File LLC in California: Everything You Need to Know
To file LLC in California, a business must first file its Articles of Organization with the California Secretary of State's office. 8 min read
2. How to File Articles of Organization with the State
3. What Is an LLC?
4. How to Choose a Company Name
5. What Is a Registered Agent?
6. What Is Ownership and Management Structure?
7. What Is an Operating Agreement?
8. What Is Required to File a Statement of Information?
9. How to Pay State Tax Obligations
10. What Are Other Tax and Regulatory Considerations?
11. What Is the Purpose of an Employer Identification Number?
12. Are There Any Special Rules in California for Professional Services?
13. What Are the Rules for Foreign LLCs Doing Business in California?
File LLC in California
To file LLC in California, a business must first file its Articles of Organization with the California Secretary of State's office. Although there are several steps to filing for a California LLC, the process is not complicated.
How to File Articles of Organization with the State
A California LLC is created by filing Articles of Organization (Form LLC-1) with the state. Form LLC-1 requires the following information:
- Name of the LLC
- Purpose of the LLC
- LLC address
- Name and address of the designated registered agent
- Information on how the LLC will be managed
Whoever prepares and files Form LLC-1 is, by default, considered the organizer. Anyone can be designated as the organizer. The person does not have to be a manager or a member of the LLC
The articles of organization form can be completed online on the website for the California Secretary of State. The completed form can be filed in person at the Secretary of State's office or mailed using the U.S. Postal Service.
The filing fee for Form LLC-1 is $70. Acceptable payments include check, money order, or cash. If hand-delivering Form LLC-1 to the Secretary of State's office in Sacramento, the filing process can be expedited for an additional fee.
What Is an LLC?
There are several advantages to having an LLC:
- Earned profits are dispersed to its members.
- A separate tax return is not required for an LLC the way it is for a corporation.
- Owner(s) are exposed to less liability for a company's activities.
In some states, the Articles of Organization must be published in a newspaper for LLC status to be finalized. This is not the case in California, where there is no requirement to publish a public notice in the newspaper.
How to Choose a Company Name
Select a name that is suitable for the type of services provided by the business. Make it a name that is easily found during a search by clients.
There are several rules in place when selecting a California LLC name:
- California law stipulates that the name of the company must end with either "LLC" or "L.L.C." or "Limited Liability Company." The word "Limited" may be abbreviated to "LTD," and "Company" may be abbreviated to "Co."
- The words "inc.," "trust," "trustee," "corp.," "bank," "corporation," "incorporated," "insurer," or "insurance company," cannot be part of the name of the LLC. Also, there can be no words in the name that suggest the company is in the insurance business.
- When filing the name of the LLC, the database searches only those names of LLCs already registered with California's Secretary of State. The name cannot be a duplicate of an already existing LLC, nor can the name be similar to a name existing in the state's records.
- The LLC name cannot, in any way, be misleading to the public regarding state or federal agencies such as the Secret Service, Treasury, FBI, etc.
Use a Name Reservation Request Form to reserve an available LLC name for up to 60 days. A $10 fee applies when reserving a name.
What Is a Registered Agent?
A registered agent is an individual affiliated with the LLC or a private business that provides registered agents. The agent has responsibility for Service of Process, which means the agent agrees to send and receive legal paperwork on behalf of the LLC. This includes paperwork for any legal action, in the event the LLC is sued, as well as for any state filings.
An agent for service of process is required for all LLCs in California. The agent must be a California resident. If a private company is designated as the agent, it must be authorized to do business in California. The LLC cannot serve as its own agent. Before designating an agent, the individual or business selected should agree to accept the responsibility of Service of Process prior to designation.
For corporate individuals serving as an agent of Service of Process, the person must have on file with the Secretary of State's office a California Corporations Code Section 1505 Certificate.
A list of private service companies acting as an agent for Service of Process is available at the office of the California Secretary of State.
What Is Ownership and Management Structure?
On the Articles of Organization Form LLC-1, one question asks how the California LLC will be managed. The form asks if one or more managers will be running the LLC or if all the members of the LLC will be responsible for management.
For LLCs that have more than one member, a limited liability company operating agreement is necessary for each member.
What Is an Operating Agreement?
While the state of California does not require an LLC operating agreement, it is highly recommended that one be in place. The operating agreement is a legal document that outlines LLC ownership and operating procedures.
For an LLC that is manager-managed, an Operating Agreement is necessary for the company records. The current law in California states that a manager-managed LLC is not valid unless it is declared in the Articles of Organization and the Operating Agreement.
Examples of information that would be included in an Operating Agreement include the following:
- Money matters
- Fiduciary constraints
What Is Required to File a Statement of Information?
Any LLC company doing business in the state of California, as well as any foreign LLC, must file a Statement of Information (Form LLC-12) with the office of the California Secretary of State. Form LLC-12 must be filed within 90 days after the Articles of Organization (Form LLC-1) have been filed.
After filing Form LLC-12, it is required that the Statement of Information be filed every two years after the initial filing. The date to file depends on when the original Articles of Organization or the application for registering a foreign LLC occurred.
The filing period is the calendar month during which the original articles of organization (or Application for Registration by a foreign LLC) were filed and the prior five calendar months. For example, if the Articles of Organization were filed Sept. 15, the Statement of Information would be filed between April 1 and Sept. 30.
The form for The Statement of Information can be hand-delivered or filed by mail. Subsequent filings can also be hand-delivered, mailed, or completed and filed online. Form LLC-12 is available on the website for the California Secretary of State.
Information needed on a Statement of Information includes the following:
- The name of the LLC and the file number from the California Secretary of State.
- Street address of the principal LLC executive officer.
- The mailing address of the LLC, if it is not the same as the address of the principal executive officer
- Name and address (business or residential) of any manager or chief officer. If a manager has not been appointed, the form requires the name and residence or business address of each of the LLC members.
- The general type of business the LLC will be involved in.
- A valid email address to receive electronic notifications from the Secretary of State instead of them being delivered by the U.S. Postal Service. If no email address is provided, the U.S. Postal Service will deliver notifications.
- Name and address of the LLC's registered agent for Service of Process.
How to Pay State Tax Obligations
For any LLC or foreign LLC that is registered in California, conducts business in California, or was organized in California, taxes must be paid to the California Franchise Tax Board (FTB.)
California taxes are also due from all LLCs and foreign LLCs that have chosen not to be taxed as corporations. The LLC will be taxed as a sole proprietorship or partnership. Any LLCs being taxed as a corporation must follow California's corporate tax rules.
The minimum annual franchise tax due on a California LLC is $800. LLCs that reach certain income levels will be required to pay an additional fee that is based on the total annual income.
California requires all LLCs to file a Limited Liability Company Return of Income (Form 568). The form is due by the 15th day of the fourth month after the LLCs taxable year has ended.
The California Franchise Tax Board has tax forms available on its website.
What Are Other Tax and Regulatory Considerations?
The type of business the LLC is promoting and where the LLC is located may require other state and local business licenses. For example, an LLC may have to do the following:
- Register with the California State Board of Equalization if the LLC will be collecting sales tax.
- Register at the California Employment Development Department (EDD) for employer taxes.
What Is the Purpose of an Employer Identification Number?
The Employer Identification Number (EIN) or Federal Tax Identification Number is the Social Security number for an LLC. The main purpose of an EIN or Federal Tax Identification Number is to identify a company.
If an LLC has more than one member, an IRS Employer Identification Number is required. If the LLC has no employees, an EIN is still needed. An LLC formed with only one member still requires an EIN if the LLC is being set up to be taxed as a corporation versus a sole proprietorship.
An LLC must have an EIN when filing state and federal taxes, and in some instances, an EIN is required to open a business checking account with a bank.
At the IRS website, online applications are available to request an EIN, or an application (Form SS-4) for an EIN can be printed out and mailed.
Are There Any Special Rules in California for Professional Services?
LLCs in California cannot be formed to provide professional services under California law. Separate requirements are in place for various professional services. For a company that is offering professional services, the LLC must meet the legal requirements set forth by the state of California that apply to professional services.
Professional services are considered those that require a professional state license. An alternative to an LLC that addresses professional services is opening a limited liability partnership (LLP).
Statutes that regulate businesses providing professional services include:
- The Yacht and Ship Brokers Act
- Chiropractic Act
- Osteopathic Act
- The Business and Professions Code
What Are the Rules for Foreign LLCs Doing Business in California?
Any LLC that is organized outside of the state of California is required to register with the office of the California Secretary of State. The LLC will not be able to do business in California until it is registered.
To register with the California Secretary of State, an Application to Register a Foreign Limited Liability Company (Form LLC-5) must be filed. The form must be filed by mailing it through the U.S. Postal Service or hand-delivering it in person. The filing fee is $70 by mail or $85 when delivered in person.
Along with the Application to Register a Foreign Limited Liability Company form, a Certificate of Good Standing must be included. The Certificate of Good Standing will be from the agency where the LLC was initially formed. This information can be requested from the Department of State in the business entity's originating state. The date of the Certificate of Good Standing should not be more than six months before filing. Within 90 days of qualification, the Statement of Information should be filed.
An advantage of becoming a foreign LLC is the company can operate as one business entity in multiple jurisdictions.
The Business Entities section on the Secretary of State's website has more detailed information.
If you need help filing an LLC in California, 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.