How to Form an LLC in California

Just like running a bakery is different than running a construction company, running an LLC is different than running a corporation. And though Limited Liability Companies have more freedom, that doesn’t mean there aren’t rules and regulations you’ll have to follow. So how do you know what you need to do? 

That’s where we come in.

If you’re planning on forming an Limited Liability Company in California, you can start now or read our article below for more information. At Rocket Lawyer, we take care of filing, checking the availability of your business’ name, serve as your registered agent, provide your compliance paperwork: you name it. If you just want additional information or stopped by to do some research, we’ve laid out, in chronological order, the steps you’ll need to take to form a legally recognized LLC in California. 
 


Pick a Name

Every LLC needs its own unique name. By that, we mean that your California LLC can’t have the same name as an existing LLC, nor can it have a deceptively similar name.  

In other words, if Joe’s Hamburgers exists, you can’t go ahead and name your restaurant Joe’s Hamburgerz. The “z” doesn’t distinguish you; it just serves to confuse everyone.

So how do you know if your name has been taken? You can contact the Secretary of State or you can let Rocket Lawyer check for you. It’s all part of our free incorporation service. 

Here are a few other points to keep in mind:

  • You can’t have the words “incorporated” or “corporation” or anything similar in your name. This implies you have incorporated as an S-Corp or C-Corp and creates confusion. 
  • In that vein, you must have LLC or some derivation thereof after your business name. (“LLC”, “Limited Liability Company”, “L.L.C.”, or “Ltd. Liability Co.” are the most popular choices.)
  • You also cannot use words that insinuate you are an insurer, a bank, or a trust. 
 

Include Your Other LLC Members

Limited Liability Companies are inherently customizable. By this, we mean that you have many more options as far as taxation, formation, and personnel than you would as an S-Corp or C-Corp.

Take your personnel, for example. In California, you can in fact form as a one-person LLC. You can also have other members of your LLC (employees or co-owners) that you don’t have to include in your LLC filing, though down the road, you may want to think about completing an LLC Operating Agreement. 

If you choose to include other members of your LLC in your state filing, they needn’t be in California.

Next, Choose a Registered Agent

A Registered Agent is the person or business responsible for receiving tax, legal, and government documents during regular business hours. It’s important that every business has one. You can either serve as your own registered agent, designate one, or have Rocket Lawyer serve as your registered agent. After all, we’re always in the office. 

If you’re not sure, our interview has a “help me decide” feature that can do just that. And while serving as your own registered agent seems logical, keep in mind that someone at a physical address needs to be present to receive documents. Designating a third-party registered agent allows you to move locations or go on vacation without worrying about missing important business documents.

Get a Tax ID

California LLCs are required to have a Federal EIN tax number. You can get one yourself or let us do the leg work for you. 

Think of your tax ID as the social security number for your company. It will be important for business contracts, tax filings, and all manner of documents down the line. 

Every company should have one to remain in good standing. 

(Also, note that California does not require you to have a state identification number, just a federal one.)

Pay the State Filing Fee

Every state has different fees for forming an LLC. In California, you can form for under $100 or spend more to have your formation expedited. These are state fees and are out of our control.

Congratulations! You’ve Formed Your LLC

Once you’ve completed our quick interview, we take care of everything. We file your Articles of Organization with California and will contact you if there are any issues with the name you’ve selected for your business or any other information you’ve given us.  

If there are no issues, sit back and wait for your paperwork to arrive. We’ll keep you updated along the way. 

Steps to Take Once Your Company is an Official LLC 

Keeping your LLC in good standing is incredibly important. By simply staying compliant and filing out a little additional paperwork, you can keep your limited liability status and protect your personal assets should your business run into any issues down the road. 

Here are some steps you should take:

Create an LLC Operating Agreement

California is one of the five states in which Limited Liability Companies are required to have an Operating Agreement. Though this agreement can be written or oral, it’s highly recommended you put it in writing. This helps protect your limited liability. Amendments to the agreement can be made when the business sees fit, and those amendments should also be written and kept. Note that you don’t have to file the agreement with any state or national agencies. Just keep it with your records.  

You can go here to start your own LLC Operating Agreement or read up on why having one is a good idea for your business here. 

File a Statement of Information Every Two Years

California LLCs are required to file a statement of information every two years. It’s a short document -- only one page -- and contains a lot of the information we ask you for up front. A Statement of Information is the state’s way of keeping track of changes in your business. It’s only $20 and needs to be filed every other year. 

Here’s what the information required on a Statement of Information:

  • State filing number (it’s on your Articles of Organization)
  • Address of your business
  • Address where your business records are kept
  • Name of CEO (if applicable)
  • Names of additional managers and members (if applicable)
  • Registered Agent information
  • Business type

Use this form if none of the above have changed since your last filing 

Use this form if there have been changes since your last filing 

Filing Taxes

Remember how we talked about the inherent flexibility of LLCs? That includes the way your Limited Liability Company is taxed. 

Traditionally, LLCs are “pass-through entities.” This means that you pay your business taxes on your personal tax form. That said, you can elect to be taxed like a corporation, if you choose to do so. As we write in our more extensive LLC tax article, the most common reason businesses elect corporate taxation is to make use of “retained earnings” (basically, keeping the money your business makes within your business.) 

That’s a decision you need to make for your unique business. Just know that the default is that your LLC profits should be reported on your personal tax return. 

Do note that California LLCs are subject to an $800 franchise tax per year. This payment should be made within 90 days of your formation and yearly from there on out. 

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We have more information in our business legal help section, as well as in our specific LLC help section. Feel free to visit our LLC Learning Center for more information, or to get started on forming an LLC right now. You can start the process for free, anytime, and return to Rocket Lawyer whenever you need help.

 

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Laws on this topic may vary from state to state. This content is not meant to provide you with complete information and it is not intended to be legal or tax advice. It is recommended that you consult with your own attorney, accountant or other advisor regarding your specific situation.