Forming an LLC in California

If you’re forming an LLC in California, then choosing a name for your LLC should be your top priority. The name must be open and available in California, and be one that no other company has the rights to use.

California has a number of stringent naming requirements for LLCs.

  • The LLC’s name must include “LLC” or “limited liability company” with it.
  • Naming your LLC must include certain words for qualification and approval.
  • The chosen name cannot include words that suggest it is a federal or state agency.

If your LLC wants to use words like “University,” “Attorney,” or “Bank,” additional paperwork may be required showing that a person licensed in one of those areas is involved in your limited liability company.

Check your LLC name for a registered trademark for your business on the USPTO website. Widespread publication of your LLC formation is not required in California.

Articles of Organization

To create an LLC in California, a person(s) must file a one-page Articles of Organization (Form LLC-1) with the Secretary of State’s office. This filing ($70 fee) must include the following company information:

  • The LLC name and address (and address of the registered agent)
  • The LLCs’ Purpose
  • How the LLC will be managed (Member managed or manager managed)

Registered Agent

A registered agent works on behalf of the LLC if it is ever sued by a third party. The registered agent agrees to send and receive legal papers for the LLC. Every LLC registered in California must show an agent for service of process. Only one agent can be designated for an LLC, and cannot serve as its own agent for service of process.

Operating Agreement

The main legal document that governs an LLC’s operations and the rights or obligations of its owners (called "Members") is called the Operating Agreement. In a nutshell, it outlines the ownership and operating procedures of your LLC.

Statement of Information

Filing a Statement of Information form (Form LLC-12) is very important for the LLC. This form keeps the state up to date on your company information. The form must be filled out and filed with the California Secretary of State office within 90 days of the LLC’s formation. 

The form (Fee $20) can be filed online, in-person or by regular mail. Afterwards, the form must be filed every two years in the month that the LLC filed its original Articles of Incorporation.

Pay Your State Tax Obligations

All LLCs and foreign LLCs organized in California, registered in California, or conducting business in California must pay state taxes to the California Franchise Tax Board (FTB).

California State Taxes

LLCs are subject to federal taxes and California taxes. These ‘taxes’ are not actually income taxes, but rather the cost to do business in California. One such cost is the annual California Franchise Tax Board tax (about $800). LLCs may also face other mandated tax costs in their first year of operation. Costs from the California Board of Equalization include taxes on sales, alcohol, gas and fuel use, and other taxes and fees.

If a company sells goods in California, it is required to collect sales tax. Same for LLCs - you must register for California state taxes. These include:

  • California Employee Withholding Tax
  • Disability Insurance
  • Unemployment Insurance Tax

Always check with the California Franchise Tax Board, California Board of Equalization and California Secretary of State for the latest annual taxes and fees.

Foreign LLC in California

All LLCs organized outside of California must register with the California Secretary of State to do business in California. The LLC must appoint a California agent for service of process and provide a certificate of good standing from the agency where the LLC was originally formed.

If one has an existing LLC and wants to register to do business in California, he or she will need to form a foreign LLC. The major benefit of becoming a foreign corporation is that it allows your company to operate as one entity in many jurisdictions.

Setting up and forming an LLC in California doesn’t have to take a lot of time and effort. You can post your legal need in UpCounsel’s marketplace to find the right legal help for your needs. Many of the lawyers that are on UpCounsel have experience with LLCs, legal requirements, company taxes and more. With more than a decade of experience on average, UpCounsel lawyers have worked with some of the biggest names in business. Put them to work for you!