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Starting an LLC in California means filing the right papers and complying with state rules and regulations when creating your business. Missing one document or overlooking a fee may result in delays that hold you back from forming your LLC. That’s why having the help of a professional company such as ZenBusiness can be quite valuable.
But even with the assistance of a professional company, you must still do much of the work on your own. Since every state has its own rules and regulations, this means that California will have some differences in its procedures. What follows is a simple step-by-step guide to help you form an LLC in the Golden Bear state.
Name the LLC
The first step is seemingly the simplest, but it may take some effort to do. That is naming your LLC for the business you intend to run in California. One rather obvious but overlooked requirement is that your business name must have some form of “LLC” in the title. Also, there are certain words such as “bank” or “corporation” that may imply your company is involved in insurance, which will require a considerable amount of documentation. So, unless it is included with insurance, avoid putting words in the company name that implies that it is.
Coming up with a proper name may be challenging enough, but under California law, it cannot be misleading or used by another company. By going through the California Secretary of State website for business names, you can discover if the name you’ve come up with for your company is currently in use.
If not, you can spend $10 to reserve that name for up to 60 days. This will require a Name Reservation Form. Also, if you download Business Entity: Name Regulations & Additional Statutory Requirements and Restrictions, you’ll have access to even more information.
Find a Registered Agent
All LLCs in California must have a registered agent. This is for processing services when documentation must go to or from the state and your company. Your LLC does not qualify as a registered agent, but it can be an individual or entity that is authorized to do business in the state and has a street address, not a P.O. box.
To become a corporate agent, you will need to file a California Corporations Code Section 1505 Certificate. The Secretary of State does maintain a list of companies that can be used as a registered agent. However, you can always search on your own to find the one for your needs.
California Articles of Incorporation
With a business name and registered agent in place, you are ready to make your LLC. This requires the following;
- File Articles of Organization or Form LLC-1
- Pay $70 State Fee
- Submit the name and address of the company for LLC
- Submit the name and address of the registered agent
- Submit how LLC will be managed
You will need to do all of these things before you can progress on to the next step. Be sure to double-check your submission forms and have everything in place before going onward.
Initial Statement of Information or Form LLC-12
Within 90 days of filing your Articles of Organization, you must file a Statement of Information or Form LL-12. The State requires this of California, and every two years afterward, as the LLC is still operational, you will need to file additional statements. There is a $20 filing fee, and you can mail the form to the state or hand-deliver it to the Office of Secretary of State. You will need to include the following information on the form;
- LLC Name, Email, & Mailing Address
- General Type of Business, such as retail, distribution, etc.
- LLC File Number with the Secretary of State
- Street address of Principal Executive’s Office of the LLC
- Name and Addresses of CEO, Manager, or Managers of the Business
- Name and address of Registered Agent
Keep in mind that if no manager has been appointed or elected to run the LLC, then all the names and addresses of each member of the business need to be included. The email address of your LLC is essential as well since the state can send information via this service as opposed to the US postal office.
Plus, if the mailing address of the LLC is different from the street address, that needs to be included as well. In essence, it is better to be safe and provides everything than being sorry and miss something vital.
To run the LLC you have created, you will need to obtain an Operating Agreement. This sets the guidelines for who owns the company and how it is to be run. The agreement itself can be either written, which includes all amendments that must be kept as part of the company records. Or, it can be an oral agreement as long as everyone is informed and understands how the company is to be run.
Oral agreements are generally for very small LLCs with one clear owner that is starting. Once the company begins to grow, a written Operating Agreement will probably need to be established to keep everything clear and consistent.
Employer ID Number or EIN
You will need to file for an EIN unless your LLC is just you and no employees. Obtaining an EIN is simple enough as you have to file with the IRS on their website. Whether your LLC needs to register with the California taxing authority is another matter. This is because filing will depend on how you collect taxes for the state.
- Sales Taxes: Register with California State Board of Equalization (BOE)
- Employer Taxes: Register with California Employment Development Department (EDD)
There is also an $800 minimum for the annual franchise tax to the California Franchise Tax Board. You may have to pay more depending on the income that is generated. If you decide that your LLC should be taxed as a corporation, then you will need to follow the corporate tax laws of California. Regardless of whether you follow corporate tax laws or not, all LLCs will have to file Form 568 or the Limited Liability Company Return of Income annually by April 15th.
For any additional information, you should check with the California Franchise Tax Board by consulting their website. This is because new laws, rules, and regulations arise annually, which may or may not affect your LLC.
You should have everything needed to form an LLC in California. However, there are a couple of points that need to be covered in case your business requires a professional state license or is considered a foreign or out of state LLC.
Professional State License: if your company requires having a professional state license, then you cannot form an LLC in the State of California. You should consult with the California Department of Consumer Affairs to ensure that you can still create an LLC. If any of the services that you provide does require a professional state license, then you can instead form a Limited Liability Partnership or LLP. The California Franchise Tax website can give some guidance.
Location: Depending on where you are located within the state, your LLC may require additional items such as a local, state-authorized, or federal business license. Check with the California Office of Business and Economic Development to see that you have all the necessary licenses to operate legally within the state. You may also want to consult with the US Small Business Administration for federal licensing.
Out-of-State LLC: Whether your LLC is from another state or another country, you will need to follow a few steps when setting up in California.
- File Application to Register for a Foreign LLC (LLC-5)
- Provide Certificate of Good Standing from LLC origin location
Keep in mind that even without a social security number or also being a US citizen, you can still get an EIN. Just complete Form SS-4 from the IRS and put the answer “none” in Section 7b and then call or contact the IRS to formally apply.
If you are considering forming an LLC in California, then you may want to get professional assistance when it comes to filing the right forms and following the proper procedures. Companies such as ZenBusiness offer an inexpensive online service in that regard.
You will need to evaluate your LLC, how large you want it to grow, and what direction you need to take before deciding to get professional assistance. While the filing process for receiving an LLC in California is relatively straightforward, there are some fees to be paid, and the rules and regulations may change, which could affect your application.
If you are in doubt, then seeking the professional help of ZenBusiness or another similarly reputable company offers the guidance and direction you need to ensure that all the proper procedures are following in forming an LLC in the State of California.