Start Your California LLC

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A limited liability company is a business structure that may help business owners in protecting their personal liability from their business debts or business liabilities (when they properly maintain their LLC). An LLC combines some of the characteristics of a corporation with those of sole proprietorships or partnerships.

State regulations applicable to LLCs vary, but, in general, when forming an LLC, owners of LLCs are called members while owners of a corporation are called stockholders. Essentially, no state allows banks or insurance companies to form LLCs.

In California, an LLC cannot provide professional services, so medical doctors, dentists, optometrists, veterinarians, and other similar professionals cannot form an LLC. Unlike some states, California also prohibits professionals from forming professional limited liability companies.

California makes it a bit difficult in that this rule does not eliminate all professionals, but according to the California Corporations Code:

“’Professional services’ means any type of professional services that may be lawfully rendered only pursuant to a license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act.”

The reasoning behind this rule is based on the assumption that individuals in these professions earn a lot of money, and if they want to shield that income from the debtors or those who may obtain a legal judgment against them, they need to take the more complicated and costly step of forming a corporation.

Here are the steps you’ll need to take in order to get your LLC in California.

How to Start a California LLC in 6 Steps

Below, you’ll find a detailed explanation to walk you through each step.

Apply for a California LLC with Tailor Brands

Business Name

Step 1

Choose state &

business name

EIN

Step 2

Answer a few
easy questions

Start LLC

Step 3

We’ll submit your

LLC application

What do I get with my LLC?

LLC filing

This includes all of the documentation you need to get your LLC formalized.

Name availability search

We’ll check federal trademark records in relation to your business name.

Priority support

Our dedicated business formation team is here to help with your LLC application!

Registered agent

Is an essential contact between an LLC and the state it's registered in, and helps take care of all the formal processes.

Employer ID number (EIN)

It helps you file tax returns for your business and reduces your personal liability. It's necessary to open a business bank account.

Annual compliance

We've got your back with all the official annual compliance for your state so that you can operate legally.

Operating agreement

You'll receive this key document, which outlines your business's structure and other information.

How to Form a California LLC in 6 Steps

Step 1: Name your California LLC

California requires you to choose a name for your business. The name cannot be the same as any other California business that is on file with the Secretary of State. You can find business names that are in use by searching through the business name database kept on file with the California Secretary of State.

In addition to not being the same name as any other business already doing business in the state, other requirements are:

Reserve a business name

If you are not ready to complete the formation of your LLC, you can pay a $10 fee and reserve a name for up to 60 days. You can access the name reservation form online and can submit it with a $10 check or money order by mail to:

      Secretary of State

      Name Reservation Unit

      1500 11th Street, 3rd Floor

      Sacramento, CA 95814

You can drop off the form at the Secretary of State’s office in Sacramento or the office in Los Angeles that is located at:

300 South Spring Street, Room 12513

Los Angeles, CA 90013

If dropping the form off in person, you can pay by check, money order, or a Visa or Mastercard credit card.

You can reserve more than one name, but each reservation must be on a separate form, delivered in a separate envelope, and have a $10 check or money order included with the reservation form.

You can renew the reservation, but there must be at least a one-day interval between the end of the 60-day reservation period and the day you submit your renewal of the reservation of the name.

File a DBA

California requires you to file a DBA if you plan on doing business under any name other than the one you used at the time of the formation of your LLC (optional). If you always sign legal documents under the name on your Articles of Organization, then using a DBA is optional.

Register your name for a trademark

When you form your LLC in California and choose the name of your business, you are protected within the state and no one else in California can use your business name or one that is similar to it.

Other businesses within the country are not prohibited from using the name in their own state or other states unless you obtain a federal trademark that gives you exclusive use of that business name.

To register the name of your LLC for a federal trademark, you must submit an application to the United States Patent and Trademark Office (USPTO). Before you do this, you must conduct a search to be sure the name is not already trademarked. You do this by searching through the Trademark Electronic Service System (TESS).

This can be a complicated and time-consuming process, and one that we can do for you if you decide this is something you want to proceed with.

Step 2: File articles of organization

California requires you to file Articles of Organization with the Secretary of State. You do this by simply filling out form LLC-1 entitled “Secretary of State Articles of Organization Limited Liability Company (LLC).” The last two pages of the form include instructions for filling out the form and submitting it.

Filing fee

The filing fee for your Articles of Organization is $70.00. You may pay for it by check or money order made out to the California Secretary of State. If you want a certified copy, it will cost $5.00 for the certification.

Requirements for filing your Articles of Organization

You need to be sure you fill in form LLC-1 correctly or it will be sent back to you for correction and delay the process of operating your business as an LLC. And if you have not filed a reservation of the name, you could risk losing your name to another business. This is likely not a high risk, but it is still a risk.

Include the following on the form: 

How to file

California allows filing the Submission of the Cover Sheet and the Articles of Organization online by mailing them or presenting them in person to the California Secretary of State in Sacramento.

Form a California LLC, Hassle-Free

Step 3: Choose a registered agent

The California Secretary of State requires a registered agent to be identified in the Articles of Organization. The agent must:

The LLC can choose the services of any approved California registered agents or can use a registered corporate who is qualified with the California Secretary of State.

You can choose to designate yourself as the registered agent. Keep in mind that if you do that, your information will be public. This may be an issue if you are running the business out of your home.

Step 4: Create an operating agreement

Like most states, California does not require an operating agreement to be filed with the Secretary of State, but the state does require the LLC to prepare one and maintain it at the LLC. An operating agreement defines the roles and responsibilities of all members and goes a long way toward preventing future misunderstandings.

The agreement should include:

The operating agreement should be updated whenever there is a new member or there are any other changes that need to be made so that the agreement will accurately reflect your current situation.

Step 5: Apply for an EIN

An EIN is your Employer Identification Number required and issued by the IRS for all LLCs. It is a 9-digit number similar to your Social Security Number (SSN) but is used for business-related purposes only.

As a business owner, you will need an EIN to open a business bank account, apply for a business loan, and to pay your business income taxes.

If you question whether you need an EIN, review this document from the IRS, answer the questions there, and decide for yourself. You can then apply for your EIN for your LLC online by filling out this form, or you can ask us to do it for you since this is a service we provide.

Step 6: Comply with the state's tax requirements

Every LLC that is organized or doing business in California must pay an annual tax of $800 from the time the LLC is formed until the LLC is formally dissolved. This is true even if the LLC is only organized in the state but not conducting any business there.

The tax is due on the 15th day of the 4th month following the date you file your Articles of Organization with the Secretary of State.

The $800 tax for the first year is waived for those LLCs formed between January 1, 2021, and January 1, 2024.

Businesses are also exempt if:

How your LLC will be taxed

Income tax

If your business made more than $250,000 in income, you will pay a fee according to the amount of income generated, in addition to the annual $800.

According to the California Franchise Tax Board, the current fee structure is as follows:

If the total California income rounded to the nearest whole dollar is:

$250,000 – $499,999: The fee is $900.

$500,000 – $999,999: The fee is $2,500.

$1,000,000 – $4,999,999: The fee is $6,000.

$5,000,000 or more: The fee is $11,790.

As for income tax, the LLC itself does not pay income tax. The members pay personal state and federal income tax based on the amount of money they earn from the LLC the same way as any of their other earnings.

Sales tax

An LLC that is in the retail business must register with the California Department of Tax and Fee Administration (CDTFA) and pay all sales tax on goods and services except for those that are specifically exempt.

Self-employment tax

Self-employment tax must be paid by LLCs that have a net profit of $400 or more during the taxable year. The tax is for Social Security and Medicare tax for self-employed people.

Payroll tax

For all LLC employees, the LLC must withhold payroll taxes, which include:

Other state taxes

LLCs pay property tax on all property they own in the county where the property is owned.

The LLC may also need to pay excise taxes, fuel taxes, and environmental fees, all depending on the type of business in which the LLC is engaged.

What To Do After You’ve Formed an LLC

Open a separate business bank account

The Small Business Administration (SBA) advises all businesses to open a separate business account as a protection to be sure they are and stay legally compliant. To open the business account you will need:

Accounts you need to have for your business include a:

Look for banks that offer good rates to new businesses. Avoid those that have hidden fees like those imposed if you fail to have a required minimum account balance and similar types of penalties.

Understand your ongoing annual LLC fees

Fees imposed by the State of California based on the income of your business if the business earns more than $250,00 as discussed above are due on the 15th day of the 6th month of your tax year.

Determine if the timing of the formation of your corporation allows you to be exempt from the $800 for first-year LLCs.

Within 90 days of filing your registration of your LLC, you must file a Statement of Information with the Secretary of State. This is essentially the equivalent of the annual statement required of corporations and must be filed every two years.

The filing fee for this document is $20 and must be paid by Mastercard or Visa. You can update the Statement of Information any time during the two-year period of time, and there is no fee for the update.

Set up finances

If you have not done so already, now is the time to consult with a tax advisor such as a tax lawyer or certified public accountant (CPA) to make a plan so that you can get the most out of the tax benefits from your LLC.

Your tax professional will assist you with identifying your goals, help you plan for a good cash flow with your business, determine your insurance needs, and provide you with many other benefits with the goal of optimizing your income.

Obtain relevant business licenses and permits

Essentially, every business operating in California is required to have a business license. The basic license is simply called a general business license. A business license is not issued to LLCs by the Office of the Secretary of State, but by the state agency with jurisdiction over the activities that are conducted by the LLC.

Also, if your business is required to be licensed, certified, or registered, the California Secretary of State urges you to contact the appropriate licensing authority to determine whether your services are considered professional and therefore prohibited from operating as an LLC.

Depending on the type of business the LLC is involved in and where it is located, you may also need a specific type of business license and/or a permit from the state before you can actually begin operating. Your local city or county may require this even if the state does not.

It is most common for a restaurant or any business that sells food and/or alcohol to need a business license. You can check state requirements to see if your business requires a license or permit online here. The Department of Consumer Affairs also provides helpful information to businesses about licensing regulations.

You also need to check with your local government and municipality to see what the rules are.

Start an LLC in California, Hassle-Free

This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.