How to Start an LLC in California

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Starting a limited liability corporation, or LLC, in California is relatively easy, but can come with significant costs for a new business. Understanding the procedures, filing fees and legal requirements for establishing an LLC can help a new enterprise avoid unnecessary pitfalls, so its managers can focus on the many other challenges of getting off the ground.

Legally Starting an LLC in California

Make sure an LLC is appropriate. Before starting the process of registering a business, it is important to understand the business structure and ensure that it will work. In California, an LLC is a legally registered business entity that helps shield its owners from the potential liabilities of business engagements, including debts and litigation. There are filing fees and taxes associated with forming an LLC, so businesses often save money by doing planning and initial research before filing their registration.

Choose a business name, and check for its availability with the Secretary of State. To check a name, the business's prospective owners file a Name Availability Inquiry with the state, or use a prepaid priority telephone service for a fee. All businesses in California are required to have a unique registered name, and those filing as an LLC must have the words "limited liability company," or the abbreviation "LLC" at the end of their name.

File articles of organization with the Secretary of State, and pay the filing fee. This document may be submitted from a form provided by the state, or drafted by an attorney. In either case, the articles must contain the business name, a statement of purpose prescribed by statute, a registered agent name and address, the number of managers and the organizer's signature. The filing fee for articles of organization is $70, as of 2011.

File and pay any necessary taxes. In California, all registered LLCs are subject to an income tax rate of 8.84 percent of income, as of 2011, or a minimum franchise tax of $800. Franchise tax does not need to be filed immediately after registration, but must be filed by the 15th day of the third month after the end of the company's first taxable business year.

Follow up with a statement of information. California law requires active LLCs to file a statement of information within 90 days after filing their articles of organization. LLCs also must file subsequent statements of information to renew registration every two years. The statement of information includes the company's name, the address where the business was organized, as well as the name and address of the business's main office, chief executive and owners, and the type of business. The fee for filing a statement of information is $20, and the penalty for failing to file on time is $250, as of 2011.

Tips

  • Be aware of the information requirements for filing before trying to register -- this will help avoid confusion. Check with the Small Business Administration for detailed advice on how to start a business.

Warnings

  • Don't register an LLC in California for hobby activities, as the process is time-consuming and expensive. Once an LLC is registered, the business is responsible for filing follow-up statements of information and paying taxes until it dissolves.

References

Resources

About the Author

Matt Petryni has been writing since 2007. He was the environmental issues columnist at the "Oregon Daily Emerald" and has experience in environmental and land-use planning. Petryni holds a Bachelor of Science of planning, public policy and management from the University of Oregon.

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