How to Start an LLC in California: Step-by-Step Guide for 2025

California leads the nation in entrepreneurship with over 4 million small businesses, but it’s no secret that the Golden State is one of the trickiest places to set up and maintain an LLC. 

While states like Delaware and Texas offer founders lower fees and more startup-friendly environments, California’s high taxes and complex compliance rules haven’t slowed down entrepreneurs in Silicon Valley, Los Angeles, or San Diego.

That said, forming an LLC in California comes with more hidden costs and administrative hurdles than most states. But it’s still entirely doable, even for international founders. 

And here’s one common myth to bust upfront: 

You don’t need to live in California (or the US) to form a California LLC.

This guide walks you through every step, cost and compliance requirements to start an LLC in California. Whether you’re a freelancer, consultant, creator, or e-commerce founder, you’ll leave with clarity, and a shortcut to getting it done the easy way with doola.

LLC Formation Requirements in California: 2025 Update

Forming an LLC in California can feel complex at first, but once you break down the essentials, it’s a straightforward process. This section covers who qualifies, the paperwork you’ll need, and the distinct rules California business owners must navigate

Who Can Form an LLC in California?

California keeps it fairly open when it comes to LLC formation, no need to jump through unnecessary hoops.

Here’s who qualifies:

✅ US Citizens and Non-Residents Are Welcome

You don’t need to live in California, or even in the US, to start a California LLC. International founders often choose California for strategic reasons, like proximity to customers or U.S. market credibility.

✅ Individuals, Groups, or Existing Companies Can Apply

Whether you’re a solopreneur, starting with a business partner, or looking to expand your current business through a separate entity, California allows it. There’s flexibility in who can serve as a member (owner).

✅ No Official Age Requirement, But Legal Capacity Applies

Technically, California doesn’t specify a minimum age to form an LLC. However, it’s generally understood that the individual should have legal capacity to enter into binding agreements, making 18+ the practical standard.

What Documents Do You Need to Form an LLC?

Here’s a quick breakdown of the essential paperwork to launch and legitimize your California LLC:

📌 Note: Even if some of these steps seem bureaucratic, skipping them can lead to major headaches later, such as fines, rejections, or even forced dissolution.

Important Reminder: California Isn’t Like Other States

California has its own unique set of rules and obligations that founders need to be aware of. These aren’t optional, they’re mandatory and can trip up even experienced entrepreneurs if overlooked.

Here are some of the California-specific quirks you can’t ignore:

1. $800 Annual Franchise Tax (Even If You Earn $0)

Yes, you read that right. California requires all LLCs to pay an annual minimum franchise tax of $800, regardless of whether your business is active, dormant, or hasn’t made a cent in profit. Budget for this from Day 1 to avoid surprise penalties.

2. Beneficial Ownership Information (BOI) Reporting

Starting in 2025, all LLCs must file a BOI report with FinCEN, a federal agency tasked with fighting financial crimes. This report discloses who actually owns and controls your business.

Missing this requirement can lead to hefty fines up to $500 per day until fixed.

Agencies You’ll Be Dealing With

When forming and maintaining your LLC, these are the key California (and federal) agencies you’ll interact with. Bookmark these now to save future headaches:

• California Secretary of State (SoS): The SoS handles your business registration, Articles of Organization, Statement of Information filings, and maintains your company’s official records.

• Franchise Tax Board (FTB): The FTB is responsible for collecting California state taxes, including the infamous $800 annual franchise tax, which applies even if your business made zero income. 

• California Department of Tax and Fee Administration (CDTFA): If your business sells goods or taxable services, you’ll register with the CDTFA to collect, report, and remit sales tax.

• Employment Development Department (EDD): If you’re hiring employees, you’ll need to register with the EDD to manage payroll taxes, unemployment insurance, and employee compliance requirements.

💡 Pro Tip on EINs:

An Employer Identification Number (EIN) isn’t just for corporations with employees, it’s essential for any LLC that wants to open a US business bank account, file taxes, or operate with legitimacy. Without it, you’ll hit roadblocks fast. 

Get yours directly from the IRS, it’s free.

If all of this sounds like a lot, because it is, doola takes the paperwork, the agencies, and the legal jargon off your plate so you can focus on building your dream. We’ll handle the forms, deadlines, and tax rules.

Sign up today and let’s get your California LLC off the ground.

Step-by-Step: How to Start an LLC in California

Your California LLC needs to be built on more than just good intentions. This section walks you through the essential steps, clearly and practically, so you can structure your business the right way from the start. 

Step 1: Choose a Unique Name for Your LLC

Your LLC’s name isn’t just branding, it’s a legal requirement.

California has clear rules to follow:

• Include “LLC” or “LLC” in the name to indicate limited liability status.

• Avoid restricted or misleading terms like “bank,” “insurance,” or anything suggesting government affiliation unless authorized.

• Search California’s Secretary of State Business Search to confirm the name is available.

• Check the USPTO Trademark Database to avoid conflicts with existing trademarks on a national level.

🔒 Name Reservation (Optional): For just $10, you can reserve your chosen name for 60 days if you’re not ready to file immediately.

🚩 Pitfalls to Avoid:

• Names too similar to existing LLCs: Even minor differences can trigger a rejection, so do a thorough search before locking it in.

• Prohibited words or misleading terms: Certain words like “bank,” “insurance,” or anything implying government affiliation, are restricted or require additional approvals. Misleading terms that don’t match your actual business activities can get flagged too.

• Missing required designators like LLC: California law requires that your name clearly indicate it’s a limited liability company. Forgetting this can delay your registration or lead to a name denial.

And remember, a rejected name will delay your formation, so getting this step right matters.

Step 2: Designate an Agent for Service of Process

Every California LLC must appoint an agent to receive official legal documents and notices.

And here’s how your options compare:

Why Use a Registered Agent Service?

• Protects your privacy (your home address stays off public records)

• Ensures legal notices don’t get missed while you’re on vacation or scaling your business

• Maintains compliance seamlessly, especially helpful for non-U.S. residents

Step 3: File Articles of Organization (LLC-1)

Filing the Articles of Organization (Form LLC-1) is the pivotal step that legally establishes your LLC in California. Until this form is filed and accepted by the California Secretary of State, your LLC doesn’t officially exist. 

📥 Where to File:

You have two filing methods, though one is strongly recommended for speed and convenience:

• BizFile Online: California’s official portal for business filings. It’s the fastest, most efficient route and allows you to track the status in real-time.

• By Mail: Traditional mail is still accepted, but processing times are noticeably slower. Only consider this if online filing isn’t feasible for your situation.

Cost: $70 (2025 rate), a one-time state fee payable upon submission. This covers the official filing and processing of your LLC’s formation documents.

⏲️ Processing Time:

• Online via BizFile: Typically 5–10 business days, though times may vary during peak periods.

• Mail: Processing times are longer and less predictable, often several weeks depending on the Secretary of State’s backlog.

📩 After Submission:

Once your filing is reviewed and approved, you’ll receive a stamped and certified copy of your Articles of Organization. This stamped document is your proof of formation: it’s what banks, tax agencies, and partners will require to verify your business exists.

Step 4: Create an Operating Agreement

While California doesn’t legally require LLCs to have an Operating Agreement, this internal document is essential for protecting your business and strengthening your legal standing, especially if you want to preserve your limited liability shield. 

Even single-member LLCs benefit from having a formal Operating Agreement in place. It acts as a blueprint for how your business will operate, clearly defining rules, responsibilities, and expectations among members (even if that’s just you).

Without this agreement, your LLC may appear less legitimate in the eyes of courts, banks, and future business partners, leaving you vulnerable to internal disputes or liability risks.

What Should You Include & Why?

1. Roles & Responsibilities of Members: Clearly outline what each LLC member is responsible for. This avoids confusion about duties, decision-making authority, and daily tasks. 

2. Ownership Percentages: Specify how ownership is divided among members. This is critical for determining voting power, profit shares, and succession rights. 

3. Profit & Loss Distribution: Detail how your LLC will distribute profits and allocate losses. Will distributions be proportional to ownership? Paid out quarterly or annually? Setting expectations now helps you avoid financial disagreements later.

4. Dispute Resolution Methods: Outline how conflicts between members will be handled, whether through mediation, arbitration, or legal action. A well-crafted process reduces the risk of costly, drawn-out legal battles and keeps business operations smooth.

Step 5: Apply for an EIN (Employer Identification Number)

An EIN is your LLC’s federal tax ID number, essential for nearly every business function. It’s issued by the IRS and required to operate legitimately in the US. 

Why Do You Need It?

• Open a US Business Bank Account: Most banks won’t let you open a business account without an EIN. It proves your business exists and is recognized by the IRS.

• Hire Employees or Contractors: Planning to scale your team? You’ll need an EIN to handle payroll taxes and employment filings.

• File Federal & State Taxes: From income taxes to employment-related filings, an EIN is the IRS’s way of identifying your LLC for all tax purposes.

How to Get One:

• IRS Website (Free + Instant): US residents can apply directly at irs.gov and get their EIN in minutes.

• Non-US Founders: You’ll need to submit Form SS-4. If you don’t have a U.S. Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), the process involves a few extra steps and waiting periods.

• Let doola Handle It: We even help international founders get their EINs without the stress, delays, or confusing paperwork, no SSN required.

Step 6: File the Initial Statement of Information (LLC-12)

Every California LLC must file LLC-12 within 90 days of formation; it’s a key step in staying compliant from the start.

• Due: Within 90 days of officially forming your LLC.

• Filing Fee: Just $20, but skipping it can lead to costly consequences.

• Details Included: You’ll need to list your LLC’s key members/managers, business address, and your registered agent’s contact info.

⚠️ Important: Missing this deadline can trigger penalties, loss of good standing, or even suspension by the Secretary of State, so don’t skip it.

Step 7: Register for State Taxes (If Applicable)

Each of these steps builds the legal, financial, and operational foundation of your California LLC. Skipping or rushing through them can cost you time, money, and legal protection later.

How Much Does It Cost to Start & Maintain an LLC in California?

Starting an LLC in California is more than a simple filing. Between formation fees, recurring taxes, and compliance requirements, it pays to know what you’re getting into. 

Here’s a breakdown of the key costs to help you budget confidently and stay on track.

With the costs outlined, it’s time to look at the bigger picture: how long the process takes and how those expenses are spread out from formation through your first year in business.

California LLC Formation Timeline & Cost Breakdown

You’ve got the cost list. Now it’s time to zoom out and see how the dollars and deadlines unfold.

Here’s the full timeline and what you’ll owe, and when, to keep your California LLC compliant.

📆 Month 1: Formation Essentials

Kick things off by filing your Articles of Organization, securing an EIN (Employer Identification Number), appointing a Registered Agent, and drafting your LLC Operating Agreement.

📆 Month 3: Initial Statement of Information (Form LLC-12)

Within 90 days of formation, you must file your Initial Statement of Information with the California Secretary of State. This document captures key details: member names, business address, and your Registered Agent.

📆 Month 4: Pay the $800 Franchise Tax

Regardless of income or business activity, California requires every LLC to pay an $800 annual minimum franchise tax by the 4th month after formation. Delays or missed payments can trigger penalties and jeopardize your LLC status.

Estimated Costs

• First-Year Estimate (with services): [ $1,000–$1,200] Includes filing fees, Registered Agent services, EIN, and compliance filings.

• Ongoing Annual Costs: [$900–$1,000] Covers state-mandated taxes and service renewals.

• Optional Extras: DBA filings, local permits, and business licenses (vary by city/county).

✔️ Money-Saving Tip: Using an all-in-one platform like doola can simplify the process, eliminate guesswork, and help you avoid costly missteps that could derail your business momentum.

California LLC Compliance Checklist

Smart founders don’t just launch, they stay compliant. The following checklist keeps you organized, penalty-free, and focused on scaling your business, not fixing avoidable mistakes.

⚠️ Penalties for Non-Compliance: Late or missed filings can result in business suspension, loss of good standing, fines up to $2,500+ and mounting interest.

Common Mistakes Founders Make (and How to Avoid Them)

As exciting as it is to file your LLC and pop the champagne, small oversights during your setup can quickly snowball into costly compliance issues, legal risks, and lost time.

In this section, we’re listing the top mistakes, potential costs, and how to avoid them altogether.

🚫 Ignoring the $800 Franchise Tax

Many first-time founders mistakenly believe they can skip the California $800 Annual Franchise Tax if their LLC hasn’t generated any income yet. 

But California doesn’t care about revenue, it cares about registration.

It’s simply the price of keeping your LLC legally active and in good standing with the state. So whether your LLC is thriving, dormant, or still in its planning phase, this tax is non-negotiable.

Business Impact:

1. Suspension by the Franchise Tax Board (FTB): Missing the tax can lead to your LLC’s suspension or forfeiture, stripping away your legal rights, including the ability to operate, sign contracts, or defend your business in court.

2. Penalties and Interest: The FTB adds $250 penalties per missed payment plus accumulating interest. What starts as $800 can quickly escalate into thousands in overdue fees.

3. Loss of Good Standing: Suspensions can lead to frozen bank accounts, lost deals, and blocked funding opportunities until all back taxes and penalties are resolved.

Example: What Happens When You Miss Franchise Tax

Let’s say you forget to pay the $800 annual Franchise Tax for two consecutive years. 

In Year 1, you’ll owe the $800 tax plus a $250 late penalty, along with accruing interest on the unpaid amount. In Year 2, the cycle repeats: another $800 tax bill, another $250 penalty, and more interest piling up. 

By the time you realize the mistake, you could be looking at well over $2,200 just to bring your LLC back into good standing. 

✅ Solution: Plan ahead by budgeting for this annual tax from Day 1. Set automated reminders so you don’t miss it, or let doola handle it seamlessly, with deadline tracking built in.

🚫 Missing Initial Statement of Information (Form LLC-12)

It’s easy to dismiss Form LLC-12 as just another administrative form, but skipping it can have serious consequences.

Many first-time founders either forget or don’t realize it must be filed within 90 days of forming your California LLC.

Business Impact:

• Automatic Suspension of Your LLC: If this filing is missed, the state may mark your LLC as suspended, halting its legal standing and operational authority.

• Reinstatement Fees and Penalties: You’ll need to pay additional fees and go through a reinstatement process, which eats up time and money.

• Disruption of Business Operations: A suspended LLC can’t open business bank accounts, sign contracts, or work with payment processors, causing friction with clients, banks, and potential partners.

✅ Solution: File Form LLC-12 immediately after formation to stay in good standing from day one. With doola, you’ll get built-in compliance tracking and deadline reminders year-round. 

🚫 Using Your Home Address for Business

Just to save a few dollars on startup costs, many founders list their home address as both their business and registered agent address.

It can expose your personal information and lead to logistical nightmares down the road, especially if you move or expand.

Business Impact:

• Your private address becomes public record: When you use your home address for business, it gets listed in state databases, easily searchable by anyone online. This compromises your privacy.

• Risk of spam and fraud: Publicly listing your home address opens the door (literally) to junk mail, scams, and even unexpected knocks from marketers, or worse.

• Missed legal documents/notices: If you move and forget to update your address with the state, important documents (lawsuits, tax notices) could be sent to your old residence, causing missed deadlines and penalties.

✅ Solution: Opt for a professional registered agent service (like the one included with doola) to protect your privacy, receive legal documents securely, and stay compliant. 

🚫 Skipping an Operating Agreement

It’s common for solo founders to treat this as optional, assuming this document isn’t needed.

In reality, it’s a foundational document that strengthens liability protection and prevents courts from treating your business as a personal extension.

Business Impact:

• No framework to resolve disputes: Without a written document, disagreements between members can escalate, often ending in expensive legal battles with no internal structure to lean on.

• Personal and business liability overlap: When there’s no formal agreement defining how the business operates, it gets harder to prove that your LLC is a separate entity. This weakens your liability protection and can expose personal assets to business risks.

• Risk of “piercing the corporate veil”: In a lawsuit or creditor claim, courts may disregard your LLC’s limited liability protection if it appears informal or mismanaged.

That means your personal assets could be on the line, all because key documentation was never put in place.

✅ Solution: Create a detailed Operating Agreement from Day 1, even if you’re the only member. doola provides templates to simplify this.

🚫 Confusing State vs. Federal Requirements

First-time founders often believe that once they file with the IRS, their tax duties are done. But in California, the Franchise Tax Board (FTB) operates independently, with its own rules, forms, and deadlines.

Missing these can cost you, not just in fees, but in credibility and momentum.

Business Impact:

• Missed or Incomplete Filings: Forgetting to submit necessary forms to either the IRS or the FTB can result in non-compliance.

• Costly Fines & Penalties: Late or missing state filings may trigger FTB penalties, while federal delays can invite IRS fines and interest.

• Double Taxation Confusion: Without proper coordination, you might accidentally pay more than you owe, or worse, overlook liabilities entirely.

• Risk of Delayed Approvals: Bank accounts, licenses, or contracts may get delayed if your filings don’t check out across both state and federal agencies.

✅ Solution: Stay organized with a clear compliance calendar that tracks both state and federal filing dates. Or, let doola handle all your filings, reminders, and documentation from formation to ongoing operations.

🚫 Failing to Update Addresses with Agencies

Founders often forget to update their address with key California agencies like the SoS, FTB, CDTFA, and EDD. That small oversight can snowball into missed notices, penalties, and even suspension.

Business Impact:

Lost franchise tax notices = late penalties = potential business suspension.

• Missed legal notices or tax deadlines: If your address is outdated, you might never receive time-sensitive documents like tax reminders, legal summons, or business renewal notices, putting your compliance at risk.

• Risk of penalties or suspension: When you don’t respond to state notices, because they were mailed to the wrong place, you could face suspension, fines, or even loss of good standing.

• Wasted time and money: Reinstating a suspended business or resolving missed filings is often more expensive and time-consuming than simply keeping your records current. 

✅ Solution: Always update your address with all relevant agencies immediately after any change. doola ensures your records stay accurate and up-to-date across the board.

🚫 Mixing Personal and Business Finances

Co-mingling personal and business expenses in one bank account is a classic startup misstep that could cost you big.

Not only does it weaken your LLC’s liability protection, but it also blurs financial records, opening the door to audits, fines, and personal exposure.

Business Impact:

• Unclear cash flow visibility: Tracking profitability or burn rate becomes nearly impossible when personal expenses muddy your books.

• Audit complications: Co-mingled accounts create messy records that raise red flags with the IRS and state tax authorities, increasing your chances of an audit.

• Personal liability risks: You could lose the very protections you set up the LLC for, meaning your savings, car, or even home could be fair game.

✅ Solution: Open a dedicated business bank account and keep every business transaction 100% separate from your personal spending. doola helps you set up a US business bank account from Day 1 so you can stay compliant, credible, and audit-ready.

Why Founders Choose doola to Form and Manage Their California LLC

California may be one of the most opportunity-rich states to build a business, but its LLC formation process isn’t exactly founder-friendly, especially if you’re doing it alone. 

That’s where doola comes in. We’ve designed our services to remove friction, eliminate risk, and save you time so you can focus on what really matters: growing your business.

📌 doola vs. DIY: What Does Your Business Really Need?

Here’s what you get with doola’s services:

• Save Time: Focus on running your business, not chasing paperwork.

• Avoid Penalties: We keep you ahead of deadlines so you stay in good standing.

• Stay Compliant: From tax filings to annual reporting, we’ve got it covered.

From formation and EIN to registered agent services and compliance reminders, we’ve got you covered, whether you’re a first-time founder or a digital nomad.

Ready to get started? Sign up with doola today!

FAQs

Can I be my own registered agent?

Yes, but your address goes on public record.

Can a non-US citizen open a CA LLC bank account?

Yes, with an EIN and proper documentation.

How long does formation take?

Typically 5–10 business days online.

Do I need a business license?

Depends on your city/county and industry.

What’s the minimum age to own/manage an LLC?

No official minimum, but 18+ is recommended.

What happens if I miss a compliance deadline?

Fines, suspension, or loss of good standing.

How do I dissolve a California LLC?

File dissolution forms with the SoS, settle taxes with FTB.