Getting Started on California LLC: What You Need to Know
Doing business in California can yield a wealth of rewards — but it also requires careful attention to certain legal issues3 min read
Doing business in California can yield a wealth of rewards — but it also requires careful attention to certain legal issues. If you are located in New York and are in need of legal counsel to understand local regulations as they apply to setting up a Limited Liability Company (LLC) in California, the information presented here is an excellent starting point.
A limited liability company, or LLC, is a popular type of business association often used by entrepreneurs and small business owners who wish to operate under the legal protection provided by having a formal business entity. LLCs in California offer the benefits of fundamental legal protection from personal liability, as well as formal distinction between personal and company assets and a more established presence in the business community.
Though the process of setting up an LLC is relatively straightforward, there are certain steps that must be taken and paperwork that must be filed in order to ensure that the business entity is formed properly and legally. Keep reading to learn the fundamentals of setting up a California LLC and the steps you should take to make sure your LLC is established properly.
Steps to Establish a California LLC
The formation of a LLC in California requires the filing of documents with the Secretary of State. The LLC structure provides certain advantages, including limited liability for its founders, tax benefits, and the practical ease of running a business. Here's a guide on the process of setting up an LLC:
1. Choose a business name
The first step in the process of forming a LLC is selecting a business name. This name should be distinguishable from the names of any other business entity already on file with the California Secretary of State and should include the words “Limited Liability Company” or an abbreviation.
2. File Articles of Organization with the California Secretary of State
The Articles of Organization can be completed online via the California Secretary of State website. Upon approval by the Secretary of State, this document will make your LLC formation official.
3. Establish an Operating Agreement
An Operating Agreement is an internal written document for the LLC and is not filed with any governmental agency. The Operating Agreement spells out how the business will operate and is extremely important, as it defines the rights and responsibilities of each member of the LLC.
4. Obtain a Federal Employer Identification Number (FEIN)
The Federal Employer Identification Number is a unique nine-digit number obtained from the Internal Revenue Service (IRS) and is used to identify the legal entity for tax purposes.
5. Register with the California Franchise Tax Board
This step is necessary for all California LLCs, regardless of whether they are actively engaged in business. A tax identification number issued by the California Franchise Tax Board is required for filing both state and federal taxes for the LLC.
6. Obtain any other necessary permits and licenses
Depending on the nature of the business activities, the LLC might need to obtain additional local and state permits and licenses in California.
The core message
The formation of an LLC is essential for protecting your personal assets and pursuing business endeavors in California. By following the steps outlined above, business owners in New York can get started on the process of creating an LLC in California. It is important to note, however, that the above steps are only the basics of forming an LLC — the process can be more complex and depends on the specific needs of each business. For thorough advice and counsel from experienced attorneys familiar with the laws governing LLCs in California, UpCounsel's network of experienced lawyers has you covered.
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