How to Form a California LLC

Use A Professional Service

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

4.6 out of 5 starsNorthwest ($49 + state fee) for basic & quick LLC formation.

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

Form an LLC

Step 1) Verify & Secure Your LLC Name

Choose a Business Name

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 or 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 trade name registered in California.

 

For an exhaustive list of naming rules you can visit the California Secretary of State website.

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 filing a DBA (doing business as) 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.

 

Quick Note: Before you commit 100% to a name, you should see if there’s a decent URL available. Use Weebly to search 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.

Step 2) Appoint A Registered Agent

Choose a Registered Agent

When you file your Articles of Organization, you will be asked to appoint a California 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 doing so through an online LLC formation service. Many of these companies (like Northwest) offer up to one year of registered agent service free when you form your LLC with them.

 

Step 3) File Articles Of Organization

Register an LLCIn order to legally conduct business in the state of California, you’re required to file Articles of Organization with the Secretary of State.

Complete the LLC-1 form and have it signed by the LLC’s organizer (may be yourself), then submit it online or by mail with the $70.00 filing fee. 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 here.

Quick Note: This is also a great time to work with a lawyer or an online filing service, although this is not required by law.

 

Step 4) Draft An Operating Agreement

Create an Operating AgreementCreating an 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. To access a free operating agreement and learn more about how this document works in California, click here.

 

Step 5) Get An EIN For Your LLC

Get an EIN for Your LLCThe Employer Identification Number (EIN), or Federal Tax Identification Number, is essentially a social security number 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 is by using the free online application on the IRS website. We prefer this method because it’s the most efficient, but if you’d prefer to apply via phone, fax or mail, read through our guide to find out how.

Maintain Your LLC's Personal Asset Protection

Best Business Bank Account

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

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

You can protect your business with these two steps:

1. Opening a business bank account:

  • Separates your personal assets from your company's assets, which is necessary for personal asset protection.
  • Makes accounting and tax filing easier.

2. Getting a business credit card:

  • Helps you separate personal and business expenses.
  • Builds your company's credit history, which can be useful to raise capital later on.

Reduce the Liability of Your LLC

Business insurance helps you manage risks and focus on growing your business. The most common types of business insurance are:

Stay Compliant

Business LicensesThe number of permits, licenses and taxes your business is obligated to take care of is determined by a number of factors. Your business type, location, level of interaction with the public, and other specifics all play a role.

To get started, bookmark the closest California district office of the Small Business Administration, as well as the Secretary of State’s business resources page. These are likely to be go-to sources along the road to total legal compliance.

Some counties/cities require a general business license (sometimes called a tax certificate) to do business, even if you’re just operating from home. Look up your city hall website to find out if you need to file for a general business license, which would need to be renewed on an annual basis.

If you decide you could use some help with this step, consider hiring a professional business license service. They’ll do the research on your behalf and send you all the necessary applications — all you’ll have to do is fill in the details.

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:

1) Accounting

Getting your books in order right up front will save you headaches in the future. At the very least, you can have a professional setup your bookkeeping and accounting for you. This will save you money and time in the long run.

There are all in one services that will do your bookkeeping/invoicing/tax filing for you all for one monthly fee. Mazuma ($95/month) is a reliable all in one tax service.

2) 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?

How To Form An LLC OnlineIf 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:

– Northwest ($49 + state fee) = Best Price & Overall Value

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

 

Note that this guide for forming a California LLC isn’t a legal document or legal advice. It’s for informational purposes and the information above is subject to change. For specific legal questions regarding how to form an LLC in California, consult with a business attorney.