Step 1) Verify & Secure Your LLC Name
The first step is making sure your brand name is unique, free of restricted wording and doesn’t mislead about your company’s purpose. It also must contain the words “Limited Liability Company” or abbreviations like “LLC” or “L.L.C.”, and it can’t be too similar to any other name registered in California.
Remember, this isn’t optional in California -- it’s mandatory.
Quick Note: Before you commit 100% to a name, you may also want to check that there’s a decent URL available for your business. Use Weebly to search your options. If there’s a quality domain name for purchase, we advise buying it right away. Even if launching a business website isn’t on your radar right now, it’s going to be soon, and you might as well nail down a domain name that’ll make it easy for customers to find you!
Step 2) Appoint A Registered Agent
The next step is appointing a registered agent in California to receive and process documents like state filings, tax forms and legal notices on behalf of your LLC.
Your registered agent must be a California resident or a registered business entity with a physical street address — not a P.O. Box. They also must maintain normal business hours (9 am to 5 pm, Monday through Friday).
You have the option to elect yourself as your LLC’s registered agent, but it’s a commitment many folks aren’t up for. Read our guide to get a better idea of what acting as your own California registered agent would entail.
Hiring a professional can cost as much as $160 a year, so it could be worth getting a qualified registered agent through an online filing service like IncFile. They’ll throw in a year of registered agent services for free when you form your California LLC with them.
Step 3) File Articles Of Organization
In 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; see link:
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) Get An EIN For Your LLC
A EIN (Employer Identification Number) is required to set up a business bank account and legally hire employees, and it’s essential to experiencing a smooth tax season.
The government will track most of your business activity via your EIN, so it’s mandatory for any multi-member LLC, and some single-member LLCs. The IRS outlines all the conditions that call for an EIN on their website. This is also the best place to apply for an EIN, given that their online application is totally free and fairly efficient.
Make sure to keep the PDF or otherwise save the number once the website gives you that option — once you click “continue” you won’t be able to go back, and you’ll have to wait 2-3 weeks for the paper copy.
Step 5) Open A Business Bank Account
There are two major reasons to open a business bank account for your LLC.
The first is to take advantage of the many perks that banks and lending institutions are offering these days — there are a fair amount of incentives for small businesses, so be sure and check around if you aren’t already familiar.
The second reason is to make your finances simpler by separating the business’ expenses from your own. By using a single account for your business and syncing it with accounting software, you’ll create a significant layer of protection and gain much better control over your finances.
Call ahead at your chosen bank to find out what paperwork is required to open up a professional account. Most banks require the EIN document from the IRS and the Articles of Organization, and some require additional documents such as a business license or “tax certificate” from your locality.
Note: Never, ever use a business account for personal expenses.
Step 6) Draft An Operating Agreement
An operating agreement is a formal contractual agreement among all owners (members) of an LLC that outlines financial and managerial responsibilities. It’s not legally required, but it’s in the best interest of your business to have one in place. It’ll help you protect your brand, your fellow members and your assets — and yes, even solopreneurs should have one.
To get started, consider using a free customizable operating agreement template!
Step 7) Handle LLC Taxes & Licensing
The 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.