Perhaps you are hoping to form a California LLC. People assume how to start an LLC is difficult and costly. However, it’s generally not difficult, and the cost would vary across states. We have all the info you need to know about the cost of forming an LLC, particularly the LLC cost in California.
On this page, you’ll learn about the following:
California LLC Cost of Filing
Here are the costs involved in forming an LLC in California.
Cost of Filing Formation Certificates
The California Certificate of Formation is responsible for the majority of the cost, which could also vary depending on whether you’re forming a domestic LLC or a foreign LLC. Still, you can file both at the California Secretary of State.
California Domestic LLC
- Online Filing costs $70 + $800 Franchise Tax.
- Filing Statement of Information within 90 days of registration costs $20.
- By Mail: Fill out the application form, and send it to Secretary of State Business Services, 1500 11th Street, Sacramento, CA 95814. Costs $70 + $15 for counter drop off (non-refundable).
California Foreign LLC
- Online Filing costs $70 + $800 Franchise Tax.
- Filing Statement of Information within 90 days of registration costs $20
- By Mail: Fill out the application form, and send it to Secretary of State Business Services, 1500 11th Street, Sacramento, CA 95814. Costs $70.
Note that filing online is ideal, not only because you need to go to the Secretary of State office, but also it would be faster. You won’t have to wait in a queue in doing so.
California LLC Formation Service or Registered Agent Fee
You need a registered agent to form an LLC in California, hence, added costs for service fees. Here are three of the best LLC services on our list that will provide you with registered agents to ease your worries.
Business Permits and Licenses
The business licenses depend on your business’s activity and location and are renewed yearly. As such, the cost will vary. Check the California Department of Tax and Fee Administration for regulatory boards or agencies requiring licensing.
Taxes Paid By The LLC in California
Any business in California has three types of taxes to be paid. Income Tax, Corporate Tax, and Franchise Tax. LLCs are exempted from the Corporate Taxes due to the pass-through taxes. The LLC members are liable to pay income taxes and Franchise tax. Apart from these three taxes, every LLC in California has to obtain EIN, there is no fee for obtaining EIN in California. On the other, a certain amount of Sales Tax has to be paid by the LLCs.
Franchise Tax is a minimum mandatory tax paid by the LLCs. Any LLC (domestic or foreign) registered with California state has to pay $800 whether it is running or inactive. As long as the LLC is registered it has to bear the Franchise Tax.
According to the Franchise Tax Board of California, this is a privilege tax for running a business in California and has to be paid by the LLCs following some terms and conditions.
Franchise Tax According to Income Tier
Following are the different income tiers based on which the amount of tax amount is calculated.
- Income from $0 to $250,000: $800 Franchise tax + $0 LLC Fee > Total $800
- Income from $250,000 to $499,999: $800 Franchise tax + $900 LLC Fee > Total $1700
- Income from $500,000 to $999,999: $800 Franchise tax + $2500 LLC fee > Total $3300
- Income from $1,000,000 to $4,999,999: $800 Franchise tax + $6000 LLC Fee > Total $6800
- Income above $5,000,000: $800 Franchise tax + $11,790 LLC fee > Total $12,590
Apart from these above-mentioned state taxes, California LLCs have to pay a Federal Tax of 15.3% on the total income generated by the LLC.
Cost Comparison Among States
California is one of the best states to start an LLC. The state is bounded by Arizona, Nevada, Colorado, and Oregon. Here’s the cost comparison among the neighboring states of California.
|State||Filing Fee||Annual Fee/Biennial Fee|
|California LLC||$70||$800 + $20 (every 2 years)|
|Oregon LLC||$100||$100 (Annual)|
|Nevada LLC||$425||$350 (Annual)|
Comparing the neighboring states, we can say Arizona has the least LLC fees, however, California is the most favorable among all for the businesses as it has immense tax advantages. Apart from that, the state has massive business opportunities.
- California Name Reservation: $10 for online filing or by mail; $20 for drop off requests
- Doing Business As (DBA): Cost varies between counties for both online filing and by mail
- Certified Document Copies: $5 + $1 for 1st page and $0.50 for succeeding pages.
- Certificate of Good Standing: $5 per entity
- Business Domain Name and Website: depend on your preference, but domain name could be as low as $2.99/yr at NameCheap, and web hosting is at least $30/mo at Kinsta.
- Online workspace: at least $4.20/mo for GSuite.
- Business Insurance: would vary depending on insurance type–whether general liability insurance or professional liability insurance–and coverage.
- Dissolution of California LLC: $0 filing fee; $15 for faster service
How Much Does It Cost to Maintain an LLC in California
To maintain an LLC in California you will need to pay a biennial fee of $800 + $20 along with Income tax, Franchise tax and federal taxes.
First and foremost, it is essential to factor in the initial cost of forming an LLC in California. The cost in itself may not seem significant, but it is still an investment that potential LLC owners must consider. Filing the Articles of Organization with the California Secretary of State requires a one-time fee. Additionally, businesses must file a Statement of Information annually, incurring another recurring cost. Both these expenses contribute to the overall cost of establishing and maintaining an LLC in California.
Moreover, LLCs are required by law to file an annual tax return, regardless of their profit or loss. While filling out the tax return may seem daunting to some, professional guidance from an accountant or tax specialist can be sought to accurately complete the process and ensure compliance. This inevitably entails an incurred cost, especially if professional assistance is necessary.
Furthermore, California necessitates LLCs to pay an annual franchise tax, which is distinct from an income tax. The specific amount depends on the LLC’s revenue with different tax rate thresholds applicable based on the company’s total income. Consequently, this annual franchise tax presents an additional cost that must be acknowledged when calculating the overall expenses of operating an LLC in California.
It is also prudent to bear in mind any legal and administrative charges potentially associated with running an LLC in California, particularly when seeking specialized advice such as debt recovery or intellectual property protection. Engaging legal expertise when required can help LLC owners navigate any intricate regulations related to their business operations. While these expenses may not be a recurring burden, they must still be considered because of their potential impact.
Moreover, business insurance is imperative. The type and extent of coverage an LLC requires in California are determined by several factors such as travel activities, leased premises, or employee relations. However, insurance premiums can be substantial depending on the scale and nature of the LLC’s business activities. Taking the time to research and compare various insurance companies and their offers can yield potential cost savings by obtaining the best coverage at the most competitive price point.
Lastly, overlooking operating costs can be detrimental to an LLC’s financial health. This includes essentials such as utilities, rent (if applicable), communication expenses, licenses and permits, advertising, and the employee payroll, including insurance, benefits, and wages. Keeping accurate records of these costs will help manage the overall budget of the LLC effectively.
Taking all these factors into account, comprehending the cost of establishing and maintaining an LLC in California is key to ensuring the financial sustainability of the enterprise. While the expenses associated with operating an LLC in this state may seem overwhelming initially, proper budgeting, planning, and seeking professional advice when necessary will mitigate potential risks and ensure the long-term viability of the business.
It is possible to form an LLC without professional help, but forms still have associated costs, regardless of where your LLC is formed.
It is difficult to say whether forming an LLC is expensive. Nevertheless, the cost could be anywhere from $40 to $500. If you refuse to hire professionals, you’ll still have expenses like form fees to cover.
The need to separate personal money from business funds, thus necessitating the creation of a business bank account for your LLC.
The cost of California is much lower compared to other forms of business. Apart from the state filing fees and annual taxes, you might bear the cost of the registered agent. Compare the price of professional LLC services and choose the most affordable one.