How to form a California LLC

Know the California landscape

California remains one of the largest markets in the United States, but its formation and compliance rules are more demanding than many other states. Expect higher fees, state-level taxes, and strict reporting requirements. The upside is access to talent, investors, and customers concentrated in industries such as technology, entertainment, and manufacturing. Understanding California’s LLC roadmap helps you plan cash flow and avoid penalties.

Step 1: Choose a compliant name

California requires LLC names to include “Limited Liability Company,” “LLC,” or “L.L.C.” The name cannot imply the company provides professional services reserved for licensed practitioners unless you form a professional LLC, which is limited in California. Use the Secretary of State’s business search to check availability, and reserve the name for 60 days by filing the Name Reservation Request Form (10 dollar fee) if you need extra time. Consider the consumer-facing brand as well as the legal name; you can file fictitious business name statements later if you operate under a different name.

Step 2: Designate a registered agent

Your registered agent must have a physical street address in California and be available during normal business hours. You can act as your own agent if you reside in the state and are comfortable having your address publicly listed. Many founders hire a commercial registered agent for privacy and reliability, especially if they work remotely or travel frequently. Services typically cost between 100 and 200 dollars per year and scan documents for immediate access.

Step 3: File Articles of Organization

File Form LLC-1 (Articles of Organization) online or by mail with the California Secretary of State. The filing fee is 70 dollars. You’ll supply the LLC’s name, address, registered agent information, and management structure. California allows you to use a mailing address outside the state, but the registered agent must remain in California. Online filings process quickly, while mailed forms can take several weeks. Once accepted, download the stamped articles for your records.

Step 4: Complete the Statement of Information

Within 90 days of filing the Articles of Organization, submit Form LLC-12 (Statement of Information) and pay the 20 dollar filing fee. This report lists the LLC’s addresses, management, registered agent, and business activities. The statement must be filed again every two years, and you may file online for convenience. Missing the deadline triggers penalties and can lead to suspension of the LLC’s powers.

Step 5: Draft an operating agreement

California’s LLC statute requires members to adopt an operating agreement, though you don’t file it with the state. Outline ownership percentages, voting rights, management duties, profit distribution, and procedures for admitting new members. Include restrictions on transfers, dispute resolution processes, and provisions for winding down. Even single-member LLCs must maintain a written agreement to demonstrate separateness from personal affairs. Keep a signed copy with your company records.

Step 6: Obtain an EIN and register for taxes

Apply for an Employer Identification Number through the IRS. California imposes an annual franchise tax of 800 dollars on LLCs, payable to the Franchise Tax Board (FTB) by the 15th day of the fourth month after formation (often referred to as the “first-year payment”). LLCs with gross receipts above certain thresholds also owe an LLC fee ranging from 900 to 11,790 dollars. Register with the California Department of Tax and Fee Administration if you sell goods or taxable services, and secure payroll accounts with the Employment Development Department if you hire employees.

Step 7: Obtain local permits and licenses

Cities and counties across California require business licenses and may impose zoning or occupancy requirements. For example, Los Angeles and San Francisco have detailed regulations for home-based businesses and retail storefronts. Research professional licensing through state agencies if you provide regulated services such as construction, health care, or legal counseling. Noncompliance can lead to fines or cease-and-desist orders.

Step 8: Open bank accounts and establish bookkeeping

Banks expect the Articles of Organization, EIN letter, Statement of Information, and operating agreement before opening accounts. Adopting accrual-based bookkeeping early helps you track the state’s gross receipts thresholds and prepare for potential audits. Document capital contributions and loans with formal agreements to maintain liability protection. Consider engaging a CPA familiar with California’s LLC taxes to plan quarterly estimated payments and avoid underpayment penalties.

Annual maintenance tasks

In addition to the biennial Statement of Information, file Form 568 with the FTB each year to report income and pay the LLC fee if applicable. The annual franchise tax is due even if the LLC operates at a loss or is inactive. Mark key dates in a compliance calendar: Statement of Information due every two years in the month the LLC was formed, franchise tax due on the 15th day of the fourth month, and Form 568 due by the 15th day of the fourth month following the close of your taxable year. Late filings accrue penalties and interest quickly.

Create a California compliance calendar

Set up a shared calendar that lists filing deadlines, tax estimates, business license renewals, and insurance audits. Include reminders for city business tax renewals if you operate in Los Angeles, San Diego, or other municipalities with separate requirements. Assign responsibility for each task so internal handoffs occur smoothly when staff changes. Review the calendar each January in case the legislature adjusts franchise tax rules or adds new reporting obligations.

Manage multi-state obligations

Operating beyond California may require foreign registration in other states. Keep certificates of good standing handy; many states demand them for foreign qualification. Likewise, if you formed the LLC elsewhere and want to operate in California, file Form LLC-5 (Application to Register) and pay the registration fee. California enforces foreign qualification requirements and can impose penalties for transacting business without authority.

Dissolution and record retention

When winding down, file Form LLC-3 (Certificate of Dissolution) and Form LLC-4/7 (Certificate of Cancellation) after settling debts and distributing assets. Pay outstanding franchise taxes and notify the FTB that the account should be closed. Retain records for at least seven years in case of audits or legal inquiries. Notify landlords, lenders, and key vendors in writing to document the dissolution timeline.

Build enduring compliance routines

Because California’s compliance landscape is complex, schedule quarterly reviews to ensure franchise tax payments, estimated taxes, licenses, and insurance policies remain accurate. Update your operating agreement after major transactions, and maintain cybersecurity controls for digital records. By treating compliance as an ongoing process rather than a one-time filing, you preserve the LLC’s liability shield while positioning the company for sustainable growth in the state’s competitive market.