California LLC

How to Form an LLC in California

Quick Start Guide ← you are here
This Quick Start Guide is a brief overview of how to form an LLC in California.

Detailed Lessons:

 

California LLC Costs:
California state fee: $70
Statement of information: $20 (every two years)
Annual franchise tax: $800 (every year)

Need help?
Hire a reliable service to form your California LLC:
Northwest ($39 + state fee) or LegalZoom ($149 + state fee)


How to Form an LLC in CaliforniaA California Limited Liability Company (LLC) is a legal business structure used to protect your personal assets (home, car, bank account) in the event your company is sued.

A California LLC can be used to operate a business, or an LLC can be used to hold your assets (such as real estate, vehicles, boats, and aircraft).

If you’d like to form an LLC in California yourself, follow our Quick Start Guide below (the brief overview), or click the detailed lessons above.

Need to save time? Have a professional LLC service file for you:
Northwest ($39 + state fee) or LegalZoom ($149 + state fee)

1. LLC Name

• The first step in forming your LLC is to make sure your desired name is available for use.

• Your desired LLC name needs to be unique among all the existing businesses registered in California.

Search your California LLC name here: https://businesssearch.sos.ca.gov/

Designator: your LLC name must end with a proper designator. California law allows for the following: “LLC” (most common), “L.L.C.”, “Limited Liability Company”, “Limited Liability Co.”, “Ltd. Liability Company”, or “Ltd. Liability Co.”.

2. California Registered Agent

• When forming an LLC in California, you need to select a Registered Agent (a person or company who agrees to receive legal mail for your LLC in case of a lawsuit).

• You cannot use a PO Box address for the Registered Agent. Instead, the address must be a street address, and it must be located in the state of California.

Who can be your Registered Agent in California?

1) You can serve as the LLC’s Registered Agent
2) A friend or relative can serve as the LLC’s Registered Agent
3) You can hire a Commercial Registered Agent

Commercial Registered Agents in California: We recommend hiring Northwest Registered Agent ($125 per year). Northwest has been in the business for over 20 years and they have great customer support. Any mail that is sent to your LLC will be scanned by them and uploaded to your online account.

Important: Please read #3 (Articles of Organization) and #7 (Annual Franchise Tax) carefully. The timing of when you form your California LLC may be able to save you $800.

3. Articles of Organization

Official CA LLC form: Articles of Organization (Form LLC-1)

CA LLC filing fee: $70

Filing methods: by mail or walk-in ($15 extra)

File online: Currently, California does not have an online filing option for LLCs. Most people file by mail.

Mailing address:

Secretary of State
Business Entities
PO Box 944228
Sacramento, CA 94244-2280

LLC approval time: 10-15 business days, not including mail time. See the California Secretary of State’s processing times page. It’s updated daily. To speed things up a bit, you can also overnight your Articles of Organization and payment to the state.

What you get back: a stamped and approved copy of your Articles of Organization and a Welcome Letter.

Future file date: If you’re forming your California LLC later in the year and you don’t actually need your business open right away, we recommend using a future file date of January 1st. This will help you avoid the dreaded back-to-back $800 franchise tax payments ($1,600 total in the span of a few months!). Use this attachment if you want to use a future file date. A future file date can’t be more than 90 days ahead. For more information, please see our Articles of Organization lesson.

Expedited filing: speedier processing times are available, but documents must be delivered in-person in Sacramento, and expedited fees range from $250 to $500. More details here.

Licensed professionals: California law prohibits certain businesses offering “professional services” from operating as an LLC or a PLLC (Professional LLC). See this page for details.

Need to save time? Have a professional LLC service file for you:
Northwest ($39 + state fee) or LegalZoom ($149 + state fee)

4. LLC Operating Agreement

• Your LLC Operating Agreement is an internal document, meaning, you’ll just keep a copy with your business records. It does not get sent to the California Secretary of State, or to any other agency.

• An Operating Agreement is where the member/members (owners) are listed, as well as their percentage of ownership. This document also spells out how profits and losses are distributed, how the LLC is managed, and how taxes are paid.

• Single-member California LLCs should still have an LLC Operating Agreement, as this is best practice.

Download a free LLC Operating Agreement: PDF | Google Doc | Microsoft Word

5. Federal Tax ID Number (EIN)

• Federal Tax ID Numbers, also known as EINs, are issued by the IRS to LLCs. It’s like the equivalent of a social security number for an individual.

• EINs are used for opening bank accounts, filing taxes, and handling payroll, if applicable.

Synonyms: The following are all the same thing: Federal Tax Number, Federal Employer Number, FEIN, Federal Tax ID Number, EIN, Employer Identification Number.

Please wait for LLC approval: Apply for your EIN only after your California LLC is approved.

Fee: $0. EINs are free from the IRS. You can obtain an EIN:

– by mail, use Form SS-4
– by fax, 855-641-6935
– or online (fastest method)

If you are a non-US resident or don’t have a social security number: You can’t get an EIN online. You can get an EIN without a social security number though if you apply by mail or fax (fax has a faster approval time). Complete Form SS-4 and write “Foreign” on line 7b.

If your LLC is owned by another LLC/company: You can’t get an EIN online. You’ll need to mail or fax Form SS-4 instead.

6. Initial & Ongoing Statements of Information

• All LLCs in California must file an Initial Statement of Information within 90 days of the LLC being formed.

Download Initial Statement of Information: Form LLC-12

File Online: https://llcbizfile.sos.ca.gov/

Statement of Information filing fee: $20

Penalty if not filed: $250 penalty if late. Eventually your LLC will be shut down by the state if you do not comply with this requirement.

Filing methods: by mail (most common), online, or walk-in filing.

Mailing Address:

Secretary of State
Statement of Information Unit
PO Box 944230
Sacramento, CA 94244-2300

Ongoing Statements of Information: You need to file a Statement of Information every 2 years (“biennially”). They are due by the anniversary date of your LLC’s approval. You can find this date on your approved Articles of Organization.

Forms: If there are no changes from your last Statement of Information, use Form LLC-12NC. If you are making changes, use Form LLC-12.

Processing times: 10-15 business days, not including mail time.

What you get back: You don’t get anything back by default. If you’d like a stamped copy of your Statement of Information, send an extra $1 ($21 total) and use the Mail Submission Cover Sheet (found inside the Articles of Organization) and write “Please return a plain copy to the address below”.

7. $800 Annual Franchise Tax & Estimated Fee

All California LLCs – regardless of income or activity – must pay an $800 Franchise Tax fee every year.

• Payment is not made with the Secretary of State, but instead with the California Franchise Tax Board.

• We get a lot of questions about how to avoid this. Long story short, LLCs in California cannot avoid the $800 fee. And if you’re thinking of forming an LLC out of state to avoid this fee, think again (see here and here).

Form 3522 (“LLC tax voucher”): The $800 Annual Franchise Tax is paid using Form 3522. This voucher changes each year, so in order to download Form 3522, please visit the Forms page on the Franchise Tax Board’s website. Select the appropriate Tax Year, select “Limited Liability Companies” for Taxpayer Type, and select “Income Tax Forms” for Form Type. Then look for 3522 Form, “Limited Liability Company Tax Voucher“.

Due date: This gets a little tricky, so please read the following twice:

This is what the tax voucher instructions say:
The annual LLC tax is due and payable by the 15th day of the 4th month after the beginning of the LLC’s taxable year (fiscal year) or April 15th (calendar year).” And we can hear you thinking, “What the heck does that mean?!” LOL ;-)

– The first payment is due the 15th day of the 4th month after your LLC is approved. The “15th day of the 4th month” sounds like 4.5 months, but it’s actually 3.5 months after your LLC is approved. For example, if your LLC is approved in November, November is “month 1”, so 4 “months” after November is February. And the 15th day would be February 15th.

– So sticking with our example above (LLC approved in November), that first $800 is paying for that short taxable year (November to December). Then the next taxable year’s $800 payment is due 2 months later by April 15th (paying for the year forward). So that’s two back-to-back payments totaling $1,600! The reason for these back-to-back payments is because the LLC was approved late in the year. So if you can wait to file your LLC in January, that’ll avoid the back-to-back payments (essentially saving you $800). You can do this by including a future file date attachment with your Articles of Organization or just waiting until the last week in December or sometime in January to send your Articles of Organization to the state.

– In summary, no matter when your California LLC is approved, you’ll owe an $800 payment 3.5 months later. Then as soon as April 15th rolls around, you’ll owe another $800. And then it’s $800 every year going forward, due by April 15th.

Form 3536 (“Estimated Fee for LLCs”): If your California LLC will have over $250,000 in gross annual income, you must also file and pay an Estimated Fee using Form 3536. And just like Form 3522, as mentioned above, the actual form changes each year so you’ll need to visit the Forms page on the Franchise Tax Board’s website to download the form. If your LLC will not have more than $250,000 in gross annual income, then you don’t need to file Form 3536.

8. Business Licenses and/or Permits

• Depending on your LLC’s location and the industry it engages in, you may need to obtain certain business licenses and/or permits. To find out your LLC’s requirements, you can contact the city, town, or county where your business is located. They’ll be able to direct you to the proper government agencies.

• Need to save time? If you don’t want to make the calls and determine your licensing requirements, we recommend using LicenseSuite.

9. Taxes

Federal taxes: California LLCs have “pass through” taxation. Income or losses are usually listed on a Schedule C and filed together with your personal tax return.

California state and local taxes: Your LLC also needs to register and pay taxes with the California Franchise Tax Board (FTB), as well as your local municipality (city, town, county, etc.).

Form 568 (“Limited Liability Company Return of Income”): All LLCs in California will need to file Form 568, as well as additional 568 Schedules and Forms with the FTB depending on how income is earned. We strongly recommend that you work with an accountant to properly file your federal, state, and local taxes. Form 568 changes each taxable year, so you’ll need to visit the Forms page on the FTB’s website and select the appropriate form for the taxable year in which you’re filing. Form 568 is usually due by March 15th or April 15th, but that will depend on how your LLC is treated for federal tax purposes.

Recommendation: Hire an accountant after your California LLC is formed. Read our how to find an accountant guide, or check out Thumbtack.

10. LLC Bank Account

Maintain liability protection: opening a separate bank account for your California LLC to keep your personal assets separate from your business assets is not only helpful from an asset protection strategy, it also makes bookkeeping and accounting easier.

Items needed to open an account: Approved California Articles of Organization, EIN Confirmation Letter, and Driver’s License.

Shop around: there are many banks that charge monthly fees for California LLC business checking accounts, but there are a handful that don’t. You’ll need to call a few banks in your area and shop your options.

Debit card: Your bank will issue a debit card (usually on the spot) when you open the account.

Credit card: Start building business credit for your LLC. We recommend creditcards.com for finding business credit cards.

11. Business Phone Number

Instead of using your home telephone number or your cell phone, you can purchase an affordable “virtual business number” specifically for your California LLC. You can set this virtual business phone up to forward to your cell phone, go through voice prompts, or configure it any way you’d like.

We recommend using Phone.com as they have the cheapest plans and their customer service is excellent.

They offer local phone numbers as well as 1-800 toll-free numbers. You can easily setup call forwarding, pre-recorded prompts, and get voicemail messages forwarded to your email.

Getting a separate business phone number for your California LLC is also a good idea in order to keep your actual number private from those pesky “public record” websites.

California State Agencies

CA Secretary of State
CA Business Entities
916-653-3794 (LLC Unit)
213-897-3062 (LA Office)
8:00am – 5:00pm, M-F

CA Franchise Tax Board
7:00am – 5:00pm, M-F
Tip: call as early as possible to avoid long hold times
Additional contact info here

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Matt Horwitz
Founder & Educator at LLC University
Forming an LLC shouldn't be so complicated. Our step-by-step guide will make the process a breeze – and no complex legal jargon! We teach people how to form an LLC for free in all 50 states. We hope you find our free guides and resources helpful in your entrepreneurial journey.

65 Comments

  1. Mike Manon February 27, 2017

    Hi,
    I have another question about EIN.
    We are going to open an multi-member LLC where all three members are foreign nationals but 1 member has SSN and other two members do not have SSN/ITIN.
    When filing for EIN, do we need to provide SSN/ITIN of ALL the members or can we just get the EIN based on one member’s SSN?

    Thanks,
    Mike.

    reply
    • Matt Horwitz February 28, 2017

      Hi Mike, only one person’s information is on file with the IRS. They are referred to as the “responsible party”. You can use this person’s SSN to apply, but you don’t have to.

      You can have another member (one without an SSN) be the responsible party… you just can’t get the EIN online if that’s the case. Instead, you’ll need to mail or fax Form SS-4 to the IRS and write “Foreign” on line 7b. Fax applications are much faster than mail.

      In your case though, and based on your question, it sounds like having the individual with the SSN be the responsible party and obtaining the EIN online will be the easiest route. Hope that helps! Let me know if you need anything else.

      reply
  2. Brian April 3, 2017

    Hi,

    I have a question regarding “$800 Annual Franchise Tax & Estimated Fee” in CA. Do you still have to pay this even if you are a single-member LLC? I also read somewhere you can avoid paying this until you pay taxes and there’s only a small penalty fee for not paying by the deadline, any insight?

    Thank you!
    Brian

    reply
    • Matt Horwitz April 5, 2017

      Hi Brian, all LLCs, regardless of the number of members (single-member LLCs and multi-member LLCs), and regardless of activity or income, must file the $800 Annual Franchise Tax and the Estimated Tax (if applicable). I’m not 100% certain about the “technique” you mention, but I would not recommend it. The California Franchise Tax Board (FTB) does impose penalties: 5% of the unpaid tax or fee, plus 0.5% on the unpaid tax or fee for each month or part of a month it remains unpaid. The maximum penalty is 25% of the unpaid tax or fee (Revenue and Tax Code Section 19132). Further, the FTB will send 2-3 reminder notices, before they eventually suspended your LLC.

      FYI, in addition to the $800 Annual Franchise Tax & Estimated Fee (if applicable), you must also file Form 568 (LLC Return of Income), and any other filings that are due to the FTB based on how you derive your income. Having said that, the timing of when you form your LLC can save you money. Check out avoiding back-to-back annual franchise tax payments. Hope that helps!

      reply
  3. Mike D April 8, 2017

    For SMLLC, can I use the LLC EIN on form W-9? The form asks to put member SSN, but I do not want to share that, any suggestion?

    reply
    • Matt Horwitz April 8, 2017

      Hi Mike, for SMLLC on W9 you can use either your SSN or EIN. So if you want some privacy on the SSN part, use the EIN. Hope that helps!

      reply
      • Mike D April 9, 2017

        Thanks Matt,
        Just want to clarify, do you suggest to get another EIN for myself or the EIN that’s attached to the LLC is fine?

        Thanks for setting up this site, much appreciated on all the info!

        reply
        • Matt Horwitz April 18, 2017

          Hi Mike, apologies for the slow reply. Your comment accidentally went into the spam folder. I don’t fully understand your question and what you mean by “get another EIN for myself”. As far as the LLC goes, you just need 1 EIN for the LLC. Hope that helps.

          reply
          • Mike D May 17, 2017

            Hi Matt,
            It’s related to the W9 instruction (pg3), which seems to ask disregarded SMLLC to use only the owner’s SSN.

            “If you are a single-member LLC that is disregarded as an entity separate from its owner (see Limited Liability Company (LLC) on this page), enter the owner’s SSN
            (or EIN, if the owner has one). Do not enter the disregarded entity’s EIN.”

            reply
            • Matt Horwitz May 17, 2017

              Hey Mike, just looked back at your prior question and I see now what you were asking. It doesn’t seem like you need an EIN for yourself, and that the LLC’s EIN is enough. You’re supposed to use the SSN on W9 for disregarded/single-member LLCs, but you don’t always have to. It depends on the company you are sending the W9 to. If you don’t mind, you can just use your SSN. If you do mind, then use the LLC’s EIN.

              reply
              • Daisy May 1, 2018

                Hi Matt, Relating to Mike’s questions. The IRS instruction for form w-9 specifically says not to use the LLC’s EIN, instead to use a SSN or EIN. I’m confused to why it says that. Also, When apply for the EIN online, if we are a husband-wife LLC in California, we are classified as single- member LLC disregarded entity, should we apply as a sole proprietor or limited liability company? Thanks in advance and great website.

                reply
                • Matt Horwitz May 2, 2018

                  Hi Daisy, if an LLC is taxed as an Sole Proprietorship, then the IRS suggests using the individual’s SSN on Form W9, however, it’s not super important, since you’ll still be reporting the income either under the SSN or under the EIN. Regarding husband and wife LLCs in community property states (like California), if you file jointly, the default taxation by the IRS is LLC taxed as Partnership, however, there is also a special election called a “qualified joint venture” which allows a husband and wife LLC to be taxed as a Sole Proprietorship (one unit). We have more info on that here: husband wife Qualified Joint Venture LLC. Hope that helps!

                  reply
                  • Daisy May 2, 2018

                    Thank you Matt for the reply. We also want to know when paying FTB $800 with form 3522, what beginning and end dates should we use for the initial year if we want to be on calendar year basis? Thank you.

                    reply
                    • Daisy May 2, 2018

                      I found the answer to my question on the form instructions. “The first taxable year of an LLC begins when the LLC files its articles of organization with the SOS. The first taxable year of a foreign LLC doing business in California begins when the LLC is organized in another state. ” Thanks so much. the questions and answers are very helpful.

                    • Matt Horwitz May 13, 2018

                      Great to hear Daisy. You’re very welcome!

                    • Matt Horwitz May 13, 2018

                      Hi Daisy, you’d use 01/01/2018 to 12/31/2018 (for the 2018 tax year’s payment). Hope that helps!

  4. Igor April 19, 2017

    Hi Matt,
    First of all your website is the most informative i have ever found. Great job on exposing the hidden lies on various uneccessary services and things that as a new business owner or developer would come across when creating an LLC.

    1. My partner and I have a plan on building an e-commerce (small gift shop online). I have heard that if you create a business, you would need to hire a lawyer to do your LLC Operating Agreement so you won’t get into issues later on. Is that true? Or when do you need a lawyer when forming an LLC?

    2. Say i would like to build an e-commerce (gift shop: popular books) business location would be in CA. When would you need a lawyer?

    reply
    • Matt Horwitz April 19, 2017

      Hi Igor, thank you very much for the kind words :) I’m glad you are finding the website useful! In regards to both of your questions, there is no set rule for when to hire/speak to an attorney, however, if you’re thinking about it, I’d advise making a few phone calls to see if it’s something you need. You don’t HAVE TO hire an attorney for your LLC’s Operating Agreement, but it’s a good idea, especially if you have uncertainties, or would prefer to have an advisor to run your questions by. I recommend making a few calls and searching on Avvo: https://www.avvo.com/business-lawyer/ca.html. Hope that helps!

      reply
  5. Alex April 25, 2017

    Hello Matt, thank you for the clear guide. I’m curious about the CA form 568 ‘Date business started in CA’ line item. If I were to form an LLC, let’s say in 2014, but open for business jan of 2016 (and don’t generate any revenue before then or have costs), do I need to file a form 568 for each year or just starting in 2016, and what would be the date to fill in for ‘date business started in CA?’ Thank you, have a great day!

    reply
    • Matt Horwitz April 26, 2017

      Hey Alex, please double-check with your accountant about this, but I’m quite certain that year should be 2014… and you owe returns (and annual franchise tax) since 2014. So if you haven’t been filing, you likely have back filings due (and possible penalties) with the California FTB. Apologies I couldn’t be more specific here, but tax questions have a lot of variation to them. Best to hire a CPA for help. We have some recommendations here. Hope that helps!

      reply
  6. Jen June 10, 2017

    Hi Matt,
    Great article! This is so helpful. I have a question- when is Form 568 really due? I read “Original – 15th day of the 3rd month after the taxable tax year end”

    But when does the taxable year end? Meaning, if I incorporated in Jan. 2017, does that mean form 568 isn’t due until March 15, 2018?

    Thanks!

    reply
    • Matt Horwitz June 12, 2017

      Hey Jen, it depends on how your LLC is taxed with the IRS, since the California Franchise Tax Board conforms to the “check-the-box” regulations, meaning the state will tax your LLC in the same way its taxed by the IRS. Of course, if you make any tax election changes with the IRS (like LLC electing S-Corp status), you’ll need to update the FTB. The following should be confirmed with your accountant, but currently, the due dates for Form 568 are:

      – Single-Member LLC taxed as Sole Proprietorship for U.S. federal tax purposes, due the 15th day of the 4th month after the taxable year end (April 15th for most)

      – Multi-Member LLC taxed as Partnership for U.S. federal tax purposes, due the 15th day of the 3rd month after the taxable year end (March 15th for most)

      – LLC taxed as S-Corporation for U.S. federal tax purposes, Form 568 isn’t due. Instead file Form 100S.

      – LLC taxed as C-Corporation for U.S. federal tax purposes, Form 568 isn’t due. Instead file Form 100.

      Also, there are more returns that need to be filed with the FTB besides Form 568, so please work with an accountant to make sure all is filed correctly. To download the instructions for Form 568, go to the Forms page on the FTB’s website, select the appropriate taxable year, select “Limited Liability Companies”, select “Income Tax Forms”, click “Get Forms”, look towards the bottom for “568 Booklet”. Hope that helps!

      reply
  7. Jamal Smith June 22, 2017

    Hi Matt,

    I currently reside in California and plan on starting a LLC soon. All of my businesses will be internet based like voice over acting, podcasts, internet radio, and short films. Is it necessary to incorporate in California or can I choose a difference state since everything I will be offering will be internet based? Ideally I want to incorporate here in California, but if it is possible to cut costs by incorporating elsewhere then I will.

    reply
    • Matt Horwitz June 23, 2017

      Hi Jamal, although your business is internet-based (which a lot of businesses are now), you’ll likely be working from home, or somewhere from California. In that case, you are legally doing business in California, and you should form your LLC there. Forming an LLC out of state to save money will end up being much more expensive, as you’ll need to file a Foreign LLC registration in California and you’ll be paying LLC fees (and annual fees) in 2 states. We wrote more details on this here: best state to form LLC. Hope that helps!

      reply
      • Jamal Smith June 25, 2017

        Thanks Matt! This is helpful information!!

        reply
        • Matt Horwitz June 26, 2017

          You’re welcome Jamal!

          reply
  8. Louise September 4, 2017

    Hi Matt,
    I’ve been hired by an LLC to prepare their income tax return. Their LLC was formed in California and file stamped 11/18/16. They obtained their EIN on 1/23/17. The EIN letter indicates their income tax return is due 3/15/18. I’m confused, is there a 2016 income tax return due or will 2017 be the first year to file an income tax return? There was no business activity in 2016. Thank you!

    reply
    • Matt Horwitz September 6, 2017

      Hi Louise, I’m not 100% sure on this and recommend speaking with a tax professional as there is some discrepancy as to when the business started. The business existed for the 2016 tax year from Nov. 18th to Dec. 31. The person who obtained the EIN may have stated the business started 1/1/2017, which is not the case since the entity did exist prior to that. The 2016 tax return(s) is/were due in April 2017 if applicable. Hope you get to the bottom of it.

      reply
  9. Paul November 13, 2017

    Hi Matt,
    In step number 7, you mentioned that the effective date can be set to January 1st to avoid paying the franchise tax back to back. In what form or document do I mention this to the secretary of state. Thanks for your help and your instructions very informative.

    reply
    • Matt Horwitz November 13, 2017

      Hey Paul, there’s no official form from the state (they just tell you to include an “attachment”), so we created one for our readers: Future File Date Attachment. This form can be used for those filing their California LLC later in the year (October, November, or December), but don’t need to their LLC open right away, and instead want their LLC to become effective on January 1st of the following year.

      The future file date can’t be more than 90 days forward. Just include this with your Articles of Organization when you mail it to the state. The Future File Date Attachment will technically become a part of the Articles of Organization. This will help you avoid the dreaded back-to-back annual franchise tax payments ($1,600 total). Hope that helps!

      For anyone else reading this, we used to have information on our website about requesting a future file date (also called delayed effective date) via the Mail Submission Cover Sheet, however, this no longer works. You’ll need to use the Future File Date Attachment or just wait until January to form your LLC.

      reply
      • Annie December 13, 2017

        Hi Matt – very helpful site, thanks for doing this. I’m looking at the Incfile LLC submission and submitting today is showing a 22 day hold. Would you recommend waiting another week before pushing the application through in order to avoid having to pay two $800 fees close together?
        Thanks!

        reply
        • Matt Horwitz December 22, 2017

          Hi Annie, you’re very welcome :) Yes, I’d certainly wait until January if you can. This will help you avoid back-to-back $800 annual franchise tax payments ($1,600 due within months). You could technically have your LLC approved on December 16th and you’d still be okay since California has a 15-day rule which states, if the tax year is less than 15 days, an annual franchise tax payment isn’t due for that year. Hope that helps!

          reply
          • Ali December 24, 2017

            If the business is earning an income (rental property), does the $800 CA FTB tax over and above taxes paid on the real estate rental income?

            reply
            • Matt Horwitz December 26, 2017

              Hi Ali, yes, correct. The $800 California Annual Franchise Tax must be paid, regardless of business activity or income (or loss for that matter). Hope that helps.

              reply
      • Michelle March 13, 2018

        Thanks for all the great information!
        Is now still a decent time to create an LLC? The fees would be due in 4 months and 15 days if I begin now, correct?

        reply
        • Matt Horwitz March 21, 2018

          You’re welcome Michelle! If you need your LLC open in 2018, then I’d say, yes, it’s a decent time to create your LLC. Regardless of when your California LLC is formed, your first LLC Annual Franchise Tax payment will be due the 15th day of the 4th month after your LLC is approved. So if you file this month (March 2018), you’re LLC will most likely be approved in April of 2018. The “counting system” is a bit weird in that April is considered ‘Month 1’. So your first LLC Annual Franchise Tax payment (paying for the 2018 tax year) will be due by July 15th 2018. Then next year (for the 2019 tax year), your Annual Franchise Tax payment will be due by April 15th 2019. And from there on it’ll be due by April 15th every year. Hope that helps :)

          reply
  10. John November 26, 2017

    Hey Matt, I just had a couple of questions about LLC’s. I just recently bought a house in Tennessee and I live in California. I want to build my real estate portfolio and begin to have houses all across the state of Tennessee. My questions include:

    1. Should I form my LLC in the state of Tennessee where my rental property is located? or should I form my LLC in the state of California where I live.

    2. Ive heard that states like Nevada, Wyoming and Delaware are great states to form LLC’s. Would you recommend me forming my LLC in those states even-though I don’t live in those states or have rental properties in those states?

    Heres a scenario I was thinking:
    For example, I form my LLC in Wyoming. I don’t live or have property there. My real estate is in Tennessee and I live in California. Would that be the best route to go?

    3. I heard also that creating an anonymity is a good thing to do to shield your assets. Do you recommend that I go this route?

    if you can get back to me I would greatly appreciate it, thanks!

    reply
    • Matt Horwitz November 29, 2017

      Hi John, great questions. For most people (not residing in California) they’d just be doing business in Tennessee, however, as a California resident, you’re doing business in both California and Tennessee. California has extremely strict rules regarding what defines doing business. Something as simple as making a phone call about your real estate is “doing business”. So you’ll want to do one of the following:
      A.) Form the LLC in Tennessee then register it as a Foreign LLC in California.
      B.) Form the LLC in California then register it as a Foreign LLC in Tennessee.
      C.) Form an LLC in California (owned by you) and have that LLC own an LLC formed in Tennessee.

      You could form a Parent LLC in Wyoming, which is common for charging order protection, but you’d still need to register that LLC as a Foreign LLC in California.

      I agree, anonymity can be helpful in asset protection. However, that’s going to require a tremendous attention to detail across multiple state filings in order to pull it off. Hope that helps!

      reply
  11. Samantha January 15, 2018

    Hi Matt-

    You are the most helpful person I have contacted in regards to LLCs/businesses.

    I have already applied for my LLC in CA, but it is still not processed. Looks like they are working on Dec. 28 submissions and mine was about Jan. 3.
    I did the prelim online name search and we were good to go- LLC. In talking to my CPA, we may switch to a corp soon. I will want the name to be the same but of course- INC. vs. LLC when we convert. My question is this:
    Should I reserve the CORP. name or because I will have the LLC with the name will that keep other entities in CA from using that name? (I.e- “ABC LLC” and “ABC Inc”.)

    Inversely, if I try to reserve the name as a corp. before my LLC is processed will that keep me from getting the LLC name?

    I just want to be sure I will have my selected businesses name as an LLC and corp and want to do it in proper order. I understand I can reserve my corp name for 60 days but if I have the LLC I may not need at all TO RESERVE name as corp?

    I hope you get my question. I talked to the SOS office and the dude didn’t understand at all what I was asking!

    Thanks again!

    reply
    • Matt Horwitz January 15, 2018

      Hi Samantha, thank you for the kind words! Yes, you’re correct on both fronts. First, the LLC name will be “distinguishable upon the records”, so a Corporation could not be filed with the same name. Second, there is a chance a name reservation filed before your LLC is processed could cause your LLC filing to be rejected. But to make things even easier, you won’t need to worry about either. If you decide to convert from an LLC to a Corporation, you’ll file an Articles of Incorporation (with a statement of conversion). Along with converting the business entity itself, you’ll be able to swap “Inc.” for “LLC”. You can find more info on California business conversions here: http://www.sos.ca.gov/business-programs/business-entities/conversion-information/. Hope that helps!

      reply
      • SAMANTHA January 15, 2018

        Thanks AGAIN. You are the best.

        reply
        • Matt Horwitz January 15, 2018

          You’re welcome Samantha!

          reply
  12. Jeff Hilger February 12, 2018

    You provide BY FAR the best information about LLCs anywhere on the web, and that’s saying quite a bit. THANK YOU so much for breaking things down simply, clearly, and efficiently. You deserve a reward of some sort for your efforts. Props and Kudos do you.

    reply
    • Jeff Hilger February 12, 2018

      *to you

      reply
      • Matt Horwitz February 14, 2018

        Jeff, you rock! Thanks for the awesome comment! I really appreciate it. Just help spread the word the next time you bump into a friend forming an LLC. That’ll do ;) Thanks again!

        reply
  13. Bruce Maxwell February 20, 2018

    Matt,
    I live in CA. I am buying two commercial real estate properties, one in MS and one in MN. I understand that I need to form LLCs in those two states, but my question is do I also need to register those LLCs in CA as Foreign LLCs since I live in CA and my office is in CA and I pay my taxes in CA?

    reply
    • Matt Horwitz February 21, 2018

      Hey Bruce, for most people they wouldn’t have to worry about this, but as a California resident you’re doing business in California as well as in Mississippi and Minnesota. You could either:

      1. Form your LLCs in MS and MN and register them as Foreign LLCs in California.
      2. Form your LLC in California and register it as a Foreign LLC in MS and MN.
      3. Form an LLC in California owned by you (the Parent LLC) and have this CA LLC be the Member (owner) of an LLCs formed in MS and MN.
      4. Form an LLC in Wyoming owned by you (the Parent LLC) and have this WY LLC be the Member (owner) of an LLCs formed in MS and MN. Then register the WY LLC as a Foreign LLC in California. Wyoming is common among real estate investors for charging order protection.

      We certainly recommend speaking with legal and tax professionals to dot “i’s” and cross “t’s” and to see what’s best in your situation. Hope that helps!

      reply
  14. Jereme Gauthier March 6, 2018

    HI Matt,

    EXCELLENT website. Thank you very much. My question is:

    I am ready to form an LLC with a partner. Our business will sell the product online for the most part, however, he lives in Alaska, and I live in California. We may have local sales as well. Where is it better to form the LLC? Can we form in just one state? Or does one of us have to register as a foreign entity in order to operate in the respective state we don’t form the LLC in?
    Thank you for any insight you can provide.

    -Jereme

    reply
    • Matt Horwitz March 10, 2018

      Hey Jereme, thanks for the kind words! It sounds like you’re both doing business in both states. You’ll want to either form the LLC in California and register it as a Foreign LLC in Alaska or form the LLC in Alaska and register it as a Foreign LLC in California. Hope that helps!

      reply
  15. Vadim March 18, 2018

    I have incorporated my LLC in MD in 2013. I have moved to CA at the end of 2016 and split my taxes between 2 states filing them in April 2017. The company was active within entire 2017 and I have realized it needs to be registered in CA to pay my taxes now. I have the federal EIN, bank accounts and need only fast registration in CA. I have a filled and signed form LLC-5 and the certificate of good standing from MD. How long it will take to get the LLC registration in CA and how much should I pay for fast regitration?

    Thank you
    Vadim

    reply
    • Matt Horwitz March 27, 2018

      Hi Vadim, the California Foreign LLC Registration (Form LLC-5) costs $70. Regular approval time is approximately 10 to 15 business days (not included mail time there and back). You can overnight your documents to shave a few days off of mail time. Or if live near Sacramento (or are willing to make the trip), you can drop your documents off in person for expedited processing. There are 3 different time windows with different prices for expedited processing. You can find the details here: California Secretary of State Pre-clearance and Expedited Filing Services (look under the “Expedited Filing Services” section). As an alternative, if you have a friend who lives near the Sacramento office, you can ask them to drop off your documents and pay for expedited processing. You can also hire a courier service. They’ll charge additional fees depending on how fast you want things filed with the CA Secretary of State. Hope that helps!

      reply
  16. Amit Gaur April 6, 2018

    Hi Matt, How are you doing?
    Coming here again with questions on Taxes.
    -California LLC with 2 Members need to file Federal Tax Return (Form 1065) if No Income and No Expenses was there for the whole year? Basically, my Business was completely inactive.
    -Opened LLC in 2017, do I need to file BIENNIAL REPORT this year?

    reply
    • Matt Horwitz April 8, 2018

      Hi Amit, doing well, thank you :) You’ll need to speak with an account regarding your federal, state, and local taxes. Your first Statement of Information is due within 90 days of your LLC being approved. The next Statement of Information for your LLC will be due in 2020.

      reply
      • Amit Gaur April 15, 2018

        Thanks Matt!

        reply
  17. Dmitriy May 18, 2018

    Name of LLC vs name of website/brand

    Two part question. One, does the name of the LLC have to be the name of your website/brand name. Say for example I file “Basic Name LLC” , does my website and brand name have to also be “Basic Name LLC” or can they be something completely different? Two, if I file that LLC name, do I still need to copyright/trademark that brand name or does filing an LLC under that name also copyright/trademarks it?

    reply
    • Matt Horwitz May 18, 2018

      Great questions Dmitriy. Nope, website name and LLC name don’t have to be the same… they can be completely different. Copyright has nothing to do with forming an LLC. You (or your LLC) own the copyright to any creative work, simply by the nature of creating it. If you want to take things a step further, you (or your LLC) can register a body of work… known as copyright registration. There are state trademarks and federal trademarks. I’ll assume you’re referring to a federal trademark. A federal trademark, once registered with the United States Patent and Trademark Office, puts the public on notice that you (or your LLC) are claiming an exclusive right to a name, brand name, product, service, slogan, or logo. More info on trademarks here: trademark facts from USPTO. Trademark rights are not granted simply by forming an LLC. So to answer your question, you don’t copyright a brand name. You would file a trademark. In regards to name protection, forming an LLC in California just prevents someone else from registering the same (or similar) business name in California. Hope that helps!

      reply
  18. sophia May 29, 2018

    Matt your site has been so helpful for me, I thought I’d share some information that may of your readers may find useful. The state of California now does online filing. Here is the link http://www.sos.ca.gov/business-programs/bizfile/ for anyone who might need it. It’s a super easy process and takes about 5 minutes to complete.

    reply
    • Matt Horwitz June 17, 2018

      Hi Sophia, so great to hear! Yes, we’re super excited that California finally has online LLC filing! We’ll be updating the lessons to reflect those changes.

      reply
  19. Xee July 1, 2018

    Hello Matt. Thank you for taking your time to answer each question. I have found this website extremely resourceful. I was just curious because I read above that you said that when there are multiple owners in an LLC, only one person needs to be registered with IRS to get an EIN number, however, whom do I register with to make it clear that there is more than one individual in the business and to let them know the ownership percentage? Also, when filing for taxes, if there is only one EIN number, how will each owner file? For instance, if there are two owners, both with 50-50% ownership and collectively earned a net income of 100K for the year, will each owner be filing separately but claiming a net income of 50K? Any help would be greatly appreciated!

    reply
    • Matt Horwitz August 3, 2018

      Hey Xee, you’re welcome :) Correct, there is only one EIN Responsible Party listed for the LLC. When you apply for your LLC, you list the number of Members. That’s how the IRS knows the LLC’s default tax classification. For example, 1 Member = LLC taxed as a Sole Proprietorship and 2 or more Members = LLC taxed as a Partnership. The IRS doesn’t need to know how many Members there are and what percentage each one owns, since the responsibility to properly file federal taxes falls on each individual. You will file an information return for the LLC (Form 1065 – Partnership Return). Then you/your tax professional will issue a K-1 to each Member which shows their portion of the income. Each person then includes that K-1 on their personal income tax return (Form 1040) and pays taxes accordingly. Hope that helps!

      reply
  20. Kenny Lou July 6, 2018

    Hi,

    I want to change my registered agent (legal zoom) to myself. LLC was created in New York.

    Do I still need to a publication in the newspaper?

    Thank you,
    Kenette

    reply
    • Matt Horwitz August 12, 2018

      Hi Kenette, if you’ve already met the publication requirements in New York, then no, you don’t need to meet them again just because you make a change to the Registered Agent. Also, check out our New York Registered Agent article. You actually don’t need to list a Registered Agent in New York (SOS is Registered Agent by default) and can instead just revoke the current Registered Agent instead of appointing yourself via the Certificate of Change. Hope that helps.

      reply
  21. Sandi July 22, 2018

    Hello Matt,
    This site is amazing. Appreciate your doing this.
    My 2 sisters and I own the land of a commercial site in CA, so we receive rental income. We are looking into putting it into an LLC. We all 3 have our own separate living revocable trusts. Would the fact that we have trusts make any difference? Is there anything that we would need to do differently? When we receive our monthly payments, the checks are made out to the 3 of us, with just our names on them. (Not trust names.)
    Thanks so much!
    Sandi

    reply
    • Matt Horwitz August 13, 2018

      Thank you Sandi! We don’t get too deep into Trusts yet, however, you would make the 3 Trusts the Members of a newly formed LLC and then you would title the property into the LLC. Rental payments would be made to the LLC and then distributions would be made to the separate Trusts. However, you’ll also want to speak with an estate planning/asset protection attorney regarding any pros/cons and in case there is a better way to structure things for your situation. Hope that helps.

      reply
      • Sandi August 13, 2018

        Thank you, Matt!

        reply

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