Forming an LLC – or Limited Liability Company – is a great choice if you are starting a business..
An LLC provides legal liability protection, flexibility and potentially some tax advantages.
It is also useful for giving your business legitimacy, trust and an air of professionalism.
Forming an LLC in California is a relatively simple and affordable process. We go through the main steps (and if you want to let someone else do it for you, see our recommendation below)
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How to Start an LLC in California
- Choose a name for your business
- Designate a registered agent in California
- File the articles of organization
- Create a California operating agreement
- Apply for a federal Employer Identification Number
How Much Does it Cost to Form an LLC in California?
Before we go through the step by step process to form an LLC in California, we’ve set out the costs involved. These are the costs for filing online, sometimes paper-based filing incurs extra fees:
- It costs $70 to file the Articles of Organization for an LLC in California and takes 3 to 5 business days in processin. In California, the articles must be filed online
- You’ll need a registered agent service in California (this costs $99 a year with our preferred agent Zen Business)
- Recommendation: You can get Zen Business to provide both your registered agent service (for one year) and file the required documents to set up for your LLC for $49 plus the California fee. If you use Northwest, you can do this for $39 plus state fees.
- There is an annual report or statement fee due each year. In California this costs [cost].
How to form a California LLC: A Step-by-Step Guide
Follow these steps to form your California LLC yourself. If you choose to use one of our recommended LLC formation services, you’ll essentially go through the same steps but within their portal rather than via the business registry department within the state.
Step 1: Choose a Name for your Business
When you name your California LLC, you’ll need to choose a name that:
- Is available for use in California. You can check this using the business entity search on the Secretary of State’s website to make sure it hasn’t been taken
- Meets California’s naming requirements [link]
- Optional but recommended: is available as a web domain
Step 2: Designating a Registered Agent for the LLC in California
Once you have chosen an available name for your business, you will need to appoint and maintain a registered agent in California.
A resident agent is an individual or business entity responsible for receiving important tax forms, legal documents, notice of lawsuits, and official government correspondence on behalf of your business.
The registered agent is your business’s point of contact with the state. A registered agent should be.
- A resident of California or a company registered to do business in the state.
- Available during normal business hours to accept service of process
We recommend using a national registered agent service to fulfil this function as they are reliable and flexible. See here for info on choosing a registered agent in California.
ZenBusiness and Northwest are our preferred registered agent service providers. If you have opted to form your California LLC with either of these providers, you will get your first year of registered agent service free anyway. See here for more info on the best registered agent services.
Step 3: Completing the Articles of Organization for the LLC
The Articles of Organization are what actually forms your California LLC. These can be filed with the state via the California Secretary of State’s website.
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To complete this you will nominate:
- The LLC name (it will usually have to contain the words Limited Liability Company or LLC)
- The business’ address
- The registered agent’s address and contact details
- The management structure (single member LLC or multiple member LLC)
The Articles of Organization are the key founding document for the LLC so please fill out these details carefully and factually when submitting them to the California Secretary of State.
Step 4: Creating an LLC Operating Agreement
An operating agreement isn’t required in all states, but it is a good idea to create one anyway even if it is not a requirement.
An operating agreement is a legal document outlining the ownership and operating procedures of an LLC.
Specifically, the operating agreement sets out
- Who the members of the LLC are
- What proportion of the LLC each member owns and their voting rights
- How the LLC will be managed
- What capital contributions have been made and how future capital contributions will be handled
- Distribution of profits and losses among the LLC members
- The process for removing and appointing the LLC members
- The process for dissolving the LLC
Step 5: Applying for a Federal Employer Identification Number
You don’t need to obtain an EIN, but it is required to a) open a business bank account or b) hire employees, so most LLCs will require one. It is also needed in some cases for taxation purposes.
You apply for the EIN directly on the IRS website or by downloading the SS4 form. It is better that you use a proper physical address to receive the EIN (which comes in the mail) than putting down your registered agent’s address.
Your California Limited Liability Company (LLC) is created!
Once you have completed these steps, you have finalized the creation of your LLC.
Forming an LLC in California FAQs
What is an LLC?
LLC is short for Limited Liability Company. It is a simple and popular business structure that offers more flexibility than a traditional corporation while providing many of the same benefits including legal liability protection, flexibility and potential tax advantages.
How do I Name My LLC?
Choose a name that meets the state’s requirements for naming and isn’t already taken and preferably can be obtained as a web domain.
How Much Does it Cost to Form an LLC?
As mentioned, that very much depends on the state. Most states charge between $50 (Colorado, Michigan, MIssouri and others) and $100, but some some will charge up to $300 (Texas). Here is a list of the costs involved in forming an LLC in all 50 states.
Do I Need a DBA or Trade Name Too?
Not necessarily. Most LLCs do not need a DBA or Trade Name. The name of the LLC can serve as your company’s brand name and you can accept checks and other payments and enter into contracts under that name. You would register a DBA in the event that you would like to conduct business under another name for branding purposes or some other reason. See more on the differences between a DBA and LLC here.
Can I Be My Own Registered Agent?
You can, provided you have a physical address in the state in which you are forming the LLC that is attended during business hours. There is, however, risks to it and most people prefer to use a reputable registered agent service to avoid this requirement to be there all the time. It also protects your privacy as the name and address of a registered agent is published on company filings and is publicly accessible.
Is A Registered Agent Service Worth It?
What is the Processing Time to Form An LLC?
This ranges from one day to two weeks, depending on the state, but can usually be expedited and completed in a day or two as required. Here is a list of the filing times for creating an LLC in all 50 states.
What is the Difference between a Domestic LLC and a foreign LLC?
An LLC is referred to as a “domestic LLC” when it conducts business in the state where it was formed. A foreign LLC is the entity that you would form if you had an existing LLC that wanted to expand its business to another state.
Can I Get an EIN if I Don’t have a Social Security Number?
This question arises with foreign investors who have LLCs but don’t have a SSN. An SSN is not required to get an EIN as you can just leave that section of the Form SS-4 blank.
Do I Have to Get an EIN for my LLC?
All LLCs with employees, or any LLC with more than one member, must have an EIN by order of the IRS (Internal Revenue Service).
What is the downside of an LLC?
As discussed, an LLC offers legal protection benefits for your personal assets and potential taxation benefits. The only real downside is cost and complexity. It does cost money to start and maintain and LLC and there is paperwork to start the LLC and filings you need to do to maintain it.
Are LLCs worth it?
It depends on your personal circumstances, but for most businesses – yes forming an LLC is worth it for the peace of mind alone in terms of protecting your own personal assets.
Why do people buy houses using an LLC?
An investment property is just like a mini business and there are legal risks involved. Tenants can sue if there is an accident in the house, so many people prefer to own investment property via an LLC for this reason.