California is one of the best ecosystems to raise funding for a small business. Because the state is so big, there are different types of regulatory atmospheres in some cities which can give the state a bad reputation from time to time for small businesses. If you are looking to start an LLC in California, this guide will walk you through the step-by-step process to help get your business up and running in no time.
What are the benefits of an LLC?
- LLCs provide liability protection for business owners, meaning that the owners’ assets will not be at risk.
- Easy to set up and manage
- One person may form an LLC
When do you need to form an LLC?
If you are exploring starting a business or perhaps you are already in business as a sole proprietor it is a good idea to form an LLC. If you are operating a business without an LLC you could be placing yourself and your personal assets at risk.
While it is not required to form an LLC before starting a business the benefits include accounting and tax standardization, limited liability risk right away, and it will be easier to stay organized since all of your business-related expenses will be tied to one business bank account.
Step 1: Choose your company name
The first step in starting an LLC is to select a business name. It is essential to choose a business name that is unique from existing entities.
Perform a California business name search
The California Secretary of State maintains a database of business entities registered in California that is free for the public to search.
Your California LLC must contain “Limited Liability Company” or include the abbreviation LLC or LLC. Prefixes, suffixes, and plural versions of an existing entity name do not make it unique.
For instance, if you wanted to start a breakfast restaurant called Bacon House Cafe LLC you would want to make sure there wasn’t a similar sounding name like Bacon House Breakfast Cafe etc. The intent with naming rules is to create a clearly distinguishable name that avoids confusion for the public so if you find a name that is somewhat similar to the one you are considering it is probably best to move on to another name idea.
If you are struggling to develop a California LLC name, one option is to use a business name generator, which can help come up with hundreds of name suggestions in seconds.
Perform a trademark search
If you intend on using your business for a commercial purpose you will want to perform a trademark search before selecting your California business name. A trademark will help protect against infringement of unauthorized use of your business name and logo without your permission and can eventually become a valuable asset if your business grows.
Avoid using a trademarked or similar name to an existing business to protect yourself.
Find out if your proposed business name is available by conducting a trademark search online at the US Patent & Trademark Office.
Determine if you want to use a DBA name
A DBA is a registered “Doing Business As” name and can be used instead of the legal LLC business entity name.
A DBA allows you to have a name for your business that reflects what it does or who its customers are. Business owners use their company’s DBA names on checks, orders, contracts, and correspondence when doing business.
Some of the main benefits of a DBA:
- Flexibility: If you have your LLC established, you can use DBA names instead of creating separate entities for each new venture.
- Branding: A DBA name is easier to brand and identify for customers.
- Expansion: It is easy to file DBAs in different geographical locations to target other customers and appear hyper-focused in your marketing.
You do not need to operate under a DBA if you use your California business name for all business purposes. However, using a DBA name will not affect your California LLC name registration.
Register the domain name
Once you decide on a business name, check to ensure that the domain name is available. can show you which domain extensions are available for your business name.
Although .com domain names are ideal, extensions like .net, .co, and .biz are becoming more commonplace
Register social media profiles
It is vital to have a solid social media presence in today’s business environment. So be sure to register for your business name on the different social media platforms ahead of time so that no one can sign up for them.
Step 2: Register California LLC
After choosing a name, start the registration process online at the California Secretary of State website.
Registering your LLC in California is a relatively straightforward and quick process.
Select a registered agent
A registered agent is required for a California LLC and is an individual point of contact for California designated to receive official correspondence from the California Secretary of State. If you work from home a registered agent can help prevent your home address from being solicited by business mail since the registered agent’s address will serve as the official address for the business.
If you are not going to be your California LLC’s registered agent, find a substitute California resident or company to serve in this role. Be sure that the registered agent’s address is included in all your business documents and correspondence if you intend to use a different registered office.
What are California registered agent requirements?
A California registered agent:
- must be over the age of 18
- have a physical street address in California
- be available during regular business hours
How to register
Once you choose a registered agent and perform a California business search, the next step is to fill out the California Articles of Organization.
The form can be filled out online and requires the following information:
- Name of corporation
- Email address
The California Secretary of State has done a great job revamping its website to make online filing as easy as possible.
Our picks of the best registered agent services
Step 3: Next steps after filing California LLC
Apply for an EIN
The IRS requires each LLC to have its own unique employer identification number. The Internal Revenue Service website can generate a federal tax identification number. An EIN makes it easy to file your business taxes and stay in compliance with the IRS and is similar to a Social Security number for your business.
EIN’s also add credibility to your business and are required for compliance purposes from time to time by companies that have to pay you for goods and services. An EIN is also required to open a business bank account and will help you establish business credit in the event you need to take out a business loan.
Start a business bank account
A business bank account is required for LLCs to start conducting business. Therefore, it is highly recommended that you start a low-risk bank account to start receiving income and paying any start-up expenses.
After the LLC has been established, your business bank account will be used for payroll, payment of bills, a deposit of earnings from your business, and any other financial transactions your business may have.
Back office tasks such as bookkeeping can also be performed on your start-up bank account to keep start-up costs low.
Apply for a business license and permits
If you are planning on selling goods or services in California, you will want to look into whether or not the city or industry requires a particular business license.
The best way to get more information on the different license requirements throughout the state is to visit California.gov.
Prepare an LLC operating agreement
An operating agreement is a contract between the LLC owners that lays out the financial and functional decisions of managing a California LLC. An operating agreement is needed if there are multiple business owners of a California LLC.
An operating agreement can be as simple or in-depth as desired, but it is important to have one in writing before starting any significant operations within the business.
File annual report
California corporations must file an annual report through the Sunbiz portal to stay in good standing with the Department of State. A California annual report is not a financial statement and the main intention behind Annual Reports is to help keep track of active businesses in California and ensure that the state has the most up-to-date contact information for businesses on file with the Division of Corporations.
How much does it cost to file a California LLC?
The California filing fee for a Domestic LLC in California is $125. You can get a complete list of fees for all business forms by visiting the fees page on California.gov.
Recommended LLC formation services
- Northwest Registered Agent: Started as a registered agent service but expanded into business formations and offered additional professional services like mail forwarding and virtual business address services.
- ZenBusiness: Another recommended online business formation platform that can help set up an LLC in Arizona. They offer a full suite of services for new business owners, including operating agreements, business websites, domain names, and more.
- Incfile: A top online incorporation service provider in the market that offers various business filing services like LLC formation, Registered Agent, State Filings, and Compliance Filings.
California LLC FAQs
What is required for business in California?
To operate a business legitimately in the State of California you must register with the California Secretary of State. After your business is registered, the next step is to file the appropriate regulatory permits and licenses
Do I need a license for an LLC in California?
There is no generic business license outside of your LLC registration, but specific licensing requirements exist in certain cities and industries. CA.gov is a great resource for information on which industries require them.
How much does the California Statement of Information cost to file?
Yes, LLCs must file a Statement of Information that active LLCs must file with the Department of State to stay in good standing. The cost to file an annual report is $20.
How do you look up who owns a California LLC?
The best way to look up who owns a California LLC is to perform a California business search through the California Department of State. Searching is free for the public, and the database maintains a list of corporations that have registered their business with the state.
What is a California Certificate of Good standing?
A California certificate of good standing indicates that a business is in good standing with the state and has paid all applicable business fees to perform business within the state. Companies can get their certificate of good standing by visiting the California Secretary of State website.
How do you terminate a California LLC?
You can dissolve a California LLC by filling out an Articles of Dissolution form and filing it with the California Secretary of State. If you don’t plan on being in business, terminating your business is a good idea, so you won’t be responsible for biennial business filing fees.
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