In California, starting a Limited Liability Company (LLC) gives business owners the freedom of a partnership and the protection of limited liability of a company. Below, we carefully explain the steps you need to take to create an LLC in California. By doing so, you can be sure you follow all the laws and build a strong base for your business.
Who Can Form an LLC in California?
An LLC can be created by almost anyone in California, even if they don't live there. People, groups of people, and even other businesses can take part in the process. It's open to people of any nationality or state, which makes it a good choice for foreign business owners.
One type of business that can't be an LLC is an insurance or bank company. These types of businesses must choose a different business format that follows federal and state rules.
What Are the Requirements for an LLC in California?
There are specific documents and regulations that must be followed in order to form an LLC in the Golden State. The Articles of Organization (Form LLC-1) is the most important document that needs to be filed with the California Secretary of State. This form needs a lot of information, like the official name of the LLC, the main place of business, and the name of the person who will receive legal documents. Also, even though it's not needed by the state, you should make an operating agreement that explains how the LLC will be run and how its money will be handled. LLCs also need to get an Employer Identification Number (EIN) from the IRS. Also, based on the type of business they run, they may need certain licenses and permits.
How To Start An LLC In California Step-by-Step:
Step 1: Choose a Name for Your LLC
Picking a unique name is the first thing you need to know when learning how to start an LLC in California. The name of your LLC must follow California's rules for names. "Limited Liability Company" or one of its forms (LLC or L.L.C.) must be in the name. When writing the name of your business, you should stay away from restricted words like "Bank," "Insurance," and "Government." Check the records of the California Secretary of State to see if the name you want is already being used before you start creating an LLC in California.
Step 2: Appoint an Agent for Service of Process
An "agent for service of process" must be designated by a California limited liability company. In case of a lawsuit, this agent is in charge of getting the court papers. The agent can be a person who lives in California or a listed business that is allowed to do business in California.
Step 3: File the Articles of Organization
Your limited liability company cannot be fully created until you file the Articles of Organization (Form LLC-1) with the Secretary of State in California. The name, address, and contact for service of process for your LLC must be filled out on this form. There is a fee to file the form, which can be done in person, online, or by mail.
Step 4: Create an Operating Agreement
An Operating Agreement is not needed by the state, but it is a good idea to make one. This internal document explains how your LLC is owned, how it works, and how it makes financial choices. As a formal contract, it makes the members follow its rules.
Step 5: File the Statement of Information
You have 90 days from the time your LLC is formed to file its first Statement of Information (Form LLC-12). In this paper, you'll find more specific information about your LLC, like how it is run and who the members are. Once every two years, the Statement of Information needs to be changed.
Step 6: Register for Taxes
An Employer Identification Number (EIN) is something you need to know about how to start an LLC in California, even if you don't have any workers. For tax reasons and to open a business bank account, you need to do this. Depending on your business and location, you may need to register for California state taxes like sales or payroll taxes.
Step 7: Obtain Business Licenses and Permits
What licenses and permits you need depend on the type of business you have and where it is located. These could be health permits, professional licenses, or local business licenses. Talk to the governments of your city and county to find out what you need for your LLC.
Step 8: Comply with Other Tax and Regulatory Requirements
There may be other rules and taxes that your LLC needs to follow, like the California license tax, sales tax, or other state taxes. Make sure you follow all local, state, and federal rules to stay in good order and avoid getting in trouble.
Step 9: Annual and Ongoing Requirements
Knowing how to file an LLC in California means knowing that you have to send in the Statement of Information every two years and pay a $800 franchise tax every year. For your LLC to stay in good legal standing, you must keep up with these ongoing duties if you want to know how to start an LLC in California successfully.