To create an LLC in California, you file Articles of Organization with the California Secretary of State online and pay a $70 filing fee. The process itself takes just a few minutes, but there are several additional steps before and after filing that determine whether your LLC is properly set up and in good standing.
Choose a Name for Your LLC
Your LLC’s name must include “Limited Liability Company” or one of its abbreviations: LLC, L.L.C., Ltd. Liability Co., or similar variations. The name has to be distinguishable from every other LLC already on file with the Secretary of State, and it cannot be misleading to the public.
California also prohibits certain words in LLC names. You cannot use “bank,” “trust,” “trustee,” “incorporated,” “inc.,” “corporation,” or “corp.” You also cannot include “insurer,” “insurance company,” or any language suggesting the business issues insurance policies. Words like “Olympic,” “Olympiad,” or “Paralympic” require permission from the United States Olympic Committee.
You can search for existing business names on the Secretary of State’s website to check availability before filing. If you want to lock in a name before you’re ready to file, you can reserve it, though most people simply proceed directly to filing.
Check Whether Your Profession Qualifies
Not every business can operate as an LLC in California. Licensed professionals whose practice requires a state license, certification, or registration under the Business and Professions Code generally must form a professional corporation instead. This includes professions like doctors, lawyers, architects, accountants, and similar licensed practitioners. If your business involves a state-licensed profession, verify that an LLC structure is permitted before you file.
File Articles of Organization
The Articles of Organization (Form LLC-1) is the document that officially creates your LLC. California handles this filing exclusively online through the Secretary of State’s website. The filing fee is $70.
You’ll need to provide basic information about your LLC: its name, the purpose of the business, its principal business address, and the name and address of your agent for service of process. The agent is the person or registered company designated to receive legal documents on behalf of your LLC. The agent must have a physical street address in California (not a P.O. box) and must consent to serving in that role.
You’ll also indicate whether the LLC will be managed by its members (the owners) or by one or more designated managers. Member-managed is the default and works well for most small businesses where all owners are involved in day-to-day operations. Manager-managed structures are more common when some owners are passive investors.
Create an Operating Agreement
California doesn’t require you to file an operating agreement with the state, but you should have one. This internal document spells out how the LLC is owned and run: each member’s ownership percentage, how profits and losses are divided, what happens if a member wants to leave, and how major decisions get made.
For a single-member LLC, an operating agreement is simpler but still valuable. It establishes that the business is a separate legal entity from you personally, which strengthens the liability protection an LLC provides. Without one, you’re relying entirely on California’s default rules, which may not match what you actually want.
Get an EIN
An Employer Identification Number (EIN) is a federal tax ID for your business, issued free by the IRS. You need one to open a business bank account, hire employees, and file certain tax returns. Even single-member LLCs with no employees typically need an EIN for banking purposes. You can apply online at irs.gov and receive your number immediately.
File a Statement of Information
Within 90 days of forming your LLC, you must file an initial Statement of Information (Form LLC-12) with the Secretary of State. This filing includes current details about your LLC’s management, members, and agent for service of process. After the initial filing, you’ll need to refile this statement every two years. The Franchise Tax Board monitors compliance and can flag your LLC if the statement is overdue.
Pay the California Franchise Tax
Every LLC doing business or organized in California owes an annual franchise tax of $800. This tax applies regardless of whether your business earns any revenue. Your first payment is due by the 15th day of the 4th month after you file your Articles of Organization. So if you file on March 1, your first $800 payment is due by July 15 of that year. After the first year, the tax is due on April 15 each year.
There is one narrow exemption worth knowing: if you cancel your LLC within one year of organizing it, you can file a short-form cancellation (Form LLC-4/8) with the Secretary of State, and your LLC will not owe the $800 tax for that first year. This matters if you form an LLC and then decide not to move forward with the business.
LLCs with total income above $250,000 also owe an additional annual fee that scales with revenue, ranging from $900 to $11,790 depending on the income bracket. This fee is separate from and in addition to the $800 franchise tax.
Open a Business Bank Account
Once you have your filed Articles of Organization and your EIN, open a dedicated bank account for the LLC. Keeping personal and business finances separate is not just good bookkeeping. It’s essential for maintaining the liability protection your LLC provides. If you mix personal and business funds, a court could decide the LLC is just an extension of you personally, which defeats the entire purpose of the structure. Use the business account for all LLC income and expenses from day one.
Obtain Local Permits and Licenses
Forming the LLC is the state-level step, but most businesses also need local permits. Your city or county may require a general business license, a zoning permit, a seller’s permit from the California Department of Tax and Fee Administration (if you sell taxable goods), or industry-specific licenses. Requirements vary significantly by location and business type, so check with your city’s business licensing office to find out exactly what applies.
Ongoing Compliance After Formation
Keeping your California LLC in good standing requires a few recurring obligations. You’ll pay the $800 franchise tax every year by April 15. You’ll refile your Statement of Information every two years. And you’ll file the appropriate tax returns with both the IRS and the California Franchise Tax Board.
Single-member LLCs are taxed as sole proprietorships by default, reporting business income on Schedule C of your personal tax return. Multi-member LLCs are taxed as partnerships, filing Form 1065 federally and Form 568 with California. You also have the option to elect S corporation or C corporation tax treatment if that structure makes more sense as your business grows, though the LLC itself remains an LLC at the state level regardless of how it’s taxed.
If your LLC falls behind on its franchise tax or Statement of Information, the Franchise Tax Board and Secretary of State can suspend or even dissolve it. A suspended LLC cannot legally conduct business, file lawsuits, or defend itself in court until the delinquency is resolved and any associated penalties are paid.