How to Start a California LLC

Filing fee: $70 (Articles of Organization, Form LLC-1)

Processing time: Varies; online filings through bizfileonline.sos.ca.gov are generally faster than mail

State agency: California Secretary of State

Annual report due: Statement of Information (Form LLC-12) due within 90 days of formation, then every 2 years by the last day of the anniversary month

State tax rate: $800 minimum annual franchise tax (California Franchise Tax Board); additional LLC fee applies if gross receipts exceed $250,000

A California LLC is a limited liability company registered with the California Secretary of State. It separates your personal finances from your business finances, which means if the business is sued or owes a debt, your personal assets generally aren't on the hook. You get that protection without the formality of a corporation.

LLCs are also flexible on taxes. By default, a single-member LLC is taxed as a sole proprietorship and a multi-member LLC is taxed as a partnership — both pass income through to your personal return. If it makes sense for your situation, you can elect S Corporation or C Corporation tax treatment instead. A tax professional can help you figure out which structure fits.

California has a few requirements that catch people off guard — particularly the $800 minimum franchise tax that applies to nearly every LLC, regardless of whether the business earns anything.

Forming an LLC in California takes 5 core steps: choose a name, appoint a registered agent, file Articles of Organization with the California Secretary of State, create an operating agreement, and file your initial Statement of Information within 90 days. Here's what each step involves.

Step 1: choose a name

Your LLC name must end with "Limited Liability Company," "LLC," or "L.L.C." It also needs to be distinguishable from every other registered business name in California. Check availability using the California Secretary of State's business entity search at bizfileonline.sos.ca.gov before you file.

Certain words — things like "bank," "trust," and "insurance" — require additional approval before you can use them. Names that differ only by punctuation or articles don't count as distinguishable, so a name like "Golden State LLC" won't clear if "Golden State, LLC" is already registered.

Step 2: appoint a registered agent

Every California LLC needs a registered agent — a person or business with a physical California address who accepts legal documents and official state mail on your behalf. You can serve as your own registered agent, but many business owners use a registered agent service to keep their personal address off public records and make sure nothing gets missed.

Step 3: file Articles of Organization

File Form LLC-1 (Articles of Organization) with the California Secretary of State. The state filing fee is $70. You can file online through bizfileonline.sos.ca.gov, by mail, or in person. Online filing is generally faster.

Step 4: create an operating agreement

California law requires LLC members to adopt an operating agreement either before or after filing the Articles of Organization. If your LLC has more than 1 member, the agreement must be in writing. It covers ownership percentages, how decisions get made, how profits are split, and how a member can exit.

Without an operating agreement, California's default rules under the Corporations Code govern your LLC — and those defaults don't always match what members actually want. Putting your own agreement in place is worth the time.

Step 5: file your initial Statement of Information

Within 90 days of the Secretary of State filing your Articles of Organization, you need to file Form LLC-12 (Statement of Information). This form confirms your LLC's address, registered agent, and member or manager information. The filing fee is $20. Missing the 90-day deadline triggers a $250 late penalty.

Step 6: get an Employer Identification Number (EIN)

An EIN is a 9-digit tax ID the IRS assigns to your business. You'll need one to open a business bank account, hire employees, and file federal taxes. Apply for an EIN at irs.gov/ein — the online application is free and issues your EIN immediately.

The minimum cost to form a California LLC is $70 for the Articles of Organization plus $20 for the initial Statement of Information. But the bigger number to plan for is the $800 annual franchise tax — California charges this to nearly every LLC, every year, regardless of revenue.

• Articles of Organization (Form LLC-1): $70 state fee
• Initial Statement of Information (Form LLC-12): $20 state fee, due within 90 days of formation
• Annual franchise tax: $800 minimum, due every year to the California Franchise Tax Board
• Additional LLC fee: applies if gross receipts exceed $250,000 — the amount scales with revenue
• Biennial Statement of Information renewal: $20 every 2 years after the initial filing

The $800 franchise tax is the cost that surprises most new California LLC owners. It's due even if your LLC has no income in its first year. A tax professional can help you figure out whether the timing of your formation date affects when your first payment is due.

After your California LLC is formed, staying in good standing means keeping up with a few recurring requirements. The most important ones are the biennial Statement of Information and the annual $800 franchise tax. Missing either can put your LLC's good standing at risk.

• Statement of Information (Form LLC-12): file every 2 years by the last day of your LLC's anniversary month; $20 filing fee
• Annual franchise tax: $800 minimum due to the California Franchise Tax Board each year
• Business licenses: check with your city and county — most California cities require a local business license
• Foreign qualification: if you do business in other states, you may need to register your California LLC there as a foreign LLC
• Payroll registration: if you hire employees, register with the California Department of Industrial Relations

California doesn't make compliance optional — the state can suspend your LLC for not paying the franchise tax or not filing the Statement of Information on time. A suspended LLC can't legally do business, enter contracts, or defend itself in court until the issue is resolved.