California LLC Formation Checklist
Launching an LLC for your business but not sure where to begin? This LLC creation checklist is your guide to the important steps to LLC formation, including:
- Naming Your California LLC
- Choosing an Agent for Service of Process
- Filing Formation Documents With the State of California
- Drafting an LLC Operating Agreement
- Getting an EIN
Download the California LLC Formation Checklist.
Step 1: Name Your LLC
Your business’s name is one of the first — and arguably most important — decisions you make when forming an LLC in California. When selecting the name for your LLC, there are a few things to keep in mind:
- Your state’s naming requirements
- Whether the name is available in California
- Whether there is a matching domain name (URL) available
Each state has its own requirements for naming a business entity.
California LLC Naming Rules:
- Your business name must include the phrase “limited liability company” or one of its abbreviations (e.g., LLC, L.L.C., etc.).
- Your business name cannot include words that could confuse your LLC with a government agency (e.g., FBI, Treasury, State Department, etc.)
- Your business name cannot include the following words: bank, trust, trustee, incorporated, inc., corporation, or corp.
- Your business name cannot include the words “insurer” or “insurance company” or any words suggesting that it is in the business of issuing policies of insurance and assuming insurance risks.
- Read the California state statutes on entity names for a complete list of naming rules.
The first step in naming your LLC is to make sure it is available. In California, your business name must be unique for you to use it. To make sure your business name meets this requirement, use our California LLC Name Search to confirm the availability of your chosen LLC name.
Domain Name Availability
Before you decide on a business name, it is important that you make sure the matching web domain name is available.
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Need Help Naming Your Business?
Fortunately, choosing a business name for an LLC is super easy with the help of our free business name generator. Simply include a keyword and industry to explore potential business names with available domain names at no cost to you.
For more help, visit our How to Name a Business in California guide.
Step 2: Choose an Agent for Service of Process
An agent for service of process, known as a registered agent in most states, is responsible for accepting legal and tax documents on behalf of your business. Your California agent for service of process can be an individual or a business entity (such as a professional service). You can also be your own agent for service of process.
If you’re not sure about serving as your own agent for service of process, you might consider hiring a registered agent service. Using a registered agent service ensures that your business never misses important mail or falls behind in legal obligations while also maintaining your privacy.
Form an LLC and get free registered agent service for the first year with ZenBusiness.
Step 3: File Formation Documents
To officially start a California LLC, you need to file the Articles of Organization with the state. You can form an LLC on your own or with the help of an LLC formation service.
You can file CA Form LLC-1 - Articles of Organization with the CA Secretary of State online, by mail, by fax, or in person, along with the nonrefundable $70 filing fee. Note that this fee is waived from July 1, 2022, to June 30, 2023.
For help with completing CA Form LLC-1, visit our California Articles of Organization guide.
Recommended: Check out our Best LLC Services review to learn more about choosing the right service to form your LLC.
Step 4: Draft an LLC Operating Agreement
Now that you’ve officially formed your LLC, the next step is to draft an LLC operating agreement. California requires all LLCs to maintain an operating agreement.
An LLC operating agreement outlines the ownership and membership duties of your LLC. In essence, this document allows the business owner(s) to clearly define both the financial and working relationships between each business owner or “members” as well as the members and managers.
This makes managing your business not only easier but also more streamlined, thanks to a solidified set of rules that inform voting rights, ownership stakes, and more.
How to Draft an LLC Operating Agreement
Here’s the good news: drafting an LLC operating agreement is easy and free using our free operating agreement tool or by downloading this free operating agreement template. If you’d prefer to create your own, here are the six articles you can generally expect to cover:
- Management and voting
- Capital contributions
- Changes to the membership structure
Visit our full How to Create a California LLC Operating Agreement guide to learn more.
Step 5: Get an EIN
An Employer Identification Number (EIN) is like a Social Security number for your LLC. Besides allowing the IRS to identify your business for tax reporting, an EIN allows you to get a bank account for your LLC. If you’re not sure if you need an EIN for your business, here are some circumstances that require LLCs to obtain an EIN.
Your LLC is required to get an EIN if:
- Your LLC has employees
- Your LLC files excise tax
- Your LLC withholds taxes for nonwage income paid to a nonresident alien
The benefits of having an EIN outweigh the disadvantages and most banks require LLCs to have an EIN to open a checking account. Not to mention, it is free and easy to file for an EIN using the IRS website.
After You've Formed Your LLC
There are some important tasks you need to complete after forming your LLC, from obtaining the right permits to developing a strong web presence.
These are some of the most important things you need to do after forming your LLC:
Open a Business Bank Account and Credit Card
Opening a business bank account and getting a business credit card before you start operating is one of the most important things to do to maintain your LLC’s liability protection — also known as its corporate veil.
Limited liability protection means that the personal assets of the owner are not in danger if the business is sued or goes into debt. This is one of the biggest benefits of forming an LLC.
The easiest way to lose personal liability protection is to mix your personal financial accounts with the business.
Hire an Accountant
You might be thinking about doing your own accounting and avoiding hiring a professional to save some money. While this might be possible (especially with the help of accounting software), the advantages of hiring an accountant are likely to save you money in the long run — not to mention help you avoid potential legal troubles.
Hiring an accountant for your LLC can:
- Prevent the business from overpaying on taxes and helps it avoid penalties and fines
- Give you more time to focus on your growing business instead of doing accounting and bookkeeping
- Help you discover areas of unforeseen loss or extra profit
Take advantage of a free tax consultation with our trusted partners.
Research and Register for Business Licenses
Getting the right California business licenses and permits is one of the most important things to do after forming an LLC.
This can sometimes be an intimidating step, as the business license and permit requirements vary considerably from state to state and even between counties and cities. Different types of businesses may also have different licensing requirements, like seller's permits.
There are three main licensing jurisdictions: federal, state, and local.
To find out which business licenses you might need and how to get them, check out our How to Get a Business License guide.
Get Business Insurance
Every LLC should have some type (or types) of business insurance.
At a minimum, your LLC should have general liability insurance, which is a broad insurance policy that protects your business from lawsuits.
Before you decide on which business insurance to get for your LLC, check out our review of the 7 Best Small Business Insurance Companies.
Establish Your Web Presence
All businesses should have an internet presence. This includes having:
- A website
- Social media accounts
- A YouTube channel
The style of your website could vary greatly depending on the type of business you have as well as your own personal preferences.
If you don’t feel comfortable making your own website, there are a lot of tools and website builders that can help you create your own business website.
Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
California LLC Checklist FAQs
Do you have to pay the $800 California LLC fee the first year?
In California, LLCs are required to pay an $800 annual tax. In your first year of business, you must submit your $800 annual tax by the 15th day of the fourth month after the date you file your formation documents with the Secretary of State.
Learn more about starting and maintaining your California LLC with our guide on How to Form an LLC in California.
How much does it cost to start an LLC in California?
To form an LLC in California, you can expect to pay a $70 filing fee ($85 in person) when you file your Articles of Organization with the Secretary of State. In addition to this, you will need to pay a $20 filing fee in order to file a Statement of Information. Learn more about the cost to form an LLC with our guide.
How do I set up an LLC in California?
To form an LLC in California, simply complete the Articles of Organization and submit them to the Secretary of State online, by mail, or in person, along with the corresponding filing fee. Alternatively, you can hire a professional LLC formation service to complete and submit your formation documents for you.
What do I need to start an LLC in California?
To form an LLC in California, you need to complete the following steps:
- Name your LLC
- Choose a registered agent
- Determine whether your LLC will be member-managed or manager-managed
- File Articles of Organization with the California Secretary of State
- File an Initial Statement of Information
- Obtain an EIN
- Draft an operating agreement
Does an LLC need a business license in California?
If you are operating a business in California and plan on selling tangible property, you will need a business license known as a seller’s permit. Additional licensing requirements will depend on the type of business you’re operating and where you’re located. Generally, each city will have its own business license you’ll need to obtain to operate your LLC legally.
If you’re not sure which licenses you need to operate your California LLC, we recommend using a business license service.
How long does it take for an LLC to be approved in California?
Processing time for LLC formation documents in California is typically between three to five business days. However, it can take up to six to seven business days during peak filing periods such as between December and January.
To speed up your filing’s processing time, you can expedite your filing to 24-hour, same-day, or four-hour processing.
How do I check the status of my LLC in California?
Check the status of your LLC or search for any California business using the California Secretary of State business search tool. Simply add in your LLC’s name or the name of the business you’re searching for.
What are the benefits of an LLC in California?
The benefits of forming an LLC in California are personal liability protection and tax benefits. Unlike informal business structures such as sole proprietorships, LLCs protect your personal assets in the event that your business is sued or is responsible for a debt.
How do I pay my LLC taxes in California?
To file taxes in California for an LLC, you need to complete and submit Form 568 - Limited Liability Company Return of Income with the Secretary of State. Additional requirements for filing LLC taxes in California vary depending on whether you’re a single-member LLC, multi-member LLC, or elected to be taxed as a corporation.
California State Resources