Forming an LLC in California requires filing Articles of Organization with the Secretary of State, paying a $70 filing fee, and meeting a few ongoing obligations like the $800 annual franchise tax. The process can be completed online in under an hour, though you’ll want to handle several additional steps to make your LLC fully operational.
Choose a Name for Your LLC
Your LLC’s name must be “distinguishable in the records” from any existing LLC already registered with the California Secretary of State, and it cannot be likely to mislead the public. The name must include “Limited Liability Company” or one of its abbreviations: “LLC” or “L.L.C.”
You can run a preliminary search on the Secretary of State’s Business Search tool at bizfileonline.sos.ca.gov. Keep in mind this is just a preliminary check. The state only compares your proposed name against other LLCs on file, not against trademarks, service marks, or fictitious business names. If you want to protect your name more broadly, you’ll need to search the U.S. Patent and Trademark Office database and your county’s fictitious business name records separately.
If you’re not ready to file right away, you can reserve your name for 60 days through the Secretary of State’s online portal. The reservation can be renewed, but not for consecutive 60-day periods. There must be at least one day between reservation periods.
Designate a Registered Agent
Every California LLC needs an agent for service of process, sometimes called a registered agent. This is a person or business entity authorized to receive legal documents and official notices on the LLC’s behalf. The agent must have a physical street address in California (not a P.O. box) and be available during normal business hours.
You can serve as your own registered agent, name another member of your LLC, or hire a commercial registered agent service. Commercial services typically charge between $50 and $300 per year. Using a service keeps your personal address off public records and ensures someone is always available to accept documents.
File Articles of Organization
This is the document that officially creates your LLC. In California, the form is called Form LLC-1 (Articles of Organization), and the fastest way to submit it is online through bizfileOnline.sos.ca.gov. The filing fee is $70.
The form asks for basic information: your LLC’s name, its business address, the name and address of your agent for service of process, and whether the LLC will be managed by one manager, more than one manager, or all members. If you’re unsure about management structure, “all members” is the default for most small LLCs where every owner participates in running the business. Choosing manager-managed makes more sense when you have passive investors who won’t be involved in daily operations.
Online filings are processed faster than paper submissions. You’ll receive a stamped copy of your filed Articles, which you’ll need for opening a bank account and other setup tasks.
Create an Operating Agreement
California requires every LLC to have an operating agreement. You don’t file it with the Secretary of State. Instead, you keep it with your business records. Even for a single-member LLC, having a written operating agreement matters because it establishes your LLC as a separate entity from you personally, which strengthens the liability protection the LLC provides.
Your operating agreement should cover:
- Ownership percentages for each member and how much capital each person contributed
- Profit and loss distribution, including how and when members get paid
- Management structure, specifying who has authority to sign contracts, hire employees, and make financial decisions
- Voting rights and how major decisions (like taking on debt or adding new members) get resolved
- Transfer rules covering what happens if a member wants to sell their interest or leave the LLC
- Dissolution terms outlining how the LLC would wind down if members decide to close the business
For single-member LLCs, the agreement can be simpler, but it should still document your capital contribution, how you’ll take distributions, and that the LLC is a separate legal entity. If you ever face a lawsuit, a court may look at whether you treated the LLC as genuinely separate from your personal finances. A written operating agreement is one piece of that evidence.
Get an EIN from the IRS
An Employer Identification Number (EIN) is essentially a Social Security number for your business. You need one to open a business bank account, hire employees, and file federal taxes. Even single-member LLCs that don’t plan to hire anyone should get an EIN to avoid using a personal Social Security number on business forms.
You can get an EIN for free on the IRS website (irs.gov) by completing the online application. The process takes about 10 minutes, and you receive your EIN immediately. The application is available Monday through Friday, 7 a.m. to 10 p.m. Eastern time.
File Your Statement of Information
Within 90 days of forming your LLC, you must file an initial Statement of Information (Form LLC-12) with the California Secretary of State. The filing fee is $20, and you can submit it online. This form provides the state with current details about your LLC’s members, managers, and agent for service of process.
After the initial filing, you’ll need to file an updated Statement of Information every two years during a six-month window based on the month your LLC was formed. For example, an LLC formed in March would file its subsequent statements between October and March of the applicable year. If any of your LLC’s information changes between filing periods, you should file an updated statement at that time.
Pay the Annual Franchise Tax
Every LLC doing business in California or organized in California owes an annual franchise tax of $800, payable to the Franchise Tax Board (FTB). This tax applies regardless of whether your LLC earns any income. A first-year exemption existed for LLCs formed between 2021 and 2023, but that exemption has expired. LLCs formed now owe the $800 starting in their first tax year.
The $800 is due by the 15th day of the fourth month after your LLC’s tax year begins. For most LLCs operating on a calendar year, that means April 15. You pay this through the FTB, not the Secretary of State.
LLCs with total income above $250,000 also owe an additional annual fee that scales with revenue. The fee ranges from $900 for income between $250,000 and $499,999 up to $11,790 for income of $5 million or more. This fee is on top of 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 business money separate from personal funds is not just good bookkeeping. It’s one of the main ways you preserve the liability protection your LLC offers. If you mix personal and business finances (sometimes called “commingling funds”), a court could decide your LLC isn’t truly a separate entity, which means your personal assets could be exposed in a lawsuit.
Most banks will ask for your Articles of Organization, EIN confirmation letter, operating agreement, and a government-issued ID. Some banks also request a certified copy of your Articles, which you can order from the Secretary of State for an additional fee.
Handle Local Permits and Licenses
Forming your LLC with the state is just the entity creation step. Depending on where your business operates and what it does, you may also need a local business license from your city or county, a seller’s permit from the California Department of Tax and Fee Administration (if you sell taxable goods), and any industry-specific licenses or permits required by state agencies.
If your LLC operates under a name different from its official registered name, you’ll need to file a fictitious business name statement (sometimes called a DBA, for “doing business as”) with the county clerk in the county where your business is located.
California LLC Formation Costs at a Glance
- Articles of Organization (Form LLC-1): $70
- Statement of Information (Form LLC-12): $20 (initial and every two years)
- Annual franchise tax: $800 per year
- EIN: Free
- Name reservation (optional): $10
Your minimum first-year cost is $890 in state fees alone, not counting any local licenses, permits, or professional services you might use. The $800 annual franchise tax is the biggest ongoing expense and catches some new business owners off guard since it applies even if your LLC has no revenue.