section.
Featured California LLC Formation Partners
- Top Notch Customer Support
- In Business Since 1998
$39 + state feesStart your LLC with
Northwest Registered Agent
- Great Value on All Packages
- Over 6,000 positive reviews
$49 + state feesStart your LLC with
Steps to Forming an LLC in California
Forming an LLC in California is done by filing Articles of Organization with the California Secretary of State under statute California Revised Uniform Limited Liability Company Act. This process can be done online or by mail. Forming a California LLC will cost you a total of $90.
Setting up a California LLC allows for your business to be recognized as a separate legal entity from yourself as an owner. This legal separation provides personal liability protection for the owner(s), known as members. Personal liability protection means that if your business was sued or had outstanding debts, your personal assets like your home, car, or personal bank accounts are protected from creditors. This protection is not available for businesses that operate as a sole proprietorship or partnership, which is one of the core reasons why so many businesses choose to operate as an LLC.
To complete the process to create an LLC in California, follow the steps below.
Before getting started with the process of applying for an LLC in California, you’ll need to choose the legal name of your LLC. When forming your business as an LLC, you’ll need to ensure that you follow the legal naming requirements laid out in California law:
- Your LLC name must be different from any other California business
- Name must include the word “limited liablity company” or a designator that denotes that it is an LLC such as “LLC” or “Ltd.”
- Cannot include phrases that could confuse the LLC with a government agency
- Should not include restricted words like Bank, Attorney, or Insurance unless accurately describing the business’s activity. Including these words often requires additional filings and/or a professional license to be approved.
- Cannot include designators of different entity types such as “Inc”, “Incorporated”, “Corp”, “Corporation”, “LP” or “LLP”
Name Search Process
- Conduct a California Name Availablity Search:
Once you have your desired company name, you’ll want to conduct a California name availability search to ensure that the name is not currently in use by an existing business or is not significantly similar to an existing business. You can complete this search by using the California Business Entity Search
- Verify Domain Availability:
In addition to verifying that your LLC name is available for use, you may also want to take the time to register the domain name for your LLC. Even if you don’t plan on creating a business website, you can register your website domain to ensure that others cannot use your business name. You can register domains for less than $10 with namecheap.
Pro Tip: When conducting your name search, you may find that the name was used in the past, but that business has since closed or dissolved their LLC. While you can proceed with a previously registered name, we recommend choosing a different name. Using a previously registered name can lead to delays in getting your business started due to the high likelihood that your EIN application will receive reference error 101. This error can cause the obtain of your EIN to go from a 15-minute process to potentially taking weeks to receive.
When in this process, be sure to take some time to develop a good business name. If you’re struggling, you can get some help to get your creative juices flowing by visiting our guide: How to Come up with a Business Name.
Before starting your LLC filing in California, you’ll need to choose who will serve as your registered agent. To complete your California Articles of Organization filing, you’ll need to list a California registered agent.
A California registered agent is a person or company who agrees to receive official documents on behalf of the LLC. This can include official notices and reminders from the state as well as receiving service of process (formal paperwork in the event of a lawsuit).
Who Can Serve as a California Registered Agent?
Any person who is a resident of California or a company registered with the state, who has a physical address within the state, and is always available during regular business hours can serve as your registered agent. If an LLC member fits these requirements, they can serve as a registered agent. While some business owners will choose to list their business address and themselves as the registered agent, there are several reasons this could harm your business:
- You receive a lawsuit in front of a client: If you receive service of process for a lawsuit or other legal dispute at your business address, customers and clients could quickly become aware of the information you wish to keep private. You can avoid this embarrassing situation by choosing a third party as your registered agent.
- You miss important documents: Registered agents are expected to be available at all times during business hours. If you are frequently away from the office or expect to take a vacation this year, you should probably reconsider listing yourself as the registered agent. The last thing you want is to find out your business is tied up in a lawsuit or late on tax filings simply because you missed receiving service of process or other important documentation.
To learn more visit our detailed guide, What is a California Registered Agent and who can serve as one?
Now that you’ve put in the hard work of choosing a name for your LLC and decide who will serve as your LLCs registered agent, you’re ready to complete your California Articles of Organization filing. Articles of Organization are the formal legal paperwork filed with the California Secretary of State to form your LLC legally. Your articles can be filed either online or by mail.
When completing the California Articles of Organization filing, you’ll need to provide the following information:
- Name of your LLC
- Business address
- Name and contact information for each member
- Name and contact information for the registered agent
- Official start date of the LLC
- How the LLC will be managed (member-managed vs. manager-managed)
Key Information about the California Articles of Organization Filing Process:
- How much does it cost to start an LLC in California?
It costs a total of $90 to form an LLC in California. This is comprised of a $70 filing fee for your Articles of Organization and a $20 filing fee for your Statement of Information filing, which is completed once your Articles of Organization filing has been approved.
- How long does it take to form an LLC in California:
Standard Turnaround Time: 3-5 business days
How to Submit your California LLC Application
If you’re ready to being the application process to reate a California LLC, there are 2 primary methods: online and by mail. The preferred method to apply is online via the California Secretary of State website.
Once the California Secretary of State approves your Articles of Organization and your LLC is officially formed, you’ll need to file a Statement of Information within 90 days of your LLCs approval. The California Statement of Information filing for LLCs outlines details about the LLC that are not provided in the Articles of Organization document. In your California LLC Statement of Information filing you’ll need to provide the following piece of information:
- LLC Name
- 12-Digit California Secretary of State Entity (File) Number
- Business Address
- LLC Manager(s) or Member(s) (if you are unsure of which management structure to use check out our Member-Managed vs Manager-Managed LLC guide)
- Agent for Service of Process (Registered Agent)
- Description of the type of business or services provided by the LLC
- CEO Name and Address (if elected or appointed)
Your LLC Statement of Information filing can be completed online via the California Secretary of State Statement of Information filing system. Alternatively, you can download the LLC-12 Form and complete the filing via mail or in-person.
While a California LLC is not legally required to have an operating agreement, it is highly recommended. An LLC operating agreement is a legal document that outlines the rules and regulations around the business’s financial and strategic decisions. It also outlines each LLC member’s initial investment, ownership percentage, and the process for if a member wishes to leave the business.
There are three main reasons why your LLC needs an operating agreement:
- Protects the LLCs limited liability status:
An operating agreement helps prove that your LLC is a legitimate business venture and isn’t operating as a sole proprietorship or partnership. Without an operating agreement, you could be at risk of losing your personal liability protection if you were sued or had outstanding debts that were unable to be paid.
- Provide Clear Rules for Resolving Disputes:
While it may not seem likely now, disputes regarding business operations and strategic decisions are common. It can save you a lot of hassle by outlining formal processes to resolve conflicts and outline operating procedures.
- Protection against default California governing rules:
If an LLC does not have an operating agreement, they are subject to the state’s default rules. These rules are very general and, as a result, are not ideal for most LLCs and can have significant downsides. Creating an operating agreement can ensure that your LLC is not subject to the default state governance rules.
Having a professionally created operating agreement is your best bet. However, not everyone can afford to have a lawyer draft a custom operating agreement. If you want to create a basic one yourself, be sure that you include these items:
- Percentage of ownership allotted to each member
- Members’ responsibilities and powers
- Voting rights (if applicable)
- General internal structure of the LLC
- How profits will be distributed
- Buyout and buy-sell rules outlining the procedures for transferring ownership interest
If you are a multi-member LLC (have two or more owners), you are required to obtain an EIN. EINs are also needed to open a business bank account or hire employees. Because of this, we recommend that every LLC get an EIN.
EINs are an ID number issued by the IRS for tax and employment reporting purposes. You can think of an EIN as a social security number for a business. You can apply online for free directly with the IRS by using their online application system, know as the EIN assistant. Note that the EIN assistant is only available from 7 AM – 10 PM Eastern.
California LLC EIN Filing Tips:
When applying for your EIN, be sure to wait until the California Secretary of State has approved your LLC. If your California LLC filing is rejected, you will need to either amend your EIN filing or obtain a new EIN under the correct name.
When completing your EIN application, you must list your LLC name correctly. In the LLC name field, be sure that your name is listed exactly as it appears on your approved Articles of Organization document. A conflict in your name could result in delays when setting up a business bank account or applying for loans and lines of credit.
The online IRS EIN Assistant has a timeout security feature that will end your session if you are inactive for 15 minutes or longer. As a result, you’ll need to complete your EIN application in one sitting. Because of this timeout feature, we recommend that you collect all the information you’ll need to complete the application and have it on hand before starting. This information includes:
- Number LLC members (the owners of an LLC are referred to as members)
- Designate a Responsible Party – A responsible party is the designated person with financial control over the entity. You’ll need to provide this person’s name, address, and SSN.
- Physical Address and Phone Number of the LLC
- The legal name of the LLC
- County where the LLC is located
- State where the LLC is located
- State where the Article of Organization were filed – California
- LLC Start Date
- If the LLC owns a high motor vehicle with a taxable gross weight of 55,000 pounds or more
- If the business involves gambling
- If you will need to file excise taxes
- If you will sell or manufacture alcohol, tobacco, or firearms
- If you will have or expect to have any W-2 employees within the next year, and if so, how many
Steps After Your California LLC is Formed
Now that your LLC is legally registered with the California Secretary of State, there are still several steps to take before you start conducting business. Often, when you search how to start an LLC in California, the instructions stop once the paperwork is filed. Yet, there are several more steps you can take to ensure your business is set up for success.
- Open a Business Bank Account
- Complete State Registrations
- Get Business Licenses and Permits
- Establish an Accounting System
- Set Up Credit Card Processing
- Sign Up for Business Insurance
When starting an LLC in California, you’ll want to open a business bank account to separate your personal fund and transactions from business activity. Not only does this help with the accounting and bookkeeping process, but it is also vital to maintaining your limited liability status.
If you fail to keep your business and personal funds separated, you risk piercing the corporate veil. If you are faced with a lawsuit or have outstanding debts, a court may evaluate your business to determine if there is any real separation between the business and its owners. Without having a separate business bank account, you are at significant risk of losing your personal liability protection due to the lack of separation.
To learn more, visit our guide, How to Open a Business Bank Account.
Another common step that should always be included in your journey of learning how to form an LLC is completing California state tax registration requirements. The two most common are registrations related to collecting and remitting sales tax and employment-related registrations.
In California, any business that sells physical goods or specific services is required to collect sales tax from their customers and remit payment to the California Department of Tax and Fee Administration (CDTFA). To do this, you’ll need to register for a California Seller’s Permit.
Any business that hires employees in California must register with California Employment Development Department (EDD).
Most businesses also will need some type of business license or permit. Business licenses and permits fall into three categories: federal, state, and local. It is essential to research which permits you will be required to obtain at each level.
- Federal Business Licenses and Permits:
To determine if you’ll need a federal license or permit review the list provided by the US Small Business Administration.
- California State Business License:
For details on the California State Business Licensing requirements visit CalGold Permit Assistance Tool.
- Local Licenses and Permits:
Check with your county clerk’s office for details on local licensing and permittting requirements.
If you’re looking for more in-depth information related to business licenses and permits, visit our Business Licenses & Permits Guide.
Even once you have sorted out how to form an LLC in California and filed for all necessary state registrations and business licenses, there are still a few steps to help you with the day-to-day running of your LLC. One of the most significant is your accounting system. Your accounting system is much more than balancing your business checkbook. Every time you gain a new customer, make a sale, pay an employee, or pay down a vendor, that information needs to be tracked.
Establishing an accounting system for your business and choosing which programs or software you will use before you even make your first sale will ensure you never miss a detail regarding your business finances. Better yet, determine if you will need to hire a bookkeeper to help you set up and use your accounting system or if it is part of running the LLC that you will manage.
Whether you sell a product or service, online or in person, customers in today’s market will expect to have options when it comes to paying you. Cash-only businesses exist in 2021; however, you could be limiting your customer base by only accepting one form of payment.
How you set up credit card processing for your LLC will depend on your business. If most of your sales are made online, credit card processing is often a built-in feature for e-commerce platforms. For in-person sales, you may need to invest in software that allows you to safely process a customer’s credit card, such as a mobile card reader or point of sale system. However you choose to set up credit card processing for your LLC, the goal is to make sales as easy and safe as possible for your customers. The better their experience with your business, the more likely they are to become repeat customers.
Business insurance protects your property, assets, employees and can also protect your company in the case of litigation. However, not all businesses need every available kind of insurance. Small business insurance can come in many forms, including:
- General Liability Insurance
- Product Liability Insurance
- Professional Liability Insurance
- Commercial Property Insurance
- Home-based Business Insurance
- Business Owner’s Policy
We offer a complete guide to finding and setting up the right small business insurance for your company, but the key is to learn what your state’s requirements are for business coverage. There is also industry-specific insurance coverage that you will want to explore based on the type of service or product your LLC offers, how much risk employees face at work, and whether you have an established business location.