How to Form an LLC in California

How To Use This Guide

It’s easy to form an LLC, just follow these steps:

  1. Name Your LLC
  2. Choose A Registered Agent
  3. File Formation Documents
  4. Create an Operating Agreement
  5. Get an EIN

Use A Professional Service

A professional LLC service will handle the entire formation process on your behalf, allowing you to focus on the other needs of your new business.

4.7 out of 5 starsZenBusiness ($39 + state fee) for basic & quick LLC formation.

3.6 out of 5 starsLegalZoom ($79 + state fee) for the most popular LLC service available.

Forming a California LLC is Easy

You can start a California LLC (Limited Liability Company) yourself by filing the California Articles of Organization with the Secretary of State. The cost to set up an LLC in California is $70.

Follow our free How to Form an LLC in California guide below to get started today.

If you are thinking about hiring a professional service to form an LLC, read our Best LLC Formation Services review.

Steps to form an L L C in California

Step 1: Create A Name For Your California LLC

First off, in order to launch a successful California LLC, you need to give it the right name. Your business name needs to be catchy for branding purposes and legitimate for legal purposes. We go into depth on this topic in our LLC naming guide, but we’ll go over the legal basics below.

Legally, your business name must:

  • Contain the words limited liability company, limited company, or the abbreviation LLC or L.L.C.
  • Not contain the words bank, trust, trustee, credit union, or insurer.
  • Be distinguishable from any other entity or fictitious business name registered in California.

For a complete list of naming rules, you can check the California Naming Guidelines.

If you’re having trouble coming up with a name that captures your brand, don’t let that stop you from forming your LLC. For now, you can focus on the legal requirements and consider applying for a fictitious business name after you’ve nailed down your branding.

What To Do:

Once you’ve decided what you’d like to call your LLC in California, do a business name search to find out whether or not it’s in the cards. If your business name is available, you’ll be able to lock it down when you file your Articles of Organization.

Need help naming your LLC? Check out our LLC name generator to find the best name for your LLC.

Quick Note: Before you commit 100% to a name, you should see if there’s a decent URL available. Use GoDaddy to search for your options. If there’s a quality domain name for purchase, we advise buying it right away because even if launching a business website isn’t on your radar right now, it’s going to be soon.

Find a Domain Now

Service provided by GoDaddy.com

After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free

Step 2: Appoint a California Agent for Service of Process

When you file your Articles of Organization, you will be asked to appoint a California agent for service of process. In other states, the agent for service of process is commonly known as a registered agent.

Your registered agent will be responsible for receiving important legal documents like tax forms and service of process notices on behalf of your LLC. Your registered agent can be an individual resident of the state or a company that’s legally authorized to represent businesses in California.

California does give you the option to act as your own registered agent, but many business owners choose to appoint a professional instead. Here are a few things to think about before you decide to act as your own:

  • You’ll have to maintain normal (9 am - 5 pm) business hours at the address you provide.
  • If you run your business from home, you’ll be required to make your personal address public.
  • You must keep up on important notices, dates, and deadlines.
  • You could be served in front of your family or coworkers.

What To Do:

If you’re considering acting as your own registered agent, do some research, starting with our registered agent guide. If you decide you’re up for the task, go ahead and list your own name and address on your Articles of Organization.

If you’re leaning toward hiring a professional, we recommend using an LLC formation service as your registered agent. Many registered agent services offer up to one year of registered agent service free when you form your California LLC with them. 

Step 3: File Articles of Organization

Now it’s time to officially form your LLC by filing your Articles of Organization with the state of California. You can do this on your own, with the help of a lawyer, or through a professional LLC filing service.

What To Do:

If you choose to do this step on your own, you can either file online with the Secretary of State or fill out a hard copy of the form and mail it in. The filing fee is $70. If you choose to mail in a hard copy, send the form and payment to the following address:

Secretary of State
Business Entities Filings
P.O. Box 944228
Sacramento, CA 94244

Or submit it in-person at:

Secretary of State
1500 11th St.
Sacramento, CA 95814

Articles filed in-person at the Secretary of State Office in Sacramento are subject to an additional $15 counter drop-off fee. This provides priority processing over applications submitted by mail. The filing counter is on the 3rd floor.

The standard processing time is 5 days. There are also expedited options and private companies that will walk in the applications for you, each of which will raise your costs a bit. Find out more information on the California Secretary of State's page on expedited services.

Sure, you can handle this step on your own, but we still recommend considering the help of an LLC formation service. Why? Not only will they take the reins and make sure you file everything properly, but they’ll also provide other necessary products and services at very competitive prices.

One great option is ZenBusiness In addition to great service, they give you a free year of registered agent service when you sign up.

Step 4: Create A California LLC Operating Agreement

Creating a California LLC operating agreement is the only way for you and your members to fully define your roles and lock down your LLC’s management and ownership structure. Having this document in place will also give you all something to return to if a dispute or lawsuit arises.

Your operating agreement should outline the following:

  • each member’s responsibilities
  • how new members will be admitted
  • how existing members may transfer or terminate their membership
  • how profits and dividends are to be distributed

From there, you can add as many provisions as you want, provided they are not in conflict with California business law. Learn more about Operating Agreements in California here.

Quick Note: Download a template or create a custom Free LLC Operating Agreement using our tool on How to Start an LLC. No credit card required, ever.

Step 5: Obtain An EIN (Employer Identification Number) For Your LLC

The Employer Identification Number (EIN), Federal Employer Identification Number (FEIN), or Federal Tax Identification Number (FTIN), is essentially a Social Security number (SSN) for your company. State and federal agencies use this number to track your business activity.

Your EIN will come in handy when it’s time to:

  • Open a business bank account
  • File Federal and State taxes
  • Hire employees

We think the best way to get an EIN for your LLC in California is by using the free online application on the IRS website. We prefer this method because it's the most efficient, but you can apply by phone, fax, or mail. You can read through our How to Get an EIN guide to find out how.

Maintain Your LLC's Personal Asset Protection

Using dedicated business banking and credit accounts is essential for personal asset protection.

Now that you’ve made it through the formation process for your California LLC, you’ll need to take steps to protect your personal assets and establish your business as an independent entity.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your California LLC is sued. In business law, this is referred to as piercing your corporate veil.

You can go a long way in protecting your assets with these three steps:

1. Open a business bank account.

A business bank account separates your personal assets from your company's assets, which is necessary for personal asset protection. A designated business bank account also makes accounting and tax filing easier.

Recommended: Find the right bank for you. Read our review of The 5 Best Banks for Startups and Entrepreneurs

2. Get a business credit card.

A business credit card helps you separate personal and business expenses. A business credit card will also build your company's credit history, which can be useful to raise capital later on.

Learn about the best small business credit cards here.

3. Designate an authorized representative.

Make sure all documents are signed by a representative of your California LLC and not by you (or other LLC members) directly. This will help separate you from liability incurred by the LLC.

Reduce the Liability of Your LLC in California

Business Insurance

Business insurance helps you manage risk and focus on growing your LLC in California. Carrying the right coverage protects your LLC from liability and keeps you safe in the event of a loss.

The most common types of business insurance are:

  • General Liability Insurance: A broad insurance policy that protects your business from lawsuits. Most small businesses get general liability insurance.
  • Professional Liability Insurance: A business insurance for professional service providers (consultants, accountants, etc.) that covers claims of malpractice and other business errors.

There are free services available that quickly assess your business’s insurance needs. These services suggest customized policies with various insurance carriers so that you can choose the best value. One such reliable service is CoverWallet.

Labor Law

You can reduce your LLC’s liability by being fully compliant with employment laws such as:

  • Verifying new employees are allowed to work in the US.
  • Reporting employees as "new hires" to the state.
  • Withholding employee taxes.
  • Printing workplace compliance posters and placing them in visible areas of your workspace.

If you plan to hire employees, you might also be required to invest in Workers' Compensation Insurance. This type of policy provides coverage for employee job-related illnesses, injuries, or loss of life.

Find out more information at the Governor's Office of Business and Economic Development website for California.

Stay Compliant

As a new LLC in California, you will need to stay compliant with permits, licenses, taxes, and state filings. This is serious business; failure to comply can lead to fines, tax penalties, and dissolution (the end) of your California LLC.

Business Licenses and Permits

To operate your California LLC, you must comply with federal, state, and local government regulations. The details of business licenses and permits vary from state to state, so make sure you research carefully and plan accordingly.

Find out how to obtain necessary licenses and permits for your business or have a professional business licensing service do it for you:

Federal: Use the U.S. Small Business Administration (SBA) guide.

State: Use California's Secretary of State website.

Local: Contact your local county clerk and ask about local licenses and permits.

Sales Tax

If you are selling a physical product, you’ll typically need to register for a seller's permit through the California Board of Equalization Online Services website.

This certificate allows a business to collect sales tax on taxable sales.

Sales tax, also called "Sales and Use Tax," is a tax levied by states, counties, and municipalities on business transactions involving the exchange of certain taxable goods or services.

Here’s a sales tax guide to find out more.

Employer Taxes

If you have employees in California, you will need to register for the Unemployment Insurance Tax and Employee Withholding Tax through the California Employee Development Department website.

Annual Franchise Tax

California requires all LLCs to pay an annual franchise tax of $800.

Biennial Report

California requires all LLCs to file a biennial report. If you miss state filings like the biennial report, you could face fines or even automatic dissolution. A quality registered agent service, like ZenBusiness, can help protect your assets by keeping track of filing requirements for you.

Submit Online with the Secretary of State.

Or mail to:

Secretary of State
Statement of Information Unit
P.O. Box 944230
Sacramento, CA 94244-2300

Or deliver in-person to:

1500 11th Street
Sacramento, CA 95814

Due Date: Every second year by the end of the month in which your LLC was formed.

Late Filings: California charges a $250 penalty for failure to file on time.

Fee: $20 for each biennial statement.

Reduce Administrative Burden

There will be many demands on your time once you start your business. With that in mind, it’s a good idea to streamline your workflow and reduce administrative overhead from the get-go. The two most important business tasks to get help with are:

Accounting

It's important to get your books in order — even if you haven't officially opened for business. A well-managed accounting system will help you:

  • Track your business finances, including bills, expenses, and income.
  • Simplify and file your annual taxes.

You can maintain your accounting in two ways:

  • Use DIY accounting software. This can come with an increased risk of errors especially when starting a new business.
  • Hire an accounting service. They can provide comprehensive advice to help optimize your bookkeeping and taxes as well as additional services such as payroll etc.

Recommended: For most small businesses, we recommend using a reputable accounting service. Schedule a free tax consultation for your business now to avoid costly errors in the future.

Employee Payroll

If you have employees, a payroll service will save you a lot of time and also save you from having to become an expert on state compliance or employee tax withholdings and filings.

Gusto is a reliable and good payroll service for small businesses.

Need Help Forming an LLC in California?

Have A Professional Service Form Your California LLC For You

If you’ve got too much on your agenda to worry about all the paperwork and state-requirements, there are a handful of LLC formation services that can take care of everything for you.

Here are the two most popular:

ZenBusiness ($39 + state fee) for basic & quick LLC formation.

LegalZoom ($79 + state fee) = Best For Brand Recognition

Useful Links for your California LLC