California State LLC: Everything You Need to Know
California state LLC types are formed by filing the Articles of Organization. 3 min read
California state LLC types are formed by filing the Articles of Organization. To maintain good standing, the LLC needs to file a Statement of Information after formation and every two years thereafter. Most LLCs pay at least $800 annually in California state franchise tax. LLCs are registered and regulated by the office of the California Secretary of State.
Formation of an LLC in California
To form an LLC in California, owners need to follow the following steps:
1. Get a Name
California LLC names are required to end with “Limited Liability Company” or its abbreviation. It is important to avoid prohibited and restricted words in the name. You can look up a name for availability online on the Business Search page of the California Secretary of State. You can reserve a name for 60 days using the California Name Reservation Form at a fee of $10.
2. Get a Registered Agent for Service Process
The agent's responsibility is to send and receive legal notices on behalf of the company. In California, an LLC cannot serve as its own agent.
3. File the Articles of Organization
The Articles of Organization are filed using Form LLC-1. The form lists basic details about the LLC including its address and registered agent. Successful submission of the form and its acceptance by the Secretary of State signals the formation of the LLC. The filing fee for this form is $70.
Foreign LLCs register by filing the Application to Register a Foreign Limited Liability Company form, Form LLC-5. The fee for normal processing for foreign LLCs is $70 and the form is filed by postal mail. Processing time for foreign LLC applications is about 2 months, therefore, you might consider paying $350 for expedited 24-Hr processing. A Certificate of Good Standing which is not older than six months is required from the LLC's home state for the registration. There are no publication requirements in California.
4. Make an Operating Agreement
The Secretary of State does not require the LLC to file an operating agreement. Nevertheless, the agreement may help LLC members to avoid future conflicts.
5. File a Statement of Information
An initial Statement of Information should be filed within 90 days of the official formation of the LLC and biennially after that. Filing costs $20.
Register for State Taxes
Depending on the LLC's management structure and activities, the LLC and its members might be required to pay franchise tax, sales tax, unemployment tax, self-employment tax, and other taxes.
If your LLC has employees or if it has multiple members, it is required to get an Employer Identification Number from the IRS. Fill in the SS-4 form to apply for free online. The LLC itself does not pay federal taxes but is required to file returns to the IRS. LLC members will likely also qualify for federal taxes.
7. Get Local Permits and Licenses
The exact licenses and permits you need to get depend on the nature of the business. You can find out details about the particular permits and licenses you need from the local Chamber of Commerce. In California, LLCs are prohibited from providing professional services.
California residents who are partners in LLCs that are not registered or conducting business in California are required to file a California K-1 form. If the tax board proves that none of the income is from California, the state will credit the state tax if it was paid to another state.
Maintenance of a California LLC
- File the Annual Statement of Information. The Statement of Information updates the Secretary of State's office with changes in any of the LLC's information. It is required by the state every other year.
- File State and Federal Taxes. Most LLCs in California pay franchise tax annually and it ranges from $800 to $12,590 depending on the total income of the LLC. Taxes for most LLCs are due on the 15th day of the third month of the LLC's tax year while the returns for some single-member LLCs are due on the 15th day of the fourth month of the LLC's tax year.
Dissolution of a California LLC
LLC registrations in California are withdrawn by closing the LLC's bank accounts followed by filing a Certificate of Cancellation with the Secretary of State.
If you need legal help with California state LLCs, including on issues of LLC formation and maintenance, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.