Step 1: LLC Name Availability
To form your LLC, first you need to make sure that the desired LLC Name is available for use.
The LLC name must be unique among the existing businesses registered in California.
Browse to the California Secretary Of State site to search LLC name:https://businesssearch.sos.ca.gov/
LLC name in California must end with a proper designator like: “LLC” (most common), “L.L.C.”, “Limited Liability Company”, “Limited Liability Co.”, “Ltd. Liability Company”, or “Ltd. Liability Co.”
Step 2: California Registered Agent
To form an LLC in California, you must select a Registered Agent (a person or company who receives legal mail for your LLC in case of a Lawsuit).
The address for the Registered Agent must be a street address, and it must be located in the state of California. PO Box address can not be used.
Registered Agent in California:
1. Hire a Commercial Registered Agent.
2. You can serve as the Registered Agent for LLC.
3. A friend or relative, who can serve as the LLC’s Registered Agent.
Step 3: Articles of Organization
You can download the Official CA LLC form from: Articles of Organization (Form LLC-1)
Filing fee for LLC in California: $70
Copy Fees: First page $1.00; each attachment page $0.50;
Certification Fee: $5.00
Filing Methods: Either by mail or by walk-in (costs $15 extra)
Secretary of State
PO Box 944228
Sacramento, CA 94244-2280
Approval time of LLC: It will take 10 – 15 business days. To speed up the things, you can overnight your Articles of Organization and payment to the state.
You will get back a stamped and approved copy of your Articles of Organization and a Welcome Letter for SOS.
Speed processing is available, but documents must be delivered in-person in Sacramento, and expedited fees range from $250 to $500.
Step 4: LLC Operating Agreement
You have to keep LLC Operating Agreement with your business records. No need to sent to the California Secretary of State.
An Operating Agreement consists of the member/members (owners) with their percentage of ownership. This document disclosures how profits and losses are distributed, how the LLC can managed, and how the taxes are paid.
Step 5: Get Federal Tax ID Number (EIN)
Federal Tax ID Numbers (EIN) are issued by the IRS to LLCs. It is like the equivalent of a Social Security Number for an individual.
You can use EIN to open bank accounts, filing taxes, and handling payroll.
You can apply for your EIN only after your California LLC is approved.
Getting EIN is free from the IRS. You can obtain an EIN:
If you are a Non-US resident or if you don’t have a SSN, then You can’t get an EIN online. You can get an EIN without a SSN though if you apply by fax or mail. Complete the Form SS-4 and write “Foreign” on line 7b.
You can’t get an EIN online, If your LLC is owned by another LLC/company. Instead, You’ll need to mail or fax Form SS-4.
Step 6: Initial And Ongoing Statements of Information
You can download Initial Statement of Information from: Form LLC-12
LLCs in California must file an Initial Statement of Information within 90 days of the LLC being formed.
Statement of Information filing fee: $ 20
Penalty to paid if not filed: $250 penalty if it is late. Your LLC will be shut down by the state if you do not follow this requirement.
Filing methods: Either by mail or by walk-in.
Mailing Address is as follows:
Secretary of State
Statement of Information Unit
PO Box 944230
Sacramento, CA 94244-2300
Ongoing Statements of Information: You should file a Statement of Information every 2 years. Due date is the anniversary date of your LLC’s approval, which can be found on your approved Articles of Organization.
Use Forms: Use Form LLC-12NC, If there are no changes from your last Statement of Information. Use Form LLC-12, If you are making changes.
Processing time: The processing time can be 10 – 15 business days.
If you’d like a stamped copy of your Statement of Information, then you need to send an extra $1 ($21 total) and use the Mail Submission Cover Sheet (which can be found inside the Articles of Organization) and write “Please return a plain copy to the address below”.
Step 7: Annual Franchise Tax & Estimated Fee $800
All LLCs in California must pay $800 as Franchise Tax fee every year.
Payment is made with the California Franchise Tax Board.
Annual Franchise Tax $800 is paid using Form 3522.
1. The Annual Franchise Tax is paid for the current year.
2. Your first $800 payment is due by the 15th day of the 4th month after your LLC is filed. Then every year going forward, it’s due by April 15th.
For example: If your LLC is formed on 11th November 2017, then your first payment is due by 15th February 2018 (paying for the 2017 tax year). Your next payment is then due 2 months later, by April 15th, 2018 (paying for the 2018 tax year).
Avoid back-to-back payments: If you are planning to form LLC late in the year, that is in October, November, or December and you don’t need the business operating right away, then it is a good idea to form LLC in January (use 1st January as the Effective Date). If you follow this way, then your first payment is due on 15th April and there will be NO back-to-back payments.
Estimated Fee of LLC: If your LLC has over $250,000 in gross income, you must file and pay an Estimated Fee using Form 3536.
Step 8: Business Licenses and/or Permits
Based on your LLC’s location and the industry it operates in, you can obtain certain business licenses and/or permits. To know about your LLC’s requirements, you need to contact the city, or county where your business is located.
Step 9: Taxes
California State and Local Taxes: LLC has to register and pay taxes with the California Franchise Tax Board (FTB) and with local municipality (city, town).
Federal Tax: California LLCs have “pass through” taxation. Income or losses are listed on a Schedule C and filed together with your personal tax return.
Form 568: LLCs in California need to file Form 568 and additional Forms with the Franchise Tax Board depending on how the income is earned.
Step 10: LLC Bank Account
Liability protection: You have open a separate bank account for LLC in California to keep your personal assets separate from your business assets. It makes bookkeeping and accounting easier.
Documents required to open an account: Approved California Articles of Organization, EIN Confirmation Letter, and Driver’s License.
There are few banks that charge monthly fees for California LLC business checking accounts. You need to enquire with the banks.
Debit card: Your bank will issue a debit card, when you open the account.