In California LLC’s are governed under the California Corporations Code. Once you have determined that an LLC is the proper entity for your business and decided that you would like to form it in California, you need to take the following steps:
1. Decide on a Name:
Like most states, in California, an LLC’s name must end with one of the following: “Limited Liability Company,” “LLC”, or “L.L.C.” The words “Limited” and “Company” may be abbreviated to “Ltd.” And “Co.” respectively. An LLC’s name may not contain the words “bank”, “trust”, “trustee,” “incorporated”, “inc.”, “corporation”, “corp.”, “insurer”, “insurance company” or any other words suggesting that it is in the insurance business.
An LLC name must not be the same as, or similar to, an existing name in the California Secretary of State records, or misleading to the public. See, https://bpd.cdn.sos.ca.gov/be/forms/name-guidelines-restrictions.pdf
You can request a free check into the availability of a name by mailing a completed Name Availability Inquiry Letter (PDF) to the California Secretary of State’s office in Sacramento. Email or online inquiries cannot be accepted at this time. Checking the availability of a name does not reserve the name and does not confer any rights to a name.
For a fee of $10.00 a name can be reserved for a period of 60 days. Instructions for reserving a name are included on the Name Reservation Request Form (PDF). The form must be either mailed or hand delivered to the California Secretary of State.
2. File Articles of Organization
Once you have determined that the name you would like to use is available you must now complete and file Articles of Organization (Form LLC-1). LLC Formations can be submitted electronically through the California Secretary of State's bizfile California portal at bizfile.ca.gov.
The Articles of Organization must contain the following:
Name of the proposed LLC exactly as it is to appear on the records of the California Secretary of State.
The complete street address, city and zip code of the LLC's initial designated office in California. The designated office is where copies of the organizational documents, operating agreement financial and other business records must be kept.
A Registered Agent. There are two types of Agents that can be named: an individual (e.g. member, manager, or any other individual) who resides in California with a physical California address; or a registered corporate agent qualified with the California Secretary of State.
Whether the LLC is member managed or manager managed.
The purpose of the LLC must be stated.
The Articles of Organization must be signed by each person responsible for forming the LLC, indicating the information is true and correct.
Once the Articles of Organization have been completed and signed and you aren’t filing online, you may mail the completed forms and fees to Secretary of State, Business Entities Filings, P.O. Box 944228, Sacramento, CA 94244-2280 or deliver in person (drop off) to the Sacramento office, 1500 11th Street, Sacramento, CA 95814.
The filing fee for Articles of Organization is $70, if you hand-deliver the Articles of Organization you can request expedited filing for an additional fee.
3. Draft an Operating Agreement
An Operating Agreement is a binding document that lays out how your LLC is governed. Having an Operating Agreement allows the members of the LLC to specify exactly how they want their LLC to run. While an Operating Agreement is not required in California, it is highly recommended. The absence of an Operating Agreement means that the LLC must be run according to the default rules set by the state.
The Operating Agreement is not filed with the Secretary of State but is kept with your LLC records.
Should you have questions on how to draft an Operating Agreement, please contact O’Neill Tran Law at info@oneilltranlaw.com.
4. File Statement of Information
A Statement of Information (Form LLC-12) must be filed with the California Secretary of State within 90 days after filing the Articles of Organization and every two years thereafter during the applicable filing period. The applicable filing period is the calendar month in which the Articles of Organization were filed and the immediately preceding five calendar months. The Statement of Information has a filing fee of $20 and can be filed online.
5. Pay the Minimum Tax Requirement
All Registered LLCs in California may need to pay a minimum franchise tax of $800 to the California Franchise Tax Board each year. If your LLC has elected to be taxed as a corporation, then you must comply with California’s corporate tax rules.
For details and tax forms, see the California Franchise Tax Board website.
6. Professional Services
A California LLC may not provide "professional services" in California. "Professional services" are defined as any type of professional services that may be lawfully rendered pursuant to a license, certification, or registration authorized by the Business and Professions Code, the Chiropractic Act, the Osteopathic Act or the Yacht and Ship Brokers Act.
If your business is required to be licensed, certified or registered, before submitting Form LLC-1 to the California Secretary of State's office, it is recommended that you contact the appropriate licensing authority in order to determine whether your services are considered professional. For licensing requirements in California, please refer to CalGold website at http://www.calgold.ca.gov or the California Department of Consumer Affairs website at http://www.dca.ca.gov.
7. Comply with any additional tax requirements
You must comply with all tax and regulatory requirements that apply to your LLC. Examples of additional tax requirements include:
EIN: If your LLC has more than one member, you will need to get an IRS Employer Identification Number (EIN), even if the LLC has no employees. If you form a single-member LLC, you must obtain an EIN only if it will have employees or you elect to have it taxed as a corporation. You may obtain an EIN by completing an online application on the IRS website or by filing IRS Form SS-4 . There is no filing fee.
Sales and employer taxes: If your LLC has employees you will need to register with the appropriate California taxing authority. For employer taxes, register with the California Employment Development Department (EDD). If your LLC will be selling goods then you will need to collect sales tax, in which case you will need to register with California State Board of Equalization (BOE), which you can do online or in person at a BOE field office.
8. Obtain all Proper Licenses and Permits
Depending on the type of business your LLC is engaged in, you may need to obtain local and state business licenses. You will also need to determine whether your business premises is properly zoned and permitted for you to operate your business. For more information, go to CalGold on the California Office of Business and Economic Development website.
9. Foreign LLCs doing Business in California
If your LLC is organized outside of California, you must register with the California Secretary of State to do business in California. To register, you must file Form LLC-5, Application to Register a Foreign Limited Liability Company and pay a $70 fee. The form must be filed by mail or may be dropped off in person for an additional fee. The LLC must appoint a California agent for service of process and provide a certificate of good standing from the agency where the LLC was originally formed. For more information, see the business entities section of the Secretary of State’s website.
None of the above should be considered legal advice, please consult with an attorney when forming your LLC. Should you have any questions regarding forming your LLC please contact O’Neill Tran Law at (707) 559-8690 or via email at info@oneilltranlaw.com.