California LLC Guide | A Comprehensive Write-up For Beginners

Filed in Business by on April 10, 2020 0 Comments

When talking about LLC, what really comes to your mind? You might have heard about LLC but you don’t really understand the concept of how it’s been operated.

A limited liability company (LLC) is a business entity that offers certain legal protections and rights to its owners. An LLC is either a corporation or a sole proprietorship/partnership.

Do you know that forming an LLC is the simplest way of structuring your business to protect your personal assets in case your business is sued?

California LLC Guide

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An LLC can be owned by one or more people, who are known as LLC “members”. An LLC with one owner is known as a single-member LLC, and an LLC with more than one owner is known as a multi-member LLC.

California LLC Guide

1. California LLC Information

Limited liability companies (LLCs) in California are affordable and easy to form. As with other states, the State of California has some specific requirements that are idiosyncratic.

Interested parties must register with the Secretary of State by filing the necessary forms, paying the necessary fees and meeting all naming and formation requirements.

Unlike some other states, however, California does not require LLCs to publish their Articles of Organization in a newspaper in order to finalize LLC status.

The specifications required of a California LLC are:

  • Registration

People who want to start an LLC in California must file the California Form LLC-1. This document names an agent for service of the process provides a name for the LLC and lists the LLC’s principal business address, among other things.

  • Forms And Fees

LLC registrants must also file the LLC’s Articles of Organization and Statement of Information. The fees are about $70 and $20, respectively, but fees can change. Contact the California Secretary of State for the most current filing fees.

  • Timeline

Processing times depend on the type of request submitted, how the request is submitted and when the request is received by the California Secretary of State’s office. Processing of LLC formation can be expedited with higher filing fees.

  • Naming Requirements

LLC naming requirements are stringent. The LLC name must be distinguishable from other LLCs and must include certain words in order to qualify and be approved. You may opt to have a preferred name checked for availability and/or reserved before filing your LLC formation documents with the Secretary of State. State fees apply for these services.

  • Formation Requirements

To form an LLC, a registrant must first file the Articles of Organization with the Secretary of State. An LLC with more than one member is also required to have a limited liability operating agreement among its members.

This operating agreement contains the terms entered into by the members of the LLC and governs such critical items as the roles of each member, voting rights, who manages the LLC, how members are admitted or removed, dissolution of the LLC and procedures for amending the LLC operating agreement itself.

2. Cost To Form An LLC In California

An LLC is formed in California by filing Articles of Organization with the California Secretary of State and paying a $70 filing fee. Most businesses must also pay an $800 franchise tax. In addition, within 90 days of filing the Articles of Organization, the LLC must file a Statement of Information and pay a $20 fee.

Your LLC is required to designate a registered agent in California. If your LLC meets the requirements for having a properly staffed office in the state, you may be able to have an owner or employee serve as the registered agent. Otherwise, you must hire a registered agent, which costs about $50 to $500 per year.

3. How To Start LLC In California

Before deciding on forming a California LLC, you must understand what an LLC is and if forming an LLC is an ideal business move for you. To begin, an LLC is a business structure that can have any number of members.

These members may include individuals, corporations, other LLCs and foreign entities. If you are a bank or an insurance company, you cannot make your business an LLC. Otherwise, anyone can form an LLC.

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Here are some tips for helping you put together what you need to begin the registration process with the California Secretary of State:

1. Choose A Suitable Name For Your Business

You can choose any name as long as it ends with “Limited Liability Company,” “Ltd. Liability Co.,” or any variant of its abbreviation e.g., LLC or L.L.C.

2. Assign An Agent For Service Of Process

Also referred to as the resident agent, this is any individual who resides in California or a business that has filed an appropriate certificate. This person or business is the entity that will receive service of process for any lawsuit naming the LLC as the defendant.

3. If You Offer Professional Services, Make Sure That Your LLC Meets California Legal Requirements Applicable To Professional Services Entities

California regulates various professional services with separate requirements. For example, statutes regulating entities that provide professional services include the following:

  • The Business and Professions Code
  • Chiropractic Act
  • Osteopathic Act
  • The Yacht and Ship Brokers Act

4. If Your LLC Has More Than One Member, Make Sure That You Have A Limited Liability Company Operating Agreement In Place With Other Members

Although this is not included in the filing requirements with the California Secretary of State, the LLC operating agreement must be submitted when filing for your California tax license.

5. Familiarize Yourself With The LLC’s Continuing Legal Obligations

As noted, the LLC must file a Statement of Information. It must also maintain internal books and records that are open to inspection by the California Secretary of State. This includes the LLC’s operating agreement.

4. Filing An LLC And Fees

Following are the forms and fees that are required when starting an LLC in California:

1. Forms

First, you need to fill out LLC Form-1, or the Articles of Organization Form. Do not forget to include the following information/fees:

  • Name and address of the resident agent
  • Signatures of all LLC members
  • LLC name that meets state requirements
  • Payment of the necessary fees

2. Fees

Processing fees for LLC Form-1 is about $70 and $20 for LLC Form-12. This can be paid in cash, check or money order. Fees can change so check with the Secretary of State for the latest fees.

3. Limited Liability Company Operating Agreement

Although the LLC operating agreement will not be submitted to the California Secretary of State with the LLC Form-1, it is necessary to have this ready within 90 days of filing LLC Form-1.

4. Statement Of Information

Form LLC-12, the Statement of Information form, should be filed within 90 days of filing Form LLC-1, and then on an annual or biennial basis.

5. Taxes

LLCs are subject to both federal taxes and California taxes such as the annual tax levied by the California Franchise Tax Board, which is about $800. There are other possible costs such as sales, use, fuel, alcohol, and other special taxes and fees by the California Board of Equalization.

Always check with the California Franchise Tax Board, California Board of Equalization and California Secretary of State for the latest annual taxes and fees.

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