Form Your US Company in California

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For most businesses, an LLC (Limited Liability Company) is the perfect business structure. It provides the owners with legal protection without overly complicating the financial side of the business. 

Forming a California LLC is your first step to founding your business, but LLCs are also useful ways to hold (and protect) assets such as real estate. Read on for a step-by-step guide to starting an LLC in California. 

How to Start a California LLC 

Step 1: Choose Your LLC’s Name

The first step is to find a suitable name for your LLC. In general, this name can be anything you find suitable, but there are some rules you need to follow. 

Firstly, your California LLC’s name must be unique from any other business’s name in California. You can search to find out if your preferred name is being used by searching here: California Business Name Search. 

Secondly, it must include a designator that makes it clear that your business is an LLC. You can choose from:  

  • LLC (the most popular choice)  
  • L.L.C.
  • Ltd. Liability Co. 
  • Ltd. Liability Company 
  • Limited Liability Company 

You should also avoid using any names that look like they may be affiliated with the government or have misleading or offensive connotations. 

Keep in mind that if you can’t find the perfect name, or if you’re not quite sure what to pick, you can always do business under a DBA name (“doing business as”) down the line. This can be a little more paperwork, but it’s a good way to rebrand your business and it’s easy to set up. 

If you’re going to be doing business under one name, make sure you also check the domain availability (website address), as the last thing you want to do is choose your name and then find out that every appropriate variation is already taken, and you have to have an unrelated or slightly obscure domain name. 

Step 2: Choose Your Registered Agent 

Every LLC needs a registered agent who can receive all legal mail on the business’s behalf. In California, they call this person an “Agent for Service of Progress.” This person will receive tax information, notices, and any subpoenas if you’re unfortunate enough to get into legal trouble. 

This person or company must have a California address (it cannot be a PO box). You can choose to be your own Agent for Service of Progress (AKA Registered Agent) or elect someone else, such as a friend, relative, or commercial registered agent. 

Commercial registered agents are a good option if you want to protect your privacy since all registered agent details are available publicly online. Most commercial registered agents cost around $15 a month and will forward your mail to you electronically. Many offer additional services for a higher fee. 

(If you can't decide whether to be your own registered agent or to hire a commercial agent, our guide here is a must-read.) 

Step 3: File Your Articles of Organization 

This is the step where you make your business official! Your Articles of Organization is your official certificate of formation. To do this, you need to file with the California Secretary of State. This may sound daunting, but it’s a straightforward process that can be completed online. You can also file by mail or via hand delivery to the Secretary of State’s office, but both of these methods will be slower and/or less convenient. 

Filing an LLC in California costs $70, and you can pay online (or by check if mailing or hand-delivering your forms). The information you need to hand includes: 

  • Your information, including name, address, phone number, and email address 
  • The name of your LLC 
  • The information for your registered agent (name, address, phone number) 
  • The LLC’s principle address - this is the primary place it does business from (this can be your home) 
  • The purpose of your LLC - This is a one-sentence description of what your business does, such as: “To provide quality landscaping services to homeowners and businesses in San Diego.” 
  • Whether the LLC is a series LLC, professional LLC, or non-profit LLC - most aren’t, and so you usually do not need to make a distinction here. Note that California will not allow most licensed professionals to form an LLC at this time. (A series LLC is an “umbrella” company holding smaller companies.) 
  • Whether the LLC is member-managed or not (if you will be the owner, in other words a “member”, then your company is member-managed) 

Once you’ve completed all the requirements of the online form, your information will be approved in about 5 working days, but you can pay a rush fee if you choose as outlined below: 

  • Within 24 hours: $350 
  • Within 4 hours: $500 
  • Almost immediate filing: $750 

(Note that the entire process is exactly the same whether you’re filing as a California resident, are a US resident elsewhere, or are a foreigner.) 

To file by mail, you need form LLC-1.

To file online, click here: Online Filing.

Step 4: File Initial Statement of Information Filing 

In California, you need to file an “Initial Statement of Information Filing”, which is Form LLC-12. This form defines your members and has other information you’ve likely already told them in your other documents. While this can seem a little pointless, you will need to complete a Statement of Information each year, confirming if the details of the LLC are still the same or have changed since you last filed. 

You can file your initial statement of information here. 

(Or for a print copy to mail in, click here.)   

It costs $20 to file. 

Step 5: Create Your Operating Agreement 

This is a step you need to take, but you only need to use it internally. Your Operating Agreement Outlines some of the things you will have outlined in steps 3 and 4, but it goes much more in-depth. If you’re the only member (AKA owner) of the LLC, the document contents will likely be brief. The document should contain information like: 

  • LLC’s name and primary address
  • Name, address, and phone number of the registered agent 
  • The names of each member (owner) of the LLC and their roles 
  • How much capital each member put into the business 
  • Any initial assets 
  • How ownership is distributed between members 
  • How taxes will be paid 
  • How profits and losses will be distributed and/or dealt with 
  • The duration of the LLC if it has a predetermined date in which it will be dissolved 
  • Outline any processes for a new member joining the company 
  • Outline any processes for a member leaving the company 
  • Meeting schedules (if any), voting rights, and similar procedures 
  • Anything else that needs to be outlined to prevent potential problems later 

Step 6: Get Your EIN

Your EIN is essentially your business’s social security number. This number will allow you to open a bank account, hire employees, and pay taxes. 

Getting your business EIN is a fast and simple process, provided you’ve completed the prior steps (though step 4 is not necessary to get your EIN). 

To apply for your EIN, click here and follow the IRS’s steps. 

You’ll receive your EIN instantly when you submit, so you’ll be able to move on with the next steps as soon as you’re ready. 

(Note: if filing from outside the US, write “Foreign” where it asks you for an SSN/ITIN/EIN on line 7b.) 

You can file via mail using Form SS-4, but it will take 4 weeks for you to receive your EIN.  

Step 7: Annual Franchise Fee 

In California, all LLCs are required to pay an $800 franchise fee each year - this is why California is considered one of the most expensive states to start an LLC in. The good news is that Assembly Bill 85 made it so all LLCs formed between 2021 and 2024 do not have to pay this fee for their first year in business. 

Normally, or during your second year, you’ll pay this fee to the California Franchise Tax Board. It is paid using Form 3522, described as an “LLC Tax Voucher,” though it is unfortunately not as beneficial for your wallet as most other vouchers! 

To find Form 3522, click here. Next, click online and then select the appropriate tax year. Click Limited Liability Companies and then Get Forms. You’ll find this form listed as Limited Liability Company Tax Voucher. 

This tax is due by April 15 each year, after your first year. (Though remember this first-year exclusion is currently only running until 2024.) 

Step 8: Apply for Licenses and Permits 

Depending on your industry, your business made need additional licenses and permits before you can start trading. There is no state-wide business license required. You may need a license or permit if trading as a licensed professional (such as medical professionals and lawyers), if you’re in construction, real estate, or working in private security. 

Step 9: Apply for Your Business Bank Account 

A separate bank account isn’t a legal requirement for an LLC, but it is best to have one. You likely chose an LLC structure for its legal protections, so get into the habit of using your business finances separately from your own, even if your company is just you. The last thing you want if there’s a legal issue is need to argue about what assets are yours (and thus cannot be accessed if you are sued) and which are the LLCs. 

Use your EIN to apply for a business bank account in this step. 

Step 10: Get Wise About Taxes 

You don’t need to think deeply about doing your taxes just yet, but be careful not to push them from your mind altogether. In California, LLCs need to register and pay taxes in two places; the FTB (California Franchise Tax Board) and your local city/county/town. If in doubt, find an accountant to work with - they nearly always save you money. 

With all 10 steps completed, you can get on with what actually matters - running your business! 

Let Us Take Formation Off Your Plate 

If all of this sounds tedious and time-consuming (it is!), why not hand the formation of your California LLC over to us? All you need to do is fill in a short form (find it here) and we’ll get to work, leaving you to make all the big picture decisions as any CEO should! 

We’ll handle everything from your Articles of Organization to acquiring your EIN. To get started, click here. 

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How to Start an LLC in California the Right Way (2022 Guide)

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BIO

Arjun Mahadevan

CEO & Co-founder
Co-founder at doola, previous Product Manager at Dropbox, and an alum of the Wharton School of Business. He’s personally processed over 100 applications and spoken to 500 customers.