- Starting a California LLC?
Smart move.
It shields your personal assets, think home and car,
from business creditors.
We'll go through five crucial steps,
and set one up in minutes.
And while we're here, we'll reveal shortcuts
to cut fees and guide you through post formation tasks.
Don't skip them, or your LLC might vanish.
Ready? Let's dive in.
Step one, choosing a name.
Step one is deceptively simple, yet crucial.
Naming problems top the list of reasons
for LLC filing rejections.
Of course, you want a name you love,
but you should also follow these rules.
The name should end with limited liability company,
limited company, limited CO, LLC, or LC.
Avoid names that suggest your LLC is
a government agency, bank, insurance company,
or any other business requiring special licensing.
Avoid using words
that imply you're a different business entity
such as Corp, Inc, Nonprofit, ET cetera.
And finally, choose a unique name distinct
from existing ones to avoid confusion and rejection.
You can easily check the availability of your chosen name
for free by conducting a California business name search
through the California portal online.
If the name is available,
reserve it for up to 60 days
by going to California's bizFile online portal.
To find all the important links and learn more
about the naming guidelines set out
by California Secretary of State,
visit our California formation page.
Also, once you confirm the name is available,
snag the domain for your LLC's website ASAP.
Click below to check the domain availability with a $5 deal.
Even if you delay building your website,
securing the URL early is crucial and wise play.
Step two, finding an agent for service of process.
The second step involves finding a registered agent,
known in California as an agent for service of process.
This person or a business entity
will receive important legal documents
on behalf of your LLC,
such as notices from the government or legal documents.
The agent must have a physical California address
or be an authorized business entity in the state.
You can be your own agent
or appoint a friend or family member.
The important thing to remember is the agent's name
and address appears on the Articles of Organization,
which makes it completely public info,
and no, you can't use a PO box.
You like a lot of entrepreneurs might decide
that's a big reason to sign up
with a commercial registered agent.
If you do, just the name of the agent has to be stated
on the Articles of Organization Form LLC-1.
Paying for a registered agent service costs
about $10 a month or less,
and besides protecting your privacy,
it frees you from some paperwork,
saving hours that might be dedicated to your business.
If you use Northwest,
they'll provide agent services for free for one year.
We like them, they've been doing this for over 20 years,
and they scan your mail
so that you can check it all virtually.
Check the link below for a deal.
You can only get it that low through our link.
Step three, filing your LLC Articles of Organization.
Next step is filing your LLC Articles of Organization.
This document includes crucial information
such as your LLC's name,
the registered agent's name and address,
and whether the LLC will be managed by managers or members.
To file, you have three options.
Fill out form LLC-1 and either mail it or deliver it
in person to the Sacramento or Los Angeles offices.
Be prepared to pay a $15 special handling fee
if you submit the LLC-1 in person.
You can also file online
through the California Secretary of State's website.
Regardless of the method,
approval typically takes around seven business days
and will cost you $70.
If you have an existing LLC
from another state and want to operate in California,
you'll need form LLC-5 application
to register a foreign limited liability company.
If you plan to use a fictitious business name,
also known as doing business as, or DBA name,
you'll have to publish the name within 45 days of filing
in a newspaper of general circulation once a week
for four consecutive weeks in the county
where the business will be principally located.
Step four, creating an LLC operating agreement.
While not legally required in California,
creating an LLC operating agreement is highly recommended.
This internal document,
inaccessible to the public outlines ownership structure,
member rights and responsibilities,
profit distribution, and internal procedures.
It's a vital tool for alignment and conflict prevention.
Some banks may request an operating agreement
and business plan when opening a business account
or applying for a loan.
To make things easier for you,
we've provided a free operating agreement template
on our formation page.
You'll find it right below this section.
We've also included
a free business plan generator there too.
Step five, obtaining an LLC EIN,
employer identification number.
The final step is to obtain an LLC EIN,
which is a federal tax identification number.
This unique number allows the IRS to identify
and track your business's taxes and filing statuses.
You'll need an EIN to open a business bank account,
manage federal and state taxes, and hire employees.
The process is super simple
and completely free of charge through the IRS.
Just fill out the online form.
Post formation steps.
After you've successfully formed your LLC,
there are a few important things to keep in mind.
All LLCs in California are required
to file an initial statement of information
within 90 days of the LLC being formed.
Thereafter, the statement has to be filed every two years.
This statement can be filed in person or by mail
by completing form LLC-12 and submitting to this address,
or submit it online at bizFile.
The filing fee is $20.
That price ain't bad when you consider
that the penalty fee is $250,
and there's the risk the state will prohibit you
from continuing in business.
A California LLC must also pay
an annual franchise tax of $800,
even if it did no business.
But until 2024, new LLCs are allowed
to skip the fee in their first year of business.
Driving your LLC to success is good news,
but it comes with some bad news.
Additional fees kick in that vary from $900
for revenues between a quarter and half a million,
and $11,790 if you end up making more than 5 million.
Next, keep your business assets
and transactions separate from the personal ones
to maintain your LLC's limited liability protection.
Mixing business and personal transactions is comingling
and will expose you to the risk
that creditors can pierce the corporate veil.
That is, go after your personal assets
to satisfy business debts.
You should also start building business credit.
Find our preferred resources
and cards by following the guide below.
Finally, having business insurance is wise
and often required as all businesses face risks.
A service like Northwest can simplify
a lot of these processes and payments,
saving time and effort
so you can focus on running your business.
Remember, they'll provide agent services
for free for one year too.
And that's it.
You've now learned how to set up an LLC in California.
All the resources mentioned in this video
can be found in the description below.
We hope you found this video really useful.
If you have more questions,
explore the rest of our channel and website
for free resources and guides
to start your California business.
We've compiled lists
of the best local California accountants,
lawyers, and registered agents on our site.
If you have any questions, hit us up.
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