Starting your own business is an exciting journey, and choosing the right legal structure for your new venture is essential.
One of the most popular options for entrepreneurs is the Limited Liability Company (LLC). This flexible structure offers a combination of liability protection, tax benefits, and simplicity, making it ideal for many small businesses in California.
If you’re considering forming an LLC in California in 2025, you may be wondering where to start. Don’t worry – this step-by-step guide will walk you through the entire process in detail. Whether you’re forming your LLC for the first time or have experience with other states, we’ve got everything you need to know right here.
Let’s get started!
Costs Summary
| Fee Type | Cost (USD) |
|---|---|
| Articles of Organization Filing Fee | $70 |
| Statement of Information Filing Fee | $20 |
| Annual Franchise Tax (minimum) | $800 |
| Biennial Statement of Information | $20 |
Steps to forming an LLC in California
Forming an LLC in California involves several essential steps to ensure compliance with state laws. From choosing a unique name to filing the necessary paperwork and paying the required fees, each step is crucial for setting up your business properly. Here’s a breakdown of the steps to form your LLC.
1. Search Your LLC Name
Choosing a name for your LLC is an exciting first step. Your business name sets the tone for your brand and makes the first impression on your customers. However, before you get too attached to a name, you need to make sure it’s available and compliant with California’s regulations.
Steps to ensure your LLC name is valid:
- Unique Name: The name must be distinguishable from other businesses that are already registered in California. If your name is too similar to an existing name, you may face issues with the Secretary of State’s office, as well as legal troubles in the future.
- Name Requirements: Your LLC’s name must include the words “Limited Liability Company” or an abbreviation such as “LLC” or “L.L.C.” If your name includes words like “bank” or “insurance,” there may be additional approval requirements.
- Check Availability: You can check if your desired name is available by visiting the California Secretary of State’s website. You can perform a business name search to see if it’s already taken or too similar to another LLC name.
- Domain Name: If you plan to establish an online presence, it’s also a good idea to check if your LLC name is available as a domain name. Having a consistent name across both your business and online presence is crucial for brand recognition.
Considerations:
If your preferred name is already taken, you’ll need to come up with something else. This is a common challenge, so take your time brainstorming. Additionally, be mindful of trademarks; even if the name isn’t registered as an LLC, it could still be a trademark owned by another business.
2. Choose a Registered Agent
In California, as with all states, your LLC must appoint a Registered Agent. The Registered Agent is responsible for receiving legal documents, government correspondence, and tax forms on behalf of your LLC. This ensures that you don’t miss important notices, and it helps protect your LLC’s legal standing.
Who can be a Registered Agent?
- Individual Registered Agent: This can be you or someone within your business, provided they have a physical address in California and are available during normal business hours to receive documents.
- Business Registered Agent: Many people choose a third-party service for their Registered Agent. This is especially helpful for out-of-state business owners who don’t have a physical presence in California. Using a professional Registered Agent service also ensures that your business address remains private and keeps you in compliance with state regulations.
Recommended Registered Agent Service:
For a reliable and secure Registered Agent service, we recommend Northwest Registered Agent. They offer professional services, easy-to-use platforms, and privacy protection for your LLC. Their customer service is known to be helpful, and they offer the option of having all your legal documents forwarded directly to you.
3. File Articles of Organization with the Secretary of State
Once you’ve chosen a name and Registered Agent, you need to officially create your LLC by filing the Articles of Organization (Form LLC-1) with the California Secretary of State.
Steps to file:
- Where to file: You can file the Articles of Organization either online through the California Secretary of State’s website or by mailing the form.
- Filing Fee: The cost to file the Articles of Organization in California is $70 as of 2025. This fee must be paid at the time of filing, and it’s non-refundable.
- What you’ll need: The Articles of Organization requires basic information about your LLC, such as its name, Registered Agent, business address, and the names of members or managers. If you’re submitting online, you can fill out the form electronically, which is the fastest method.
After submitting your Articles of Organization, the Secretary of State will review your application, and if everything is in order, they will approve your LLC. You’ll receive confirmation from the state, and at that point, your LLC officially exists.
4. Create an Operating Agreement
While California doesn’t require LLCs to file an Operating Agreement with the state, it’s still highly recommended that you create one for internal purposes. The Operating Agreement is an essential document that outlines the ownership structure and operating procedures of your LLC.
Why an Operating Agreement is important:
- Ownership and Management: It defines how ownership will be divided among LLC members (owners) and outlines their responsibilities, powers, and how decisions will be made.
- Helps Avoid Disputes: By setting clear rules from the start, an Operating Agreement can help prevent conflicts between LLC members. For example, if a member wants to leave the business, the Agreement can specify how their exit will be handled.
- Protects Limited Liability Status: An Operating Agreement reinforces the legal separateness of your LLC, helping to protect your personal assets from business liabilities.
Though you can draft an Operating Agreement on your own, many LLC owners consult a lawyer to ensure that their agreement covers all necessary provisions. The document doesn’t need to be filed with the state, but it should be kept on file with your LLC’s other important records.
5. Get an EIN for Your LLC
An Employer Identification Number (EIN), sometimes called a Federal Tax ID, is required for almost every LLC, especially if you plan to hire employees or open a business bank account. This number serves as your LLC’s unique identifier for tax purposes.
How to get an EIN:
- Apply for an EIN through the IRS: You can obtain your EIN for free directly from the IRS. The easiest way is to apply online on the IRS website. After completing the application, you will receive your EIN immediately.
- Why you need an EIN: This number is essential if you want to file taxes, hire employees, open a business bank account, or apply for business licenses and permits. Without an EIN, your LLC can’t legally operate in most cases.
Note that if your LLC is a single-member LLC, and you’re the only owner, you may not need an EIN if you are a sole proprietor with no employees. However, most LLC owners apply for an EIN to separate their personal finances from the business.
6. File Your Statement of Information
After forming your LLC, California requires you to file a Statement of Information (Form LLC-12) within 90 days of forming your LLC. This form provides the state with updated information about your LLC’s business address, Registered Agent, and management.
Filing requirements:
- Filing Fee: There is a fee of $20 to file the Statement of Information.
- When to file: The Statement of Information must be filed within 90 days of your LLC’s formation. After that, you will need to file it every two years.
- How to file: You can file the Statement of Information online through the California Secretary of State’s website or by mail. The online filing method is typically faster and more convenient.
Filing the Statement of Information ensures that the state has accurate and up-to-date contact information for your LLC, which is critical for compliance purposes.
7. File Your $800 Annual Franchise Tax & Estimated Fee
Once your LLC is formed, you are required to pay the $800 Annual Franchise Tax each year. This fee is due regardless of whether your LLC is profitable, and failure to pay it can lead to penalties.
Details about the Annual Franchise Tax:
- Amount: The annual fee is $800 and is due by the 15th day of the 4th month after the formation of your LLC. After the first year, the $800 fee is due every year.
- How to file: You can pay the Annual Franchise Tax through the California Franchise Tax Board’s website, by mail, or by electronic transfer.
LLC Estimated Fee:
In addition to the Annual Franchise Tax, your LLC may be required to pay an Estimated Fee if your LLC has gross receipts of $250,000 or more. The fee is based on your LLC’s income and can range from $900 to $11,790, depending on the amount of gross receipts.
When is the LLC Estimated Fee due?
The Estimated Fee is typically due with your Annual Franchise Tax payment. You can file and pay online through the Franchise Tax Board.
8. File Form 568 (or 100 or 100S)
Form 568 is an annual tax return form that LLCs in California must file to report their income and deductions. If your LLC has elected to be taxed as a corporation, you may need to file different forms such as Form 100 or Form 100S.
Filing Requirements:
- When to file: Form 568 is due on the 15th day of the 4th month after the end of your LLC’s taxable year (for most LLCs, this will be April 15th).
- How to file: Form 568 can be filed online through the California Franchise Tax Board website, or you can file a paper version by mail.
What Do I Do After My LLC Is Approved?
After your LLC is approved, it’s important to ensure you remain compliant with California’s regulations:
- Maintain Accurate Records: Keep track of all financial transactions, including income and expenses. This will help with tax filings and future legal requirements.
- Obtain Business Licenses: Depending on the type of business you plan to run, you may need specific licenses or permits. Research which ones apply to your business and apply for them as needed.
- Open a Business Bank Account: To separate your personal and business finances, open a business bank account using your LLC’s EIN.
How Will My LLC Be Taxed?
California offers flexibility when it comes to LLC taxation. Your LLC can be taxed as:
- Sole Proprietorship (Single-Member LLC): This means the LLC’s income is reported on your personal tax return.
- Partnership (Multi-Member LLC): In this case, the LLC’s income is divided among members, who report it on their personal tax returns.
- Corporation: If your LLC elects to be taxed as an S-corp or C-corp, it will file taxes separately.
Consult with a tax professional to understand the best option for your LLC.
Conclusion
Starting an LLC in California in 2025 is a straightforward process if you follow the necessary steps. By choosing a unique name, selecting a registered agent, and filing the Articles of Organization with the state, you can officially form your LLC. It’s important to create an Operating Agreement, even though it’s not required by California law, as it helps outline the internal structure of your business and prevents potential disputes.
Additionally, obtaining an Employer Identification Number (EIN) from the IRS is crucial for tax purposes, and filing the Statement of Information ensures that the state has your most up-to-date contact details. Don’t forget about the $800 Annual Franchise Tax and, if applicable, the LLC Estimated Fee based on your business’s income. Finally, make sure to file your annual Form 568 to stay compliant with state tax laws.
By taking the time to understand the requirements and following the steps outlined in this guide, you’ll set your LLC up for success. With the right preparation and organization, you can enjoy the benefits of limited liability protection, flexibility in management, and potential tax advantages that an LLC offers. Good luck with your new business in California!
FAQs
Can I form an LLC in California if I don’t live there?
Yes, you do not need to be a California resident to form an LLC in California. However, you will need to have a Registered Agent who resides in California or a Registered Agent service that operates in the state.
How long does it take to form an LLC in California?
The processing time varies depending on whether you file online or by mail. Online filings are usually processed in about 7-10 business days. If you file by mail, it can take several weeks.
Do I need a lawyer to form an LLC in California?
Not necessarily. Most business owners can file an LLC themselves using online resources. However, if your LLC has complex ownership structures, or you have legal questions, consulting with a lawyer may be a good idea.