The Golden State, Silicon Valley, Disneyland and Coachella. California is known for many things including its wine country and sunny beaches, however, it is also where businesses of all shapes and sizes thrive with America’s largest state economy weighing in at $3.36 trillion.
Numerous budding entrepreneurs chose California to launch their LLC and tap into the state’s advantageous population, wealth and resources to grow their business. Here’s what you need to do to kick start your LLC dreams.
Summary
When it comes to taxes and legal protection, small companies may gain a lot by forming an LLC. If you think an LLC would be the best option for your company, here’s how to set one up in the Golden State.
Please be aware that you may either set up the LLC on your own, or hire a company formation specialist to handle the process for you.
1. Naming basics
Your company’s name must follow all applicable federal and state laws. The state of California mandates that your LLC’s name:
- Stand apart from the rest of California’s LLCs.
- Limited Liability Company (or just “LLC”) should be included. For example, “Ltd.” may stand in for “limited” and “Co.” can stand in for “business.”
- If you don’t want people to mistake your company for the government, avoid using terms like “treasury” or “state department”
- The following is a more comprehensive set of rules to follow while choosing an LLC name.
2. Appoint an Agent of Service of Process
If your California LLC is located in the Golden State, you must choose a local resident as the Agent for Service of Process. In certain states, a Registered Agent takes the place of an Agent for Service of Process.
The role of the Agent of Service of Process
If you own a company, you need to choose a reliable third party to act as your “Agent of Service of Process,” or A.S.P., to receive legal and tax paperwork, court notices, and other official communications from the government on your behalf.
The role of your registered agent is similar to that of a liaison between your company and the government.
Who may act as Agent of Service of Process
An Agent of Service of Process in the State of California must either be a permanent resident of California or a California company with the authority to accept service of process. You, or anybody else in the business, may make the choice.
3. Draft and Register Articles of Organization
Your limited liability company (LLC) will be formally established with the help of a document called Articles of Organization. File Articles of Organization with the California Secretary of State using Form LLC-1.
To register a California LLC with the Secretary of State, you must first draft and submit Articles of Organization. Even though it may seem like a lot of work, all you have to do is fill out a short online form and send it in. Alternatively, you may mail it.
These are some of the things you’ll often need in order to have your articles ready:
- The Name and Location of Your LLC.
- Why an LLC was formed.
- Your designated agent’s full name and mailing address.
- How will the LLC be managed? By its members or by outside managers?
- The Articles must be signed by the individual establishing the limited liability company.
The secretary of the state will examine your Articles of Incorporation once you submit them. If the documents are accepted, the limited liability company is formed. Applying in California may be done by letter, electronically, or in person.
4. Get your Certificate From the State
After the LLC formation paperwork is submitted and authorized by the state, the state will provide a certificate attesting to the LLC’s legal existence. Certificates may be obtained the fastest by filing online.
If the LLC has this certificate, it may apply for an EIN, receive a business license, and open a business bank account with a financial institution like Bluevine or Kabbage.
5. Setup an Operating Agreement
In the state of California, an operating agreement is required for every limited liability company. Your business’s ownership and operating guidelines are spelled out in this document.
Essentials like who may do what inside the firm, how revenues and losses will be split, and what the buyout terms are should all be spelled down in this document.
If all members of an LLC sign an operating agreement, it becomes a legally enforceable contract and is not required to be filed with the state.
6. Filing of your Statement of Information
A California limited liability company (LLC) must submit an Initial Statement of Information (Form LLC-12) with the Secretary of State within the first ninety days after it is formed. This may be done over the internet, in person, or by mail.
- What follows is a partial list of what may be found on a Statement of Information:
- Company name and California State Secretary filing number for a Limited Liability Company
- Agent’s name and address for a limited liability company
- The official headquarters of the company
- Mailing address for the LLC
- Whether or not a manager has been chosen, as well as their full names and business or residential addresses, or if no management has been elected, the names and addresses of all members.
- The LLC’s Contact Information via email
- The LLC’s primary business focus.
The filing period consists of the month in which the first articles of organization were submitted together with the five calendar months that immediately precede it. You may submit the form to the California Secretary of State either electronically or by printing it out and submitting it through mail or in person. A $20 filing fee must be paid.
7. Get an EIN (Employer’s Tax Identification Number)
An EIN, or tax ID number, is a federally issued identification number required by many LLCs. You will need an EIN to register a business with the IRS, open a bank account, and in many cases, recruit workers.
The IRS’s site has all the information you need to determine whether you need an EIN and how to apply for one, and it’s free of charge. Although most companies will need an EIN, single-member limited liability companies (LLCs) may use the owner’s SSN instead.
Business Licenses
In certain cases, securing the proper state and municipal licenses and permissions for your limited liability company’s operations is essential. Go to the CalGold website to learn more about the state’s requirements.
Your LLC should also contact the local city or county governments in the area in which it operates to learn about any additional regulations that may apply.
8. Pay Your Annual Franchise Tax
An LLC must pay a $800 franchise tax to legally do business in the Golden State. This cost must be paid every year, whether or not the company makes any money. Your company must pay an extra yearly charge if its annual gross sales are more than $250,000.
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