California LLC
A Limited Liability Company in California is an excellent choice for companies owned by entrepreneurs. Read on for more information.
$0
Filing fees
$10
Name reservation fees
13.3%
Income tax ($1m+)
Page sponsor
Why we like StartGlobal?
My genuine thoughts
Willy Justin
Founder, Statepedia
StartGlobal: Legal + Taxes + Bookkeeping for solopreneurs
Product
For small businesses, managing taxes, accounting and everything legal is just a pain. Nobody wants to do it, but they have to. Instead of working with CPAs, attorneys and others separately, Start brings all of them under a single subscription. It’s just smooth.
Team
I know the team behind StartGlobal very well. It’s a very hardworking group of individuals who are genuinely passionate about small businesses. They are backed by successful founders like Balaji Srinivasan, Biz Stone(Twitter) and others.
Price
Getting a CPA or attorney is a matter of thousands of dollars. It’s just unfair to pay so much when you’re a small business. Start has a single subscription that covers it all. It is a definite money saver.
$599 one-time
What is an LLC?
Limited Liability Company
LLC is a business entity in the U.S that provides limited liability to its members. It has characteristics from both corporation and sole proprietorship. LLCs are permitted under State statutes of each US state.
Limited liability
Personal assets are protected for people with limited liability when they are sued.
Corporation
A business entity that can issue shares and give limited liability to shareholders.
Members
Owners of an LLC are referred to as members. They own membership interest in the LLC.
Sole proprietorship
Where an individual engages in business activity without formal organization.
Types of LLC
Depends on the number of members and whether it has elected to change its IRS classification.
Single-member LLC
Has only a single member. IRS considers it as a sole proprietorship for tax purposes.
LLC as C-corp
Owners of an LLC are referred to as members. They own membership interest in the LLC.
Multi-member LLC
Has two members. IRS considers it as a partnership for tax purposes.
LLC as S-corp
A special election for a maximum of 100 US shareholders.
Actions
The following are some typical actions that a California LLC may take.
How to add a California LLC member?
Follow these 6 steps:
1. Check your operating agreement
If you have an operating agreement, check the procedure for adding a new member. Follow the voting and transfer procedures accordingly.
2. Default California provisions
If you do not have an operating agreement, you will have to follow California’s default rules as mentioned in California Corporations Code (§ 17704.01)
According to the default provisions, all the existing members of the LLC must vote and consent to add a new member.
3. File Statement of Information
To update the Secretary of State with the latest list of members, you can file Statement of Information.
4. Get EIN if necessary
Some single-member LLCs don’t require an Employer Identification Number (EIN) from the IRS. If you were one of these, now you will require one after you add a new member. If you already had one, you don’t have to do anything now.
5. Update the Responsible party with IRS
If you want the new member to be the responsible party with the IRS, then you have to file Form 8822-B with the IRS within 60 days of the change. However, if you’re not changing the responsible party, you don’t have to file this.
Notify within
60 days
6. Update your operating agreement
Amend your operating agreement to include the names and details of the new member.
Entity name
Every LLC should have a unique name in California. California maintains a list of names of entities in the state. Go through it to check if your chosen name is available.
Search for names
Go to the official website of the California business search tool to see if the name you want is available.
Searching fee
Free
Reservation
You can reserve a name for your LLC for a specific duration by paying reservation fees to the California business entities. You will have to file your LLC formation documents within this period to keep the name. Alternatively, you can directly go ahead with the LLC formation without any reservation. That's fine too.
Reservation fee
$10
Reservation period
60 days
LLC naming guidelines
The name you choose for your LLC must the official naming guidelines.
CCC §17701.08
Visit
Here are some of the guidelines in simple language:
- 1
Shall contain the words limited liability company, or the abbreviation L.L.C. or LLC. Limited may be abbreviated as Ltd., and company may be abbreviated as Co.
- 2
Don’t include terms that indicate that you are doing an activity that you are not authorised to do.
- 3
Your name should be ‘distinguishable’ in the Secretary of State records. Adding a punctuation or ‘the’ does not make it distinguishable.
- 4
Don’t use words that makes it seems like you are a governmental entity or has an affiliation.
Operating agreement
Operating agreement is an internal business document that outlines the general rules and policies of the LLC.
Importance
It is not a legally mandatory document. However, it is recommended to have one since many courts, banks and financial institutions use it for verification. It is also nice to clearly outline the duties and relations between multiple members of an LLC—so you avoid any confusion in the future.
Format
There is no ‘required’ format for an operating agreement. You can include anything reasonable in it. In general, it has the following sections:
Basic Business information
Contains name, address, names and details of members, purpose
Member relationship
Contains membership interest, decision making process, powers, duties.
Membership transfer
Contains details on how to add or remove members and managers.
Accounting and tax
Contains details on how company records and distributions are maintained.
Dissolution
How to dissolve, wind up and terminate, due process to follow and exceptions.
Annual report
There are 3 types of reports to file annually for California LLCs: Statement of Information, LLC return of income, Schedule R (Apportionment and allocation of income). Additionally, California annual tax and LLC fees must be paid as well.
Statement of Information
This is a mandatory filing that keeps the state updated on the entity’s participants like registered agent, members and other details of the entity. There are three types of Statement of Information (file any one)- initial statement, due in 90 days of registration (first time filing); Statement of Information, to be filed biennially thereafter, before the anniversary date; Statement of No Change, file instead of Statement of Information if there are no changes since last filing.
Address
Secretary of State
Business Programs Division
Business Entities
1500 11th Street, Sacramento, CA 95814
P.O. Box 944260, Sacramento, CA 94244-2600
Note
Anniversary date is the date on which the articles of organization was approved by the state
LLC Return of Income
LLC Return of Income summarizes your California LLC’s financial activity during a taxable year. File Form 568 online by the return due date (15th of March or April).
Schedule R - Apportionment and allocation of Income
If you have income or loss inside and outside California, you use this form to determine your California source income.
Annual tax
California LLCs have to pay annual taxes until it's cancelled, even if not in business, regardless of revenue. This is a flat tax which is due by - 15th of the fourth month of filing with the state, when paying the first time; subsequently due by 15th day of fourth month of taxable year. E.g. if LLC formation date is June 2nd, then due by Sep 15th.
LLCs registering between Jan, 2021 to Jan, 2024 don't have to pay annual tax in the first year
If LLC is cancelled within 1st year of forming, annual tax is waved off
Mail waiver form
Fee
$800
Due
annually
LLC Fee
LLCs that make more than $250,000 have to pay LLCs fees based on a schedule depending on the revenue of your LLC, file this form only if your revenue exceeds this threshold. Fees are due by the 6th month after the beginning of the tax year.
Fee schedule based on revenue
Visit
Address
Franchise Tax Board,
PO Box 942857,
Sacramento CA 94257-0531
Fee
varies
Agents of process
A agents of process is an agent of your LLC on whom any notice, process or demand may be served. Every LLC in California needs to have a agents of process located in the state.
Requirements
According to California Corporations Code § 15800:
- 1
Agents of process can be an individual or an authorised organisation.
- 2
Agents of process must have a street address where they can personally receive service of process.
- 3
Office of Agents of process cannot be just a mailbox service of a telephone answering service.
Articles of Organization
In California, Articles of Organization is the form you file with the Secretary of State to form an LLC. It contains the articles of formation for the LLC.
Filing Articles of Organization
There are a couple of ways to file
Address
Secretary of State
Business Entities Filings
P.O. Box 944228
Sacramento, CA 94244
Online fee
$0
Online processing time
5 days
Mailing fee
$0
Mail processing time
5 days
EIN
An Employer Identification Number, also known as Federal Tax Identification Number, is used to identify a business entity.
Who must have an EIN?
Single member LLC elected to be taxed as C-corp or S-corp
Single member LLC with an employee
All multi-member LLC
Business license
Some businesses need to get business licenses to operate in California. Businesses dealing with physical products often need registration.
Seller’s permit
To collect, accrue and remit taxes, you may need to register with California Department of Tax and Fee Administration.
How to get seller’s permit?
You can apply for it online through Department’s website
California trademark
California trademark registration helps protect a business’ name, logo, or slogan from being used by another business in the state of California.
Difference between trademark and service mark
Trademark identifies goods or physical products.
Service mark identifies tangible services.
Requirements for California trademark registration
- 1
You should be using the mark in connection to your goods or services in California before registering it.
- 2
Your mark must be different from other trademarks registered with California and with USPTO.
LLC in California
California is popular among tech startups, who often form limited liability companies (LLCs). Other entities, such as partnerships and corporations, are also popular among entrepreneurs in California.
California Business search
California LLC add member
California LLC remove member
Page sponsorWhy we like StartGlobal?
My genuine thoughts
Willy Justin
Founder, Statepedia
StartGlobal: Legal + Taxes + Bookkeeping for solopreneurs
Product
For small businesses, managing taxes, accounting and everything legal is just a pain. Nobody wants to do it, but they have to. Instead of working with CPAs, attorneys and others separately, Start brings all of them under a single subscription. It’s just smooth.
Team
I know the team behind StartGlobal very well. It’s a very hardworking group of individuals who are genuinely passionate about small businesses. They are backed by successful founders like Balaji Srinivasan, Biz Stone(Twitter) and others.
Price
Getting a CPA or attorney is a matter of thousands of dollars. It’s just unfair to pay so much when you’re a small business. Start has a single subscription that covers it all. It is a definite money saver.
$599 one-time