Unless you’re selling insurance or dispensing a licensed professional service, there’s a way to establish a business that protects your personal assets while avoiding the red tape involved with launching a corporation.
It’s the California Limited Liability Corporation, also known as a California LLC!
Here is what you will need to know to form a California LLC:
1. Decide on a Company’s Name to form a California LLC
You’ll want to choose a unique and descriptive designation that’s dissimilar to any that currently exist in California’s database. For an LLC, the name you select must end in one of the following:
- Limited Liability Company.
You can abbreviate “limited” and “company.” At the same time, your name must not include any of the following words:
- Corporation or Corp
- Incorporated or Inc
- Trust or trustee
- Insurance, insurer or insured
The submission of a Name Reservation Request form along with a $10 fee will put your choice on hold for 60 days.
2. Appoint Your Registered Agent after your form a California LLC
Before doing anything else, you must hire a registered agent, also known as a statutory agent or agent for service of process, to accept state notifications and legal papers on behalf of the LLC. This must be a California-based individual or certified business that exists apart from your company.
3. File Your Articles of Organization to form a California LLC
Your next step to form a California LLC is to file Form LLC-1, Articles of Organization, with California’s secretary of state. You’ll have to include such details as:
- Your company’s name and address.
- Its reason for being.
- How you plan to manage it.
- The name and address of its registered agent.
The fee for filing LLC-1 is $70. You can expedite the process by personally delivering the form to Sacramento’s secretary of state and paying an additional charge. Read More on the Requirements for filing the Articles of Organization.
4. File Your Statement of Information after you Form your California LLC
After you have filed your Articles of Organization, California gives you 90 days to file Form LLC-12, the Statement of Information, with the secretary of state. You can either mail or hand-deliver it along with a filing fee of $20.
On the Statement of Information, you will include:
- A description of your LLC’s principal business activity.
- Its name and state-issued company number.
- The name and address of its registered agent.
- The street address of its main executive office.
- Its mailing address if not the same.
- An optional email address.
You must also provide the names and addresses of your LLC’s chief executive officer and manager or managers. If none of the above exist, then list the names and addresses of each of your LLC’s members.
5. Draft an Operating Agreement for your LLC
An operating agreement is a document used by LLC’s to explain the rules of the LLC. It generally will cover who can and cannot be an owner of the LLC, the type of business the LLC conducts, the registered address of the business, and when and how to change ownership. Your operating agreement should also cover what formalities your LLC should follow each year.
6. If your LLC is outside of California, register as a Foreign LLC
If you’ve already organized your LLC outside California and wish to do business in the state, you’ll need to file Form LLC-5 to apply for its registration. You must also appoint an agent and show a proof of good standing from the agency at which your LLC originated.
Unless it has opted to be taxed as a corporation, every local or foreign LLC that is organized, registered or conducting business in California must pay state taxes to California’s Franchise Tax Board. At the end of its taxable year, the LLC has until the 15th day of the fourth month in which to file Form 568 to the FTB. Every California LLC must also pay an $800 yearly minimum franchise tax along with an additional fee of between $900 and $11,760 if its total annual income has exceeded $250,000.
If your LLC will be collecting sales tax, you must register it with California’s State Board of Equalization. Furthermore, if it employs workers, has more than one member or is taxed as a corporation, you must also obtain an employer identification number or EIN. Those with employees must register as well with the Employment Development Department.
8. Legal Assistance when trying to Form a California LLC
Mistakes made in innocence can bring the best startup to its knees. A business attorney from Odgers Law Group will ensure that your fledgling LLC adheres to the law, avoids unnecessary tax liability and keeps potential risks to a minimum. Call us today for a free consultation and let us help get your LLC off on the right foot.