How to Start an LLC in California (CA LLC 2023)

How to Start an LLC in California: If you’re looking to start a California LLC, you’ve come to the right page. Setting up an LLC is easy and cost-effective. To form an LLC, you must follow a few steps that include naming your LLC, hiring a registered agent, filing your formation documents, submitting an initial report, doing the operating agreement, and finally obtaining the EIN. Though, you must pay the mandatory state filing fee. These fees and charges can be tax deductible, making the LLC formation cost almost negligible.

On this page, You’ll find all the steps that must be taken to ensure that your California LLC has been correctly formed. We recommend you read the whole article very carefully, word by word, don’t miss anything 🙂

How to Start an LLC in California

An LLC (aka Limited Liability Company) is a hybrid business entity combining a corporation’s characteristics with a partnership or sole proprietorship. It separates your personal assets from your business assets, thus giving you personal asset protection. For an LLC, members’ personal assets are not affected by business debts. However, in some cases, if the LLC is sued for business debts, courts might pierce the corporate veil and use the owner’s personal assets to meet their corporate liabilities.

If you wish to start an LLC, you must file your Articles of Organization with the State and pay a filing fee of $70. While it’s the most important step, it’s not the only one. There are 5 other crucial steps to follow to get your LLC formed in California. Below are all 6 steps that explain everything you need to do to start a California LLC in 2023. Let’s get started! You can always hire a professional LLC formation service in California to set up your LLC instead of doing it alone; a Pro service will ensure everything is done properly.

Step 1: Decide a Name for Your California LLC

The first step while forming a limited liability company in California is to give a proper name to your LLC. Before you name your business, you must know that the name should be easy to remember, available in the state, and follows all the LLC naming guidelines.

LLC Naming Guidelines in California

There are a few specific requirements all the LLCs in California have to follow while naming their Company. Some of the most important requirements are as follows:

• Your business name should be available, and no other existing business in California can have the same name. ZenBusiness offers unlimited business name searches without any hassle.
• “Limited Liability Company”, “LLC”, “L.L.C.”, “LC”, “L.C.”, and “Limited Company” – any one of these has to be used as a suffix in your business name.
• You cannot use any name for your business that is confusing or misleading. Terms such as “Treasury”, “State Department”, “FBI”, “CIA”, etc. shouldn’t be included.
• Terms like “Bank“, “University“, “Attorney“, “Doctor“, etc can be added only after the additional requirements by California State Government are fulfilled.
• (Optional) It’s better to name your business something for which your desired domain is available.

Reserve Business Name for Future

If you do not wish to file your LLC right now, but want to hold the name you have decided on, you can reserve your LLC name for 60 days. To keep the name, you must file a name reservation application and pay $10 (by mail) or $20 (in-person drop) to reserve your name with the California Secretary of State. You can renew the name after 60 days but not for another 60 days period.

Doing Business As (DBA) or Trade Name

Once you have a legal name for your LLC, you can register it. However, it is not mandatory. You can, instead, use DBA, Fictitious Name, or Trade Name. In that case, you must register your name with the California Secretary of State by submitting an online form and the filing fee of $26 for first-time registration for each additional filing, which costs $5 for each.

Apart from LLC formation, ZenBusiness offers customized website templates and business emails at a very reasonable price. If you plan to get a website, then it is wise to have a “.com” domain for your business, but these days you can also use other TLDs like “.io”, “.company”, “.xyz,” etc. Here you can get everything you need for your business in one dashboard.

Step 2: Assign a California Agent for Service of Process

The second step to forming an LLC in California is to appoint an Agent for Service of Process. In some states, it is known as a Registered Agent. A registered agent is a person or business entity working on your LLC’s behalf. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in California. Hence, hiring a competent California Registered Agent for your LLC is necessary. 

Make sure your registered agent is a resident of California or has a physical street address. This address will be used as the principal address of your LLC to receive any legal documents. Most LLC formation companies also provide registered agent services. Below are two great LLC formation services; even if you buy their cheapest plan (normally $0), you also get registered agent service and other services at a very reasonable price.

LLC Service	Our Rating & Pricing	Top Features	Learn More
#1 TOP PICK	4.5/5 $0 + State Fees	100% accuracy guarantee Worry-free service Great customer support	Learn More
	4/5	Established reputation Extras are bit more expensive Good customer support	Learn More

These two are our top recommendations for registered agent service, as they are competent and authorized to conduct business in California. Some LLC formation services also offer standalone California registered agent services. You can purchase only Registered Agent services without purchasing any other LLC formation services. This standalone service might become handy if you are doing it yourself and don’t want to disclose your home address or you don’t want to pierce the corporate veil.

Step 3: File Articles of Organization in California

The third and most important step in forming an LLC is to file the Articles of Organization. This California Articles of Organization is a legal document that is required to register your business with the California Secretary of State. It costs $70 (online and by mail filing) to file your formation certificate in California.

The articles of organization include details like the name of the LLC, the registered agent’s name, address, employees’ details, and the company’s structure (member-managed or manager-managed). Before hiring employees in California LLC, one should know about the rules and regulations thoroughly. Also, if you are expanding your existing business (an LLC) in other states to California, you must register as a California Foreign LLC.

Processing Time: Normally, it takes around 5 business days (approx) to get your LLC formed in California. The processing time for online filing might be a little faster than offline filing. But this can be expedited by paying an additional fee. $350 for filing in 24 hours, $500 for filing in 4 hours, and $750 for filing on the same day. However, the document processing time can be changed due to various factors.

Every LLC owner has to pay the filing fees to register their business in California. This fee is mandatory but also tax deductible. If you’re doing it yourself (filing on your own), it will not cost you any additional service fee. However, it is not feasible to do that as the DIY process might be delayed, complicated, and messy, especially if you’re a novice entrepreneur. Hence, it is recommended to get professional guidance to get your LLC formed in California.

Step 4: Initial Statement of Information Filing

In California, LLCs have to file the Initial Statement of Information with the California Secretary of State. This type of document is not common in all states. This statement includes all the unknown information that is not mentioned in the formation documents. After 90 days of LLC formation, LLCs have to submit this statement.

California is one of those few states that have the requirement of this document. Basically, this document has everything that has been decided in the LLC in their first board meeting. It costs $20 to file the Initial Statement of Information. It can be filed online or by mail, or in person.

Step 5: Create Your LLC Operating Agreement in California

Moving on to the fifth step, filing your operating agreement. An operating agreement is an internal document that legally outlines the proprietorship and operating procedures of your LLC. This document is vital as it ensures that all business owners are on the same page regarding how they operate, thus reducing future conflicts. Even for the informal business structure, you should get this document.

When it comes to filing a California LLC Operating Agreement, the state does not require you to have a comprehensive operating agreement, but it is ideal to have one that contains all the details of your business operation that helps in taking future business decisions, especially if you decide to dissolve California LLC later. Hence, having an operating agreement may not be necessary, but it is surely ideal.

The operating agreement draft can be created for free if you don’t hire a professional. However, there is an advantage to appointing a proficient person/service. You will get a businesslike quality operating agreement at a very cheap fee, which will help you in the future. Hiring a professional service means you can sleep well at night 🙂

Step 6: Filing a California LLC EIN

The Employer Identification Number (aka EIN) is a nine-digit number given by the Internal Revenue Service (IRS) to make it easier to identify the type of business for tax purposes and taxes in general. The EIN is necessary for any active business or any form of business, for that matter. 

EIN is needed when the LLC hires employees. Hiring employees in California LLC requires following specific rules and regulations. On the other side, EIN for California foreign LLC should be obtained if your LLC is based in other states.

To obtain EIN (aka FEIN), one must fill up a form (Online or by mail) and submit it to the IRS. Enter details of your LLC, and finally, complete the form and send it to the address given. You can also get an EIN Assistant to help you with the process.

Mail to: Internal Revenue Service, Attn: EIN Operation, Cincinnati, OH 45999

Fax: (855) 641-6935 | Fee: Free

Note: You don’t need a Social Security number when getting an EIN. You can proceed to fill out I.R.S. Form SS-4 and leave section 7b blank. You must then call the IRS at (267) 941-1099 to complete your application. Agents or employees will help you with that.

Congratulations, you are now done with all the necessary steps to form your Limited Liability Company in California. If you do it yourself, it should take you a long time to understand and do all the steps properly.

However, if you use ZenBusiness, it should be way faster. You will always have a live chat option and phone support with experts for any help you need. Their worry-free service will make things easier for you.

After Starting Your California LLC

After forming your LLC, there are still some things that you will need. The most important thing is to separate your business and personal assets. LLCs have limited liability protection that protects your personal assets from business liability. This is called a corporate veil. However, the corporate veil can be lifted or pierced by the court if the LLC is sued. In that case, the owners of the LLC become personally liable for their corporate debts. A few things like appointing a legit registered agent, having enough capital, and filing all the major documents with the state can save the LLCs from being pierced into the corporate veil.

Apart from that, there are a few things you need to take note of,

• Get a company business bank account, business credit cards, business accounting tools, and, if needed, business accounting software. Business accounts and related software help LLCs to conduct business with ease.
• File California business permits & licenses. Check all the details of business licenses before you choose the one for your LLC. Pay the fees for business licenses on time to avoid discrepancies. To run any legitimate business in California, it is mandatory to get a proper license and permit. 
• Get general liability insurance and professional liability insurance with coverage for employees. There are many types of business insurance. If you have a simple business structure, you might not need much insurance. On the other side, for a large LLC, you might need more. 
• File a California LLC annual report or biennial report

This page has provided you with steps to LLC formation and filing processes. You now have to remember upcoming filing deadlines and filing fees or filing costs, including fees for late filings, to make sure your LLC is up-to-date.

Cost of Starting an LLC in California

LLCs can be formed by spending a very less price. Apart from the mandatory state filing fees, you don’t have to bear additional service charges if you do it yourself. Following are the fees and taxes LLCs in California must pay to register and run a business in the state. Forming an LLC is no doubt cost-effective compared to other business structures. However, the fees and charges (tax-deductible) that you must pay to the state, such as name reservation fee, name filing fee, LLC filing fee, and Franchise Tax & Sales Tax (If applicable). Here are the main fees and taxes you must pay while forming your limited liability company in California,

In California, LLC name reservation is mandatory. You can register your LLC name at the time of registering your LLC. If you wish to hold the name for some time without registering your LLC, you can do it for 60 days. It can be renewed by paying $10 (by mail) and $20 (in-person drop-off). Your LLC name will be reserved for additional days (less than 60 days). In some states, Name Reservation is not mandatory.

According to the Franchise Tax rule, LLCs have to pay this tax every year. Annual Franchise Tax reports are considered to be the annual revenue report or annual report of the LLC. Read our guide on LLC costs in California for more information.

California Foreign LLC

If you are interested in forming a Foreign LLC in the state of California, then you need to file the Certificate of Foreign LLC to the California Secretary of State. Foreign LLCs allow you to operate your business in more than one state. Along with the Certificate of Foreign LLC, you need to submit some more documents like the Certificate of Good Standing, etc. to the California SOS to form your foreign LLC in the state of California. To know more in detail, check out our guide on California Foreign LLC.

Reasons to Start an LLC in California

California is one of the best states to set up an LLC. With a GDP of $2.3 Trillion, California’s economy has become one of the strongest ones in the last few years. Having an LLC in the state of California is not only easy but also economically profitable for any start-up. Among 130 businesses, the top 20 businesses have their business home in California. The reason mostly is the tax benefits. There are some government regulations under which LLCs get incentives and grants.

California is the heart of the business, where you can get vast potential customers for your business. The state has a lot of opportunities for entrepreneurs. The best part of the state is that you can get business funds easily for your business. For example, there are small banks for small business to support. These business banks have loan facilities for informal business structure as well. Besides, if you have a woman-owned business, then you might get tax benefits. Along with providing limited liability protection, LLCs have fewer tax liabilities. Besides, you may get professional liability insurance to protect your professional assets along with personal asset protection. Here are some benefits of having an LLC in the state of California,

Personal Liability Protection

In California, starting an LLC means your personal liability is protected from your professional debts. In any situation, if you are unable to pay the debts, none of your personal assets will be lost. Personal and professional assets and liabilities are separated.

Tax Benefits

California is a state where various tax credits are given to qualified companies. A couple of important tax benefits that a qualified company can get while starting your LLC located in California. Read more on California’s classification of LLC tax.

• Small Business Tax – In California, if the company is small and qualified, it will get access to corporate tax rates. For a small company, the tax rates are lesser than the bigger ones.
• Capital gains exemptions – If qualified, the smaller companies will get the facility of capital gains exemptions.
• Same Tax rate as Partnership – When you start your LLC in the state of California, it will generate a C-corp. You can shift from C-Corp to S-corp if you want if certain eligibility criteria meet. The tax rates will be the same for S-corp as Partnership.

Low-Cost LLC Formation

The cost of LLC formation in California is much lesser than in the District of Columbia, Connecticut, and Delaware. 

Raising Funds

As per requirement, LLCs located in California can raise funds through sales of stocks. There are some criteria to meet. Once qualified, companies can raise funds easily.

Businesses to Start in California State

There are plenty of business ideas that must be hitting your mind if you want to start an LLC in the state of California. But it is not possible to enter every business and earn money. So, here is a list of businesses that one can consider starting in California.

Technology Related Manufacturing

The sector of technology manufacturing is employing the most significant proportion of the workforce compared to other industries, i.e., 9.4%. High-tech computers, software developments, and electronic items come under this business industry. It is noted that the technology products have constituted an equal of around 29% of the total export of state, which is equal to a contribution of $120 billion to the state GDP.

Service Sector

The Californian state’s service sectors like educational services, health care services, tourism, and leisure services sector have shown promising growth in a few years. More than 4 million small to big service provider businesses in the state have a considerable contribution of around $500 billion. Out of this huge value, only two universities, named the University of California and California, Los Angeles, contribute around $!29 billion, which is enormous.

Renting Businesses

The population of the Californian state is increasing day by day. In the past few years, the state’s people have doubled as people see more scope of earning money in the state. It is nearly impossible for every person to buy a new property, so they look for renting houses. If you are thinking of starting a new business, then renting a business is also great. A significant portion of renting business contribution is made by corporate sector renting.

There are some small business ideas also that you can consider if you have a low investment.

• Customized cake shops
• Catering business
• Gift shops

California LLC Formation Review

How Fast Can I Form an LLC in California

California LLC formation takes up to 5 days both via mail or online. Additional payment to the state government can speed up the process.

California is known for its thriving entrepreneurial environment, with countless individuals dreaming of turning their innovative ideas into profitable businesses. However, establishing an LLC in California can be a somewhat complex process due to the state’s specific regulations and requirements. Although the exact timeline may vary depending on individual circumstances, there are a few key aspects one should consider when aiming to form an LLC promptly.

First and foremost, it is important to understand the basic steps involved in forming an LLC. These typically include choosing a unique name for your business, filing articles of organization with the California Secretary of State, drafting an operating agreement, obtaining necessary licenses and permits, and finally, applying for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Each of these steps requires attention to detail and compliance with respective legal frameworks.

Choosing an appropriate name for your LLC is the starting point. California imposes some constraints on business names to maintain clarity and prevent any misleading associations. It is essential to ensure that the chosen name is not identical or confusingly similar to any existing business entities registered with the Secretary of State. Conducting a thorough search before filing can help avoid setbacks that may arise if the chosen name is rejected.

The process of formally filing the articles of organization with the Secretary of State is the most critical aspect of establishing an LLC in California. While the exact time taken for processing varies, it is generally advisable to opt for online filing for quicker results. Online filing, known as ‘e-filing,’ has significantly expedited the process for many entrepreneurs, as it typically produces faster responses compared to traditional mail filing.

After filing the required documents, a few additional tasks must be completed before your LLC is up and running. Drafting an operating agreement is one such task that should not be overlooked. Although not required by law, an operating agreement outlines the internal workings and rules of your LLC, providing clarity on ownership, membership rights, managerial duties, and decision-making processes among members. Designing a comprehensive operating agreement can help prevent future discrepancies and conflicts.

Moreover, it is vital to acquire any necessary licenses and permits before commencing business operations in California. The requirements vary for different industries and enterprises, so conducting thorough research or consulting professional assistance is advisable to ensure compliance. Additionally, obtaining an EIN from the IRS will be necessary to facilitate tax filings and other financial matters related to your LLC.

While forming an LLC in California may seem like a time-consuming process, acknowledging and completing each step diligently will undoubtedly ensure a smoother experience. Entrepreneurs must be patient yet determined during the initial stages of establishing their business. Taking the necessary time to understand and fulfill the state’s requirements will result in a strong foundation for the LLC and position it for future success in California’s competitive business landscape.

F.A.Qs

In Conclusion

LLCs are easier to establish than other business structures. Small businesses, especially start-ups can easily start their LLCs in California at a bare minimum cost. LLCs have a ‘pass-through taxation’ advantage for which they are excluded from certain taxes. The formation of limited liability companies requires much lesser documents and legal processes. Share your queries with us, and leave a comment below.