California LLC

This guide covers all the steps involved in establishing and operating an LLC in California, how to name your business to how to remain in operation on an annual basis.

1. Select a Name of Your California LLC

The first step is an important step, which involves choosing the appropriate business name. Your LLC name must be distinctive, catchy and representative of what you are doing.

Business Name Choosing tips

State your business idea first before deciding on a name.
Seek advice and recommendations of close friends or co workers.
Do a web search to make sure that the name is not already a household name.
Ensure domain name is available in the future as a brand.
Get business name generators to inspire (but do not make use of them blindly).

A name is a brand thus you must take the necessary time to choose the right name.

Check Name Availability

Search Business Search database, California Secretary of State.
Research the US Patent and Trademark Office (USPTO) database to see whether the name is federal in name of trademark.

California You shall add to your LLC name the designation Limited Liability Company or a recognized abbreviation (LLC or L.L.C.) and shall not include in your LLC name any terms that may give rise to confusion with a governmental agency.

Moreover, the name of the business cannot contain any restricted words like a bank, insurance and university without permission of the state authorities.

Reservation of LLC Name in California

You would like to have your name registered prior to filing:

Go to Californian Secretary of State on bizfile Online.
Even open up or sign up an account.
Go to Forms -Entity Name Reservation.
Finish the web based application.

After submitting you will see that you can go through all the details again to be sure they are accurate and then you have to make a payment of $10 as the filing fee. The reservation of the name lasts 60 days.

Doing Business As (DBA) in California

A DBA (Fictitious Business Name) will be required in case you intend to use a different name than the legal name of your LLC.

Common Reasons to Use a DBA:

In order to launch new product lines or brands.
To be paid and open bank accounts with an alternative name of business.

Registering a DBA:

Register a Fictitious Business Name Statement with the county clerk of the county in which you use the business address as your principal business address.
The filing fees depend on the county (the fee is usually 10-50 dollars).
The majority of counties demand newspaper publication over some period of time.
With the help of the CalGold Permit Assistance site, you will be able to find the right local office.

2. Appoint a Registered Agent

All Californian LLCs should assign a registered agent that will take legal, tax, and government documents.

Requirements of Registered Agent

Must be 18 years or older
Should be located with physical street address in California (no P.O. Boxes)
Should be accessible during the regular business hours.
In case of a company, it should be licensed to operate in California.

You can be your own registered agent but most owners prefer privacy and convenience and may therefore engage professional registered agent service.

3. Choose Your Management Structure

The California LLCs may be organized either as member-managed or manager-managed, and the selection of the appropriate structure is subject to the degree to which the owners would like to participate in the day-to-day activities.

Member-managed - owners have control of day-to-day affairs.
Manager-managed - the business is operated by managers (members or non-members).

Selecting the appropriate Structure

Member-managed LLCs are most effective in the case of small businesses that have active owners.
It is best when managers of LLCs prefer passive participation among some of their owners.

California asks that you designate the management structure on your Articles of Organization.

4. Submit Articles of Organization

You need to register your LLC with Articles of Organization with the California Secretary of State to form your LLC legally.

Information Required

LLC name
Principal office address
Name and address of registered agents.
Member-managed or manager-managed management structure.

The filing fee is $70. When you do online file, you will normally get the confirmation within 5 business days. Filings via mail can take up to 2 3 to process.

Secretary of State Contact

California Secretary of State- Business Programs Division
1500 11th Street
Sacramento, CA 95814
916-653-6814

5. Make an Operating Agreement

California demands an Operating Agreement (written or oral) on all LLCs.

What It Should Include

LLC name and address
Ownership percentages
Control and stock share.
Distribution of profits and loss.
Member responsibilities
Procedures of dispute resolution.
Admission and expulsion regulations.

Though not registered with the state it has to be attached with company records.

6. Get an Employer Identification Number (EIN)

An EIN is required if:

There are more than one members of your LLC.
You hire employees
You decide on corporate taxation.

Apply in the IRS webpage at no cost. The application shall identify a responsible party (not an entity).

All applications filed by mail, fax, or Web by EINs should contain the name and Taxpayer Identification Number (SSN, ITIN or EIN) of the true principal officer, general partner, grantor, owner, or trustor of the entity. This individual is known by the IRS as the responsible party. It is the person who owns or runs or oversees the entity and its finances and resources that is in charge. The party to bear responsibility should be a natural person, not a different business or an establishment except in the case of the government.

7. Get Necessary Permits and Licenses

The conditions of license are dependent on the business activity and location.

Possible Licenses

General business license
Sellers permit (taxable goods/ services)
Licenses that relate to the industry (construction, healthcare, finance, etc.).
Health, fire, zoning, and signage permit.

Determine federal, state, and local requirements with the help of CalGold.ca.gov.

Failure to operate according to the proper licenses may attract fines or penalties.

It is one of the steps which should be taken into consideration during the LLC formation process, and you should make sure that you visit your state and local government offices to determine all the licenses and permits that you have to acquire.

8. Determination of Your Tax Classification

Default Tax Treatment

Single-member LLC → taxed as a sole proprietorship.
Multi-member LLC → partnership taxation.

Optional Tax Elections

C-Corporation (Form 8832):

21% corporate tax rate
Possible double taxation

S-Corporation (Form 2553):

Payroll taxable salary.
Remaining profits are not liable to self-employment tax.

Further California LLC Requirements

Open a Business Bank Account

Maintains personal and business finances, and maintains liability protection.

Get a Business Credit Card

Helps obtain business credit and set up costs.

Obtain Business Insurance

Common policies include:

General liability
Professional liability (E&O)
Workers' compensation
Commercial auto
Equipment coverage and property coverage.
Business Owner's Policy (BOP)

California Annual Compliance

Statement of Information

File in 90 days of formation.
Then every 2 years
Filing fee: $20

Annual Franchise Tax

$800 minimum tax
Paying by the 15th day of the 4th month.
Extra charge where revenue is greater than $250,000.

California LLC FAQs

Name reservation: $10

Articles of Organization: $70

Statement of Information: $20

Annual franchise tax: $800

Online: ~8 business days

Mail: up to 3 weeks

Yes. You may serve as your own registered agent if you are at least 18 years old, have a physical street address in California (no P.O. Boxes), and are available during normal business hours to accept legal documents.

Yes. California law requires every LLC to adopt and maintain an operating agreement internally, though it is not filed with the state.

Yes, but only under strict conditions. A nonprofit LLC in California must be organized exclusively for charitable purposes, have only 501(c)(3) tax-exempt members, and include IRS-required language in its Articles of Organization.

It must also file Form 1023 with the IRS and Form 3500A with the Franchise Tax Board for tax exemption.

Yes, a trust can own an LLC in California. You can name your revocable trust as the member in the LLC's operating agreement, allowing the trust to hold ownership. This setup enables smoother succession planning, as the trust can designate who takes over the membership upon your death.

How to Start Your LLC in California