Forming an LLC in California? We can help!
Forming an LLC in California? We can help!
Let LawInc.com set up your California LLC, the right way. We keep things simple and allow you to easily form your California Limited Liability Company online or over the phone (800-989-5294).
California LLC formation is simple with LawInc.com. Once you submit your application, we check name availability, prepare your articles of organization and file your paperwork with the California Secretary of State. As soon as your California LLC is formed, we forward you your final paperwork.
A California LLC can help protect your personal assets, such as your home, car or family savings. In the event of a lawsuit or if your business should fail, your personal assets cannot be touched, assuming you have properly formed, capitalized and maintained your LLC. This limited liability feature of a California LLCs is not available in a sole proprietorship or general partnership, where the business owners are personally liable for all business debts.
Let LawInc walk you through the California Limited Liability Company formation process. Our clear, concise and easy to use website, helps keep things simple.
California LLC Name
California LLC Name Registration: The first step in forming a California Limited Liability Company is selecting the business name. California LLC names:
- Must end with “Limited Liability Company,” “Ltd. Liability Co.,” “LLC” or “L.L.C.”
- Cannot contain language indicating or implying that it’s organized for anything other than a legal business purpose.
- Cannot contain the following words or their abbreviations: corporation or incorporated.
- Cannot contain a word or phrase that indicates or implies that it is organized for non-legal business purpose.
- Must be distinguishable from the name of each California LLC, limited liability partnership, and each foreign limited liability company, limited liability partnership, and limited partnership authorized or registered to do business in California, and each name the right to which is, at the time of organization, reserved.
LawInc.com permits you to choose up to three names and will conduct a name search for your California LLC, prior to filing.
Registering a California LLC Name: After choosing an available LLC name, we will register the name with the CA Sec. of State.
California LLC Formation
California LLC Articles of Organization: When forming a California LLC, the articles of organization must be executed by at least 1 person organizing the LLC and delivered to the California Secretary of State for filing. California LLC articles of organization must include the following:
- LLC name
- The following statement: “The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the Beverly-Killea Limited Liability Company Act”.
- LLC duration
- Organizer’s name and address
- LLC registered agent address
- LLC registered agent name
- Whether LLC is member or manager managed
California LLC Filing: The California LLC is considered registered upon delivery of the executed articles of organization to the California Secretary of State. The original articles will then be filed, with the date being indicated. A copy will be returned to the organizer.
California LLC Membership Requirements:
- California LLCs must have at least 1 or more members.
- Member must be a natural person.
- Member may be admitted by signing, complying or by a vote.
- Member has the power to resign at any time, although certain prohibitions apply, as dictated by the LLC operating agreement.
- Member contribution can be in the form of money, property or services.
California Business Address: The registered office may be, but is not required to be, the LLC’s place of business. The business address cannot be a PO box.
California LLC Organizers: An California limited liability company can be formed by one (1) or more organizers. An organizer may be an individual, business entity, business trust, estate, trust, association, joint venture, government, governmental subdivision or agency, or any other legal or commercial entity.
California LLC Members: California LLCs require 1 or more members. There is no residence or age requirement. California LLC members are not required to be listed in the Articles of Organization.
California Registered Agent: A California Limited Liability Company must have a registered office and agent, designated to receive official state correspondence and notice if the LLC is sued. The California registered agent should be available, at an California physical address, during normal business hours to accept important legal and tax documents on behalf of the California LLC. The registered agent can either be (1) a domestic entity or a foreign entity that is registered to do business in California or (2) an individual resident of the state. A California LLC may not act as its own agent.
California LLC Operating Agreement: After filing, it is highly advised that an operating agreement is drafted which dictates the LLC internal affairs and management. There is no set criteria, but an California LLC operating agreement should reference how the California LLC is managed, allocation of profits and losses and member capital contributions. The California LLC operating agreement does not need to be filed.
LLC Restrictions: In California, the following businesses may NOT form and operate as LLCs:
Professional Practices: The practices of specially licensed California professions, such as lawyers, accountants, doctors and other health professionals (the same professions which, if they are incorporated, must be set up as special California professional corporations), may NOT be organized as LLCs. The following professionals, in an individual capacity, can only form a professional corporation:
- Clinical Social Workers (Licensed)
- Marriage and Family Therapists
- Naturopathic Doctors
- Pest control
- Physical Therapists
- Physician Assistants
- Shorthand Reporters
- Speech-Language Pathologists and Audiologists
Certain Regulated Businesses: It is important to note that businesses requiring a license, certification, or registration under the California Business and Professions Code may NOT form a California LLC. The following is a list of some of the businesses that may NOT form a California LLC:
- Automotive repair facilities
- Adult Day Health Center
- Advertising, outdoor
- Agricultural chemicals
- Agricultural pest control
- Artists’ managers
- Automotive repair dealers
- Bail bondsmen
- Boxing, wrestling
- Building and loans
- Cattle slaughtering
- Cemetery brokers, sales
- Check sellers and cashers
- Child care centers
- Cleaning, dyeing, pressing
- Clinical laboratories
- Cold storage warehouses
- Collection agencies
- Community care facilities
- Detectives, private
- Egg and dairy producers
- Escrow agencies
- Farm labor contractors
- Fish breeders
- Fish brokers and importers
- Fish packing and reduction
- Fish (shellfish cultivation)
- Fishing, commercial
- Fishing craft and gear
- Franchise investments
- Funeral establishments
- Furniture and bedding
- Game breeders
- Geologists and geophysicists
- Health centers, clinics, dispensaries
- Health facility
- Hearing aid dispensers
- Horse racing
- Industrial homework
- Insurance agents, brokers
- Investment advisers
- Itinerant merchants
- Land and photogrammetric surveyors
- Landscape architects
- Liquid waste haulers
- Loans, small
- Meat inspection
- Milk products, imitation
- Mineral, oil and gas brokerage
- Mobile homes and parks
- Mortgage brokers
- Motor transportation brokers and agents
- Motor vehicle dealers, manufacturers,
- Motor vehicle dismantlers
- Motor vehicle driving schools
- Motor vehicle salesmen
- Nursery stock
- Nurses’ registry
- Nursing home administrators
- Oil and Gas Well Drilling
- Personal property brokers
- Pest control
- Private Investigators
- Process servers
- Processors of farm products
- Produce dealers
- Real estate brokers
- Real estate appraisers
- Real property securities dealers
- Security guards
- Securities agents and broker-dealers
- Securities depositories
- Shorthand reporters
- Structural pest control
- Talent agencies
- Tax preparers
- Trading stamp companies
- Vehicle verifiers
- Vessel operators
- Warehouses, agricultural
- Warehouses, grain
- Yacht and ship brokers
California LLC Post-Filing Requirements
After a California LLC has been formed, the California Secretary of State mandates certain ongoing responsibilities and duties.
Biennial Information Statement: Newly formed California LLCs must file a Statement of Information (Form LLC-12) with the California Secretary of State within 90 days after filing the original articles of organization. This statement must contain (a) the name of the LLC, the Secretary of State’s file number and, if the LLC is a foreign LLC, the state in which it is organized; (b) the name and address of the LLC’s agent for service of process; (c) the street address of its principal executive office and the office at which records are being maintained, if it is a domestic LLC; (d) the name and address of any managers and the chief executive officer, if any, or if no manager has been elected or appointed, the name and address of each member; and (e) the general type of business comprising the LLC’s principal business activities. There is a $250 penalty for late filing, and the powers, rights, and privileges of the LLC may be suspended for failure to file a statement. In every second year, the LLC must file a Statement of Information Renewal (Form LLC-12R) during the calendar month in which the original articles of organization were filed, or during any of the immediately preceding five calendar months. Foreign LLCs must submit this filing biennially in the month in which its application for registration was filed, or during any of the preceding five months. If the LLC changes its agent for service of process, it must file a current statement designating the new agent or address. A $250 penalty is imposed for late filing, and the LLC may have its powers, rights, and privileges suspended for failing to file this statement. If the LLC fails to file the statement, the Secretary of State will send it a notice of delinquency, noting its right to request relief for reasonable cause or unusual circumstances that justify its failure to file. If no statement is filed within the 60-day period prescribed by the notice, the Secretary of State will certify the LLC’s name to the California Franchise Tax Board, which will assess a penalty under the Revenue and Taxation Code.
Records: Each California LLC shall keep the following records open to inspection at their office:
- A current list of the full name and last-known business, residence, or mailing address of each member, each governor, and chief manager
- A current list of the full name and last-known business, residence, or mailing address of each assignee of financial rights other than a secured party, and a description of the rights assigned
- A copy of the articles of organization and all article amendments
- Copies of any currently effective written bylaws
- Copies of the LLC’s federal, state, and local income tax returns and reports, if any, for the 3 most recent years
- Financial statements
- Records of all proceedings of members for the last 3 years
- Records of all proceedings of the board of governors for the last three years
- Reports made to members generally within the last three years
- Member control agreements
- A statement of all contributions
- An explanation of any restatement of value
- Any written consents obtained from members under this chapter
- A copy of agreements, contracts, or other arrangements or portions of them
California Business License: In the State of California, business licenses can be obtained from the city in which the primary business is located. It is best to contact your local business licensing authority for further information.
California LLC Taxes
Federal Income Tax: An advantage of the California LLC is its tax flexibility. California LLC members are allowed to select how the entity will be taxed. A California LLC may be classified for federal income tax purposes as either a:
- Sole proprietorship
- Partnership, or
Single member California LLCs are treated the same as sole proprietorships. Profits are reported on Schedule C as part of your individual 1040 tax return. Self-employment taxes on California LLC net income must be paid just as you would with any self-employment business.
Most multi-member California LLCs elect to be treated as partnerships by the IRS and file IRS Form 1065. On this form, California LLC profits are reported and allocated to each of the owners according to the California LLC’s operating agreement. Each owner is given a Schedule K-1, which shows each owner’s share of LLC income or loss. The owner then reports and pays taxes on this income on the owner’s annual 1040 income tax return. It is important to note that as with sole proprietorships, all LLC profits are taxed to the owners, even if they are not actually distributed by the California LLC. This situation can arise when the California LLC needs to use its profits to pay ongoing expenses.
If pass-through taxation is not desired, a California LLC may elect to be taxed as a corporation by completing IRS Form 8832. If this election is made, the California LLC is taxed as a C corporation by the federal government. Because the corporate income tax rates for the first $75,000 of corporate taxable income are lower than the individual income tax rates that apply to the taxable income of non-corporate taxpayers, it is possible a net income tax savings can result from this tax election. Additionally, an LLC can be taxed like an S corporation by filing IRS Form 2553.
California State Income Tax: California state taxes are variable depending on California taxable income.
California Minimum Franchise Tax: California LLCs are subject to an annual minimum (non-refundable) franchise tax of $800 per year. The first payment must be made within 3 months of California LLC formation.
California Gross Receipts Tax: California imposes a statutory fee each year on gross receipts of the LLC. The amount of the fee is zero if gross receipts are less than $250,000, $900 if gross receipts are between $250,000 and $500,000, $2,500 if gross receipts are between $500,000 and $1 million, $6,000 if gross receipts are between $1 million and $5 million, and $11,790 if gross receipts are $5 million or more.
Federal Tax Identification Number/Employer Identification Number (EIN): The Federal Tax Identification Number, also known as the Employer Identification Number (EIN) is a number that is assigned to a business by the Internal Revenue Service. An EIN is like a Social Security Number for a business. It is a requisite for certain business functions such as opening bank accounts or hiring employees. An EIN will be required if the California LLC has more than one owner, or any employees.
California LLC Dissolution
In order to dissolve or cancel an California LLC, the members or managers must file a certificate with the California Secretary of State.
Acts Triggering California LLC Dissolution: A California LLC can be dissolved upon the happening of one of the following:
- At a time specified in the Articles of Organization or operating agreement;
- Upon occurrence of events specified in the Articles of Organization or operating agreement;
- Consent by the specific number or percentage of members indicated in the operating agreement; or
- At any time there are no members;
- Judicial decree to dissolve by a Court.