Want to launch your business as a limited liability company (LLC)? California could be the right place for you. With millions of residents and a wide range of potential industries, the Golden State presents a ton of opportunity to ambitious entrepreneurs. In 2021, WalletHub ranked California as number 3 on its list of 10 best states to start a business. Some of the reasons for this high ranking included access to resources and availability of human capital. 

Starting a California LLC is a smart way to give your business security. This type of business entity can protect your personal assets, give you flexibility in how you run your business, and identify your company with the state of California. An LLC can also help add legitimacy to your business idea. 

That said, forming an LLC in California can seem trickier than trying to merge lanes in bumper-to-bumper L.A. traffic. But don’t worry. This guide will walk you through the entire process, step-by-step. Along the way, we’ll also show you how our professional services help you cut through the red tape so you can focus on running and growing your business. 

Starting a Limited Liability Company in California

Wondering how to start an LLC in California? You’ll need to file formation documents with the state. Our filing service can handle these legal documents for you, but we’ll show you the process, too.

LLC California Formation Process

Starting a California LLC begins with choosing a name. You’ll need to check that the name you want isn’t already registered to another business owner. Your name must also follow all state guidelines. For example, California LLC names cannot be vulgar or include words that might mislead the public.

Next, you’ll need to find an agent for service of process and fill out paperwork, such as your Articles of Organization and Statement of Information. These forms tell the state of California basic information about your company, such as who’s involved, where you’re located, and what type of business you’re in. Filing these forms will allow you to move forward with your new company. California also requires you to create an LLC operating agreement, which details how your business will be run.

Finally, you’ll get set up with the IRS and apply for any business licenses, permits, or insurance policies that are required by your industry. 

6 Steps to a LLC in California

Below, we’ll cover how to form an LLC in California in six simple steps. We’ll also include some other helpful information to set up your LLC for success.

Note that these guidelines are for starting a domestic LLC, which is one started within the state you’re residing in. A foreign LLC is one that originated in a different state. To register a foreign LLC in California, you would complete a registration statement for a foreign LLC and follow a different process.

Step 1: Name your California LLC

The first step to starting your business is to name your California LLC. Unlike a sole proprietorship (which typically has the same name as the person who runs it), LLCs often opt for branded company names.

Your name plays a huge part in how the public views and perceives your brand. So, it’s important to make a great choice.

Name Requirements for a Limited Liability Company in California

When forming an LLC in California, the words “Limited Liability Company” or the abbreviations “L.L.C.” or “LLC” must be included in your formal name. You may also abbreviate “Limited” to “Ltd.” and “Company” to “Co.”

Reading up on the state’s naming guidelines to ensure you’re following all the rules. A few of the general guidelines include:

• Avoiding profanities
• Not using an already registered name (or one that’s confusingly similar to a name already in use)
• Avoiding names that could mislead the public
• Avoiding names that make your company sound like a government agency or entity (like “police,” “county,” and “state”)

Reserving a Business Name

It’s important to make sure your desired name hasn’t already been taken in the state of California. Our California business search page can help you with that. If you find that your name is available but you’re not yet ready to file Articles of Organization with the state of California, you can reserve it. Our business name reservation service not only reserves the name for you, but also does a search for your desired name to make sure it’s available.

File a Fictitious Business Name (FBN) in California

Next, you may want to consider a California FBN name. Some businesses use an FBN (or “fictitious business name”) when they register under a different moniker. This is also known as a “doing business as” or DBA name in most other states.

There are many reasons a company will use a DBA name, such as introducing a new product line. Some examples of when a DBA name would be used include:

• An LLC with the official company name “ABC Toys, LLC” wants to sell toys online as “ABC Toys”
• An LLC with the official company name “ABC Toys, LLC” wants to sell puzzles on Amazon as “ABC Puzzles”
• An LLC with the official name “XYZ Computers, LLC” wants to sell online as “XYZ Laptops”

By filing for fictitious names, you can avoid having to re-establish your company with the state of California each time you want to do business under a different moniker.

In California, FBNs aren’t registered with the California Secretary of State office, but at the local level. You must file in the county where your business is, and you’ll need to get the necessary forms from your county clerk.

Trademark your company name or logo

Registering a trademark in California can help protect your business or DBA from being used by others in the state. A brand logo or company name trademark can be beneficial to your business, even as a new LLC. Placing a trademark on your name or brand’s design helps keep it from being copied or stolen by existing or upcoming businesses. It helps protect your intellectual property and provides you with standing ground in the event of copyright infringement. 

When starting your LLC in California, intellectual property includes things like:

• Your brand name
• Your logo
• Inventions
• Written or artistic work

Holding a trademark means that you “own” the right to use certain words or designs, and others are infringing on that ownership if they copy or repeat your work. Likewise, it means that another business cannot have the same name as yours. 

You can learn more about California’s guidelines on the Secretary of State website. Regardless of whether you want to apply for your own trademark, it’s wise to search the California trademark database to make sure your desired business name hasn’t already been trademarked in the state.

By the same token, you’ll want to check the U.S. Patent and Trademark Office (USPTO) database to make sure your name hasn’t been federally trademarked. If it is available, you can apply to register it on the USPTO website. Please keep in mind that this process is not immediate, but can provide broader protection if you plan on doing business outside of California.

Register a trademark in California

In the state of California, you can file to register a trademark for a fee of $70 per “classification code.” You can fill out the “Trademark / Service Mark – Application for Registration” (Form TM-100) online, in person, or by mail via the California Secretary of State. Online and in-person drop-offs are marked with the time and date that they are received. Mail submissions are marked at 5 p.m. of the day they are delivered.

Once approved, you will receive a free copy. You can also request a certified copy for a fee. Learn more about trademarks on our trademark vs. copyright page. 

Secure a domain name for your LLC

Secure a website domain name to help potential customers find you online. You can conduct a quick online domain name search to make sure the domain name you want is available, and then have us register that domain for you.

For help naming your business and other filing services, look to our online services. With a range of affordable options, we can help you with the paperwork to set up your business, which gives you time to focus on actually growing your company. 

Step 2: Appoint a California agent for service of process

The next step is to appoint a California agent for service of process. In other states, this is more commonly referred to as a registered agent. The agent for service of process is a person or business entity assigned to receive legal notices (such as subpoenas) and official correspondence on behalf of your business.

Agent for service of process requirements

The California requirements for an agent for service of process include: 

• Being a resident of California or a company authorized to do business in the state
• Having a physical mailing address in California (a P.O. box will not suffice)
• Being over the age of 18

You can appoint yourself or another member of the company to be your agent, or you can hire an outside source to serve in this position.

Agent for Service of Process Responsibilities

An agent for service of process: 

• Will be notified if the business has been sued or has had legal action taken against it
• Is responsible for relaying any information received to the appropriate people at your LLC
• Should always be available during normal business hours to receive service of process
• Must accept important government mail

Hire a registered agent service

By using a registered agent service, you can free up time to focus on your business since you won’t have to be available during regular business hours.  Additional perks of hiring a registered agent service include:

• Private receipt of potentially embarrassing paperwork (for instance, legal action that’s taken against you)
• Ability to move your office location without having to update your registered agent address with the state
• Assurance that notifications will be received and dealt with in a dependable, timely manner

For help with your California agent for service of process, contact us and learn about our affordable registered agent service. Our professional registered agent services can help keep your company well-organized and compliant with the government.

Step 3: File California Articles of Organization

Next, you need to file your California Articles of Organization. This form explains things such as who’s involved in your LLC and their contact information. Articles of Organization are required for any LLC in the state of California. Fortunately, we specialize in handling this kind of paperwork with our business formation plans. So, we can take care of this step for you and make sure it’s done correctly the first time.

Unlike many other states, California requires two separate forms to be filed in order to form your LLC. First, there are the aforementioned Articles of Organization. Next, is the Statement of Information (which we’ll cover in the following step). 

What to include in your California LLC Articles of Organization

California LLC Articles of Organization should include:

• Your business name and address
• Contact information
• Your name and information for your agent for service of process
• Whether your LLC will be manager-managed or member-managed
• Signature of the organizer

Most LLCs choose member-managed, meaning the members (owners) all share in the running and management of the business. In a manager-managed LLC, the members appoint one or more managers to manage the company. These appointees can be members of the LLC or someone hired from outside.

File paperwork in-person, by mail, or online with the California Secretary of State

California charges a filing fee plus an additional fee when submitting paperwork in person. All in-person filings are considered to be expedited and will be processed faster than online or mail submissions. There are additional fees associated with in-person filings. 

You may choose to have your paperwork pre-cleared and/or expedited to hit a specific timeline. Next-day approval services are available. You will need to mail or drop off the paperwork in person at the Sacramento office public counter. These services are not available at the Los Angeles Secretary of State location. We also have a fast filing speed service to help you expedite the LLC formation process.

Preparation for forming an LLC in California with applicable forms for pre-clearance and expedited services should be done respectively.

• Pre-clearance services: “Provide a customer with the option to submit a business entity document in person to the Secretary of State’s Sacramento office prior to filing to determine if the document conforms to law and to receive a pre-clearance response within a guaranteed time frame.”
• Expedited filing services: “Provide a customer with the opportunity to submit for filing a business entity document in person to the Secretary of State’s Sacramento office and to receive a filing confirmation or filing response within a guaranteed time frame.”

File in-person for expedited processing in California

The expedited timelines are guaranteed and begin at the time that the paperwork is received. For example, if you file the 24-hour pre-clearance form Tuesday at noon, your pre-clearance will begin Wednesday at noon.

All expedited paperwork must include:

• The file you’re submitting. The file needs to be signed by all involved parties. This will be personally delivered to the California Secretary of State’s office in Sacramento. Digital signatures are not viable or accepted by the state on paper copies. 
• A copy of your pre-clearance response
• Your complete filing fee
• The complete expedited fee (this will need to be a separate check and will be deposited even if your request is rejected) 
• A note and/or instructions on your requested class, as well as specific filing date, if applicable 
• Notification on filing response (how do you want to be notified?)
• The name and phone number for a point of contact

Filing your Articles of Organization can be done on a quick schedule, as long as you follow the proper protocol. Consider this option if you’re in need of a quick turnaround or have hard dates for forming an LLC in California. 

The Articles of Organization are usually approved within seven business days without expedited or pre-clearance services.

Digitally store your California Limited Liability Company documents

If you have us handle filing your Articles of Organization, once the state of California approves your LLC, you can digitally store and organize your paperwork in your ZenBusiness dashboard. This is where you can keep it and other important paperwork digitally organized.

Once you get your physical paperwork back from the state approving your new California Limited Liability Company, you’ll want to keep it in a safe location along with your other important documents, such as your LLC operating agreement, member certificates, contracts, compliance checklists, transfer ledger, legal documents, etc. We offer a customized business kit to help you keep these important documents organized and looking professional.

Step 4: File California Statement of Information

Next, you’ll submit your California Statement of Information. This is the second part of the initial paperwork in starting your LLC in the Golden State. Remember, this step is in addition to filing the Articles of Organization.

Your Statement of Information has to be filed within 90 days of formation to retain your LLC name and status with the state. 

The Statement of Information is also filed with the California Secretary of State and can be done in person or online. There’s an accompanying filing fee. 

Because each entity can be updated on the California Secretary of State website, it’s important that you are dealing with your own LLC. Accidentally modifying the wrong business can lead to prosecution by the state. 

Finally, when filing your Statement of Information, remember that this information will be open for public record.

Biennial Report

You’ll also need to renew the Statement of Information every two years, as long as you continue to operate and remain in business. This type of reporting is known as an Annual Report or Biennial Report in other states.

When refiling within your intended time slot, there’s a fee for renewal on all California LLCs. If you have more than one member within your LLC, you’ll need to add an attachment to the Statement of Information. This is added to the original paperwork with no additional charge.

Tips for Getting Your Application Approved

According to the state of California’s business website, there’s a large portion of applications that can’t be processed due to typographical errors, issues with their business name, or omitted items in the applicant’s Articles of Organization. To avoid these errors, which could potentially slow down or halt your LLC completion process, check out these tips provided by the state.

Name Reservations

As mentioned earlier, check to ensure that your business name has not already been registered. A name that is in use will cause your application to be denied and force you to start the process over with a new name. Check your preferred business name before filing so that this simple mistake won’t slow you down. 

Electronic Signatures

The state of California has very clear guidelines as to what constitutes a legal digital signature. While typing your name in as a signature on an electronic device is acceptable, you will also need paperwork confirming the use of electronic signatures and that all parties are signing digitally. In addition, the Secretary of State website advises: “Electronic signatures on filings submitted through the Secretary of State’s online process are the only electronic signatures that are acceptable for filings with the Secretary of State. Computer-generated signatures or fonts made to look like a signature printed on paper filings are not acceptable.”

This also means you can’t digitally sign paperwork and print it for expedited filing. When using paper copies of LLC forms, all paperwork should be signed in person. Keep this in mind when multiple signatures are a requirement, especially when dealing with members who live far apart. The state’s Sacramento office only accepts paper copies. These can be mailed if you’re not local or within driving distance from the Secretary of State location.

Step 5: Create an operating agreement

Your California operating agreement outlines the rules and operating procedures for the management of the LLC, much like the bylaws required by corporations. Your operating agreement should include information such as:  

• Whether members have the right to admit additional members
• An explanation of the business’s terms and conditions
• How the business will be managed and ran
• The circumstances, if any, under which the cessation of membership of one or more members will result in the LLC’s dissolution
• A plan of succession for when a member passes away (the agreement can also stipulate what happens to that member’s portion of the business)

Unlike some other states, California law actually requires LLCs to have an operating agreement. Aside from just being a legal requirement, your California operating agreement is a great resource to look back on in a time of need. Keep it on file and update it as your business changes.

California LLC Operating Agreements

Most states do not require LLC operating agreements, but California does. Your company can benefit from an operating agreement for many reasons:

• To help uphold the limited liability aspect of your limited liability company in the eyes of the courts
• Settling disagreements between LLC members
• Clarifying business structure ownership
• Proving legitimacy with financial institutions, the state, and the federal government

Even single-member LLC businesses are required to have this document in California. 

Although an operating agreement is required by the state of California, you’re not required to file it. It should be kept on hand with your company’s files so it can be referred to in times of need. For instance, if there’s a dispute among LLC members or a change in industry standards, the operating agreement will be looked upon for guidance.

Not sure how to create an operating agreement for your California Limited Liability Company? We offer an operating agreement template to help you get started.

Step 6: Apply for an EIN

An Employer Identification Number (EIN) is the tax ID number for your LLC. This number is also commonly referred to as a Federal Employer Identification Number (FEIN).

Your EIN identifies your company to the Internal Revenue Service (IRS) much like your Social Security number identifies you with the federal government. Just as you use your Social Security Number to file personal taxes, you’ll use your EIN to file business taxes.

An EIN also allows you to open a business bank account and is a requirement for hiring employees. 

You can get your California Limited Liability Company’s EIN through the Internal Revenue Service (IRS) website, by mail, or by fax. Don’t want to deal with the government agency yourself? No worries, we can get it for you. Our EIN service is quick and eliminates the hassle.

Open a business bank account for your LLC in California

After you have your EIN, you’ll be able to open a business bank account for your LLC. Separating your business accounts from your personal banking is critical. By doing so, you avoid commingling funds and get a better handle on your finances for tax time. 

(Note: You can also get a business credit card. By using a business credit card for company expenses, you further separate personal and business funds.)

In addition to making tax filing more difficult, commingling funds could also be used against you. If someone takes you to court to challenge whether you and your LLC are truly separate entities (that is, they’re trying to sue you for your personal funds, not just your business’s), having a separate bank account for the business helps establish to the court that your LLC is legitimate and separate from you.

In conjunction with LendingClub, we offer a discounted bank account for your new LLC. This allows for unlimited transactions, online banking, a debit card, and more. When you want to authorize others in your business to use the account, we offer a banking resolution template to simplify the process.

Also check out ZenBusiness Money. It can help you receive payments, create invoices, track tax deductions, and manage everything to do with your business finances in one place. Best of all? It’s free to use!

Recurring Costs for Your California LLC

The California Franchise tax board requires all businesses to pay an annual franchise tax of $800. Under Form FTB 3522, LLC owners must file with the state and pay their annual tax to the Franchise Tax Board by the 15th day of the 4th month following their business’s formation. Even though it can take a month for filing to process, this counts as the first month. 

This tax payment are due for all California LLCs, regardless of annual income or annual revenue. The funds are due as long as the business is operational. 

Businesses will owe the full amount per calendar year, no matter how many months they remained in business. For example, if you opened your LLC in November, the franchise tax will be due Feb. 15 of the following year. (Because November counts as the first month, those fees will actually fall three and a half months after filing.) 

Fees are due to all businesses still in operation with the state, even if they do not have an income for the calendar year. Dissolving the business is the only way to free your business of California franchise taxes. 

The only exceptions to the California franchise tax law are as follows. LLCs are not subject to pay the annual fee if both of the following statements are true: 

• They did not conduct any business in California during the tax year
• Their tax year consisted of 15 or fewer days

From then on, your LLC will pay for the calendar year by April 15, or tax day, for that year. This payment will cover January to December of that year. Keep in mind that can mean two payments in short succession, depending on when the business LLC paperwork is filed. 

Another exception occurs if you cancel your LLC within one year of forming. In this case, you can file a Short Form Cancellation SOS Form LLC-4/8 with the Secretary of State. Your LLC will not be liable for paying the $800 franchise tax for its first tax year. 

Busy Season for State of California Filing LLC Paperwork

Due to the nature of these payments, California is often busier filing LLC paperwork toward the beginning of the year. Keep in mind that it could take longer during this time to be approved and receive your paperwork. 

Filing forms can also be post-dated, but not by more than 90 days. Therefore, if you open your LLC toward the end of a calendar year, you could potentially save funds by waiting to file all necessary paperwork until after New Year. 

Going forward, the annual franchise fee will always be due on April 15, eliminating the piggyback payments that can occur in your first year of filing. 

This franchising fee is an additional fee that most states do not charge.

Your Statement of Information will also need to be renewed every other year, along with a fee.

Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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