Starting a business in California can be an exciting and rewarding experience. One of the most popular and flexible ways to organize a business is by forming a Limited Liability Company (LLC). This business structure provides liability protection for its owners while offering flexibility in management and taxation. If you’re planning to start an LLC in California in 2025, this comprehensive guide will help you navigate the process step by step, from choosing a name to staying compliant with state requirements.
1. Search Your LLC Name
Before forming your LLC, the first step is to choose a name. Your LLC name must be unique and meet the naming requirements of the California Secretary of State.
Name Requirements:
- Your name must include the words “Limited Liability Company,” “LLC,” or “L.L.C.”
- The name cannot be identical to or deceptively similar to any existing business name in California.
- Certain words are restricted, such as “bank,” “trust,” or “insurance.” You’ll need additional licenses or approval to use these words.
- Your name cannot imply an illegal business or one that violates public policy.
The easiest way to check if your name is available is by searching the California Secretary of State’s business database online. It’s crucial to ensure your LLC name isn’t already in use before you proceed.
2. Choose a Registered Agent
In California, every LLC is required to designate a registered agent. This is an individual or business entity responsible for receiving important legal documents, such as service of process (lawsuits), tax notices, and other government correspondence. Your LLC’s registered agent must have a physical address in California and be available during business hours.
Who Can Be an LLC Registered Agent?
A registered agent can be:
- An individual who resides in California and is over 18 years old.
- A business entity authorized to conduct business in California that provides registered agent services.
Some business owners choose to act as their own registered agent, but there are benefits to hiring a professional service. Hiring a third-party registered agent ensures that your LLC’s documents are handled professionally and that you don’t miss important notices. It also helps maintain privacy, as the registered agent’s address is the one publicly listed.
We Recommend Northwest Registered Agent
One of the most trusted registered agent services in California is Northwest Registered Agent. They offer professional services that ensure your business stays compliant with state regulations. Northwest Registered Agent is known for its excellent customer service, privacy protection, and affordable pricing. They will handle all your official documents, so you can focus on growing your business.
3. File Articles of Organization with the Secretary of State
The next step is to officially create your LLC by filing the Articles of Organization (Form LLC-1) with the California Secretary of State. This is a critical document that legally establishes your LLC.
How to File the Articles of Organization:
- Visit the California Secretary of State’s website and download Form LLC-1.
- Complete the form with the following details:
- LLC name
- Principal address
- Registered agent information
- Management structure (whether your LLC will be managed by members or managers)
- Submit the completed form online or by mail. The filing fee is $70, and you’ll need to include payment with your submission.
If you file online, your Articles of Organization will be processed faster, typically within 8 business days. If you file by mail, the processing time may take longer.
Processing Times and Expedited Options
Standard processing for online filings usually takes about 8 business days. If you want your Articles of Organization processed faster, you can opt for expedited processing for an additional fee. This will shorten the processing time to 24 hours or less, depending on the service you choose.
4. Create an Operating Agreement
Although California does not require LLCs to have an operating agreement, it is highly recommended. This internal document outlines the management structure, responsibilities, and financial arrangements within your LLC.
What Should Be Included in the Operating Agreement?
- Ownership percentages: Specify each member’s ownership stake in the company.
- Member roles: Define the roles and responsibilities of each member or manager.
- Profit and loss allocation: How will profits and losses be divided among members?
- Decision-making process: Outline how major business decisions will be made.
- Dispute resolution: Provide guidelines for resolving disagreements between members.
An operating agreement helps clarify expectations and can prevent conflicts between LLC members. It also protects the LLC’s limited liability status by demonstrating that your business operates separately from your personal assets.
5. Get an EIN for Your LLC
An Employer Identification Number (EIN) is a unique identifier issued by the IRS that is used to identify your LLC for tax purposes. Even if you don’t have employees, you will still need an EIN to open a business bank account and file taxes.
How to Apply for an EIN:
You can apply for an EIN online through the IRS website, and it’s completely free. The process is quick, and you’ll receive your EIN immediately after completing the online application. You can also apply by fax, mail, or phone (for international applicants).
6. File Your Statement of Information
After your LLC is formed, you must file an Initial Statement of Information (Form LLC-12) with the California Secretary of State. This document provides important details about your LLC, including the names and addresses of its members or managers.
How Much Does the LLC Statement of Information Cost?
The filing fee for the Statement of Information is $20.
When Is the Statement of Information Due?
The Statement of Information is due within 90 days of forming your LLC. After the initial filing, you must file a Statement of Information every two years.
How Do I File My Statement of Information?
You can file the Statement of Information online through the Secretary of State’s website. It’s important to keep track of when your Statement of Information is due to avoid penalties.
7. Pay Your $800 Annual Franchise Tax and Estimated Fee
Once your LLC is established, California requires you to pay an Annual Franchise Tax of $800. This tax is due every year, regardless of your LLC’s income or whether it’s actively doing business.
How Much Is the Annual Franchise Tax in California?
The Annual Franchise Tax is $800 for most LLCs. However, if your LLC is formed in the second half of the year, you can pay a prorated amount for the first year.
When Is the $800 Annual Franchise Tax Due?
The $800 Annual Franchise Tax is due by the 15th day of the 4th month after your LLC is formed. For subsequent years, the tax is due by April 15.
How Do I File the $800 Annual Franchise Tax?
To pay the franchise tax, you can file Form FTB 3522 online or by mail. Payments can be made via check, credit card, or electronic funds transfer.
How Much Does the LLC Estimated Fee Cost?
LLCs with gross receipts exceeding $250,000 are subject to an LLC Estimated Fee. This fee is based on the amount of income your LLC generates and ranges from $900 to $11,790.
When Is the LLC Estimated Fee Due?
The LLC Estimated Fee is due by the 15th day of the 6th month after your LLC is formed. For subsequent years, it’s due on June 15.
How Do I File My LLC Estimated Fee?
You can file your Estimated Fee using Form FTB 3536, which is available online on the Franchise Tax Board website.
8. File Form 568 (or 100 or 100S)
Depending on your LLC’s tax structure, you may need to file additional forms. The most common form is Form 568, which is required for LLCs taxed as disregarded entities, partnerships, or S corporations.
When Is CA Form 568 Due?
Form 568 is generally due by March 15 or April 15 each year, depending on your LLC’s tax classification. You can file for an extension if necessary, but keep in mind that the estimated tax payments are still due by the original deadline.
9. What to Do After Your LLC Is Approved
Once your LLC is approved, it’s time to focus on running and growing your business. Below are a few important steps:
How Will My LLC Be Taxed?
LLCs in California are taxed as pass-through entities by default. This means that the profits and losses of the LLC pass through to the members’ personal tax returns. However, you can elect to have your LLC taxed as a corporation if that better suits your business needs.
FAQ’s
Can I form an LLC in California if I live outside the state?
Yes, you can form an LLC in California even if you’re not a resident. However, you’ll need a registered agent in California and may be required to pay additional fees.
What if my LLC doesn’t make any money?
Even if your LLC doesn’t generate any revenue, you still need to pay the $800 Annual Franchise Tax.
Do I need to file a business license in California?
Depending on your LLC’s location and the type of business you run, you may need to obtain a local business license. Check with your city or county for specific requirements.
