LLC Cost California: Everything You Need to Know
An LLC in California is a business entity that is separate from yourself.4 min read
In terms of LLC cost, California requires that a fee of around $70 be paid when filing the Articles of Organization (Form LLC-1) for your LLC and a fee of about $20 when filing a Statement of Information (Form LLC-12). The latter is due within 90 days of filing your Articles of Organization and again every two years thereafter. These two fees bring the initial cost of starting an LLC to roughly $90.
Why Start an LLC?
An LLC in California is a business entity that is separate from yourself. The separation gives personal liability protection to the members of the LLC, which protects them from personally being held responsible for the business' debts.
This means if the business is sued or owes money for any reason, the creditors can only go after the business assets; the owner's assets are not at risk. An LLC has operating flexibility and enjoys pass-through benefits between you and the entity for tax purposes like a sole proprietorship or partnership.
How Much Does It Cost to Operate an LLC?
The cost for applying for and maintaining an LLC differ from state to state. However, there is a fee to file for an LLC in each state, and there is also an annual fee to keep up the LLC.
Most states need an annual report to be completed. It is one page and often called a “Statement of Information.”
How to Form an LLC in California
A Form LLC-1 needs to be filed by anyone wanting to form an LLC in California. Only one owner needs to fill out the form. Form LLC-1 designates a name for the new entity; assigns an agent for service of process; and lists the LLC's principal business address, manager, and other important filing information.
The person filing also needs to file the LLC's Articles of Organization and a Statement of Information and pay the respective fees. Visit the Secretary of State website for the state you want to file in before you file any documents with the state.
How Long Will It Take?
The processing times is dependent on on several factors, such as how and when you send the request and whether or not the name you choose is available.
How Do I Pick a Name?
The name has to stand out from others. If your name is too similar to another LLC's, the state will not approve the application. Performing a name search to find out if a name is available is easy. Most states allow you to do the search online through their website.
LLCs with more than one member are required to submit a limited liability operating agreement that the members of the LLC agree upon. The aspects the agreement governs are listed below:
- The roles of each member
- Voting rights
- Who manages the LLC
- How members are admitted or removed
- Procedures for dissolution of the LLC
- Rules for amending the LLC operating agreement itself
The members' names are not required on the initial application, but not including them will slow the application down.
In California, original signatures are not required on filings. When the SOS files your documents, they will send a copy to you.
Things to Remember When Forming an LLC in California:
Choose a unique name with “Ltd. Liability Co.," ”Limited Liability Company,” or an abbreviation like “LLC” or “L.L.C.” at the end.
You can reserve a name, but doing so requires paying a fee, which differs depending on where you are filing.
You need to assign a registered agent, a person or business in California receiving service of process and other legal documents for your LLC.
If your LLC offers professional services, you need to make sure you meet the state's applicable requirements for professional service companies.
A Statement of Information must be filed yearly with the California Secretary of State.
Annual LLC Maintenance Fees and Additional Fees
- If the LLC's income is more than $250,000, a fee of $800 is due by the 15th day of the fourth month after formation of the LLC.
- A yearly fee of $800 is required every year afterwards in which the LLC's income exceeds $250,000.
- If the yearly income exceeds $250,000, additional taxes will be required as well.
- Active members are required to pay self-employment taxes.
- If you need other business licenses, you need to pay for those, too.
- An 8.84-percent flat California corporate tax applies to all CA business entities.
- California corporations must keep a designated office in CA.
- A new Statement of Information must be filed every other year.
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