How to Form an LLC in California
How to form an LLC in California ← you are here
This Quick Start Guide is a brief overview of how to form an LLC in California.
California LLC Costs:
California state fee: $70
Statement of information: $20 (every two years)
Annual franchise tax: $800 (every year)
(check out Northwest vs LegalZoom)
Here is a quick overview on starting an LLC in California
A 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.
Important: The majority of California licensed professionals cannot form LLCs. For more information, please see here: California licensed professionals can’t form LLCs.
Northwest ($39 + state fee) or LegalZoom ($149 + state fee)
(check out Northwest vs LegalZoom)
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.
• Make sure your California LLC name is available by doing a business name search.
• Designator: your LLC name must end with a proper designator.
California law allows for the following:
- LLC (most common)
- Ltd. Liability Co.
- Limited Liability Co.
- Ltd. Liability Company
- Limited Liability Company
2. California Registered Agent
• When forming an LLC, you need to select a Registered Agent, technically called an Agent for Service of Process in California.
• A Registered Agent is a person or company who agrees to receive legal mail (called “service of process”) on behalf of your LLC in case your business is sued.
• Service of process can include items such as a complaint, summons, and subpoena.
• You can’t use a PO Box address for the Registered Agent.
• The Registered Agent’s address must be a street address. And it must be located in California.
• Who can be your Registered Agent in California?
1) You can be your LLC’s Registered Agent
2) A friend or relative can be your LLC’s Registered Agent
3) You can hire a Commercial Registered Agent
• LLC University® recommendation: If you want to hire a Registered Agent, we recommend Northwest Registered Agent ($125 per year).
• Privacy: California includes your personal information in public records, which may appear in google searches. A nice feature of hiring Northwest is they’ll let you use their office address throughout your LLC filing (keeping your home address private). Any mail that is sent to your LLC, will be scanned by Northwest and uploaded to your online account.
(to learn more about Northwest, check out our Northwest Registered Agent review)
3. Articles of Organization
• Official CA LLC form: Articles of Organization (Form LLC-1)
• CA LLC filing fee: $70
• Filing methods: online, by mail, or walk-in
• LLC University® recommendation: We recommend the online filing as it’s easier to complete and the approval time is slightly faster.
• Online filing: You can file your LLC online via BizFile.
• Mail filing: Prepare a check or money order for $70 and make it payable to “Secretary of State”. Mail your payment and Articles of Organization to: Secretary of State, Business Entities, PO Box 944228, Sacramento, CA 94244-2280.
• Approval time: Once the state receives your filing, they’ll approve your LLC in 3 to 5 business days. If you’re forming your LLC during a peak filing period (December through January), approval can take 6 to 7 business days. You’ll receive back an approved Articles of Organization and a Welcome Letter.
• Back-to-back $800 franchise tax: If your LLC goes into existence late in the year (October through December), you’ll owe $1,600 within a few months. If you don’t need your LLC open right away, we recommend using a future file date. For more information, please see: avoid $1,600 LLC franchise tax.
• Licensed professionals: California law prohibits most businesses offering “professional services” from operating as an LLC. Please see the following page: most California licensed professionals can’t form an LLC.
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.
• Your LLC Operating Agreement is an “internal document“, meaning, you don’t have to send a copy to the Secretary of State, the Franchise Tax Board, the IRS, or any other government agency. Just keep a copy with your LLC business records.
• California LLC Operating Agreement template: We provide free California LLC Operating Agreement templates that you can download here: California LLC Operating Agreement.
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:
• 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.
• Filing methods: online, by mail, or walk-in
• Statement of Information filing fee: $20
• Penalty: $250 penalty if late. Eventually your LLC will be shut down by the state if you do not comply with this requirement.
• File online: You can file your LLC Statement of Information online via BizFile.
• File by mail: Download Form LLC-12 and mail to the state (with check or money order for $20): 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. They are due by the anniversary date of your LLC’s approval. For more information please see our California LLC Statement of Information instructions.
7. $800 Annual Franchise Tax & Estimated Fee
• All California LLCs – regardless of gross receipts (total revenue) 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. Click “Online“. Select the appropriate Tax Year. Select “Limited Liability Companies“. Click “Get Forms“. 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?!“
– 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!
– Good news, you can avoid back-to-back payments by using a future file date. Please see how to avoid $1,600 franchise tax for more information.
• Form 3536 (Estimated Fee for LLCs): If your California LLC will have over $250,000 in gross annual receipts (total revenue), 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 receipts (total revenue), 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 IncFile.
• 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.
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