Forming a Limited Liability Company (LLC) in California provides entrepreneurs with liability protection and operational flexibility.
Starting an LLC involves understanding California’s specific rules, meeting filing obligations, and paying various fees. This guide details the necessary steps.
Name Requirements
When establishing an LLC in California, your chosen name must comply with state guidelines. The name must end with Limited Liability Company, or an abbreviation like LLC or L.L.C. Variations such as Ltd. Liability Co. are also allowed.
The name must be unique and not misleading.1California Legislative Information. California Corporations Code Section 17701.08 (LLC Naming Requirements) It cannot closely resemble names already registered with the California Secretary of State. You should perform a name availability search on the Secretary of State’s online database before filing to avoid delays.2California Secretary of State. Online Business Search Tool
An LLC’s name cannot include certain restricted words like bank, trust, or insurer, unless specific regulatory conditions are met. Businesses using professional designations such as accountancy or law in their name usually need to form as professional entities and meet relevant state board licensing requirements. The Secretary of State provides guidance on these restricted words.3California Secretary of State. Business Entity Name Guidelines and Restrictions
Articles of Organization
After selecting a name, you must prepare and submit the Articles of Organization (Form LLC-1).4California Secretary of State. Forms, Samples and Fees (Form LLC-1 Articles of Organization) Filing this document with the California Secretary of State officially creates your LLC as a legal entity.
Form LLC-1 requires:
- The LLC’s chosen name.
- The physical street address of its initial designated office in California (a P.O. Box is not acceptable).
- The mailing address, if different from the street address.
- A statement on whether the LLC will be managed by one manager, multiple managers, or all members.
You can submit the completed Articles of Organization to the California Secretary of State by mail or in person. The Secretary of State’s website provides submission addresses. Once filed, the LLC is officially formed, and this information becomes public record.
Registered Agent Obligations
A California LLC must designate and maintain an agent for service of process in the state.5California Legislative Information. California Corporations Code Section 17701.13 (Agent for Service of Process) This agent is responsible for receiving legal and tax documents for the LLC.
The agent can be a California resident individual or a registered corporate agent. An individual agent must have a physical California street address (not a P.O. Box) and be available during business hours to accept documents. If using a corporate agent, its name is provided as its address is already on file with the state.
Maintaining a registered agent is an ongoing requirement. The LLC must keep the agent’s information current with the Secretary of State, filing updates if the agent resigns or their address changes. Failure to maintain an agent can lead to serious consequences, such as default judgments or administrative penalties.
Operating Agreement Essentials
While the Articles of Organization establish an LLC, an operating agreement details its internal operations and member relations. This agreement covers member relations, manager duties, LLC activities, and how the agreement can be amended. California law requires every LLC, even those with a single member, to have an operating agreement.6California Legislative Information. California Corporations Code Section 17701.10 (LLC Operating Agreement Requirement) It is not filed with the state but helps reinforce the LLC’s separate legal status and liability protection.
Operating agreements are customized to an LLC’s specific needs. Common provisions include:
- Member identification and ownership percentages.
- The management structure (member-managed or manager-managed).
- Roles, responsibilities, and decision-making processes for members and managers.
- How profits, losses, and distributions are handled.
- Capital contributions.
- Procedures for admitting or removing members, including buyout terms.
- Dispute resolution mechanisms.
A written operating agreement is strongly recommended for clarity, although it can be oral or implied.
Filing Fees
Registering an LLC in California involves a primary fee for filing Form LLC-1, the Articles of Organization. The standard filing fee is $70.7California Secretary of State. Business Entities Fee Schedule (LLC Formation Fee)
An optional cost is a $10 fee for reserving an LLC name for 60 days using Form LLC-1505.8California Secretary of State. LLC Name Reservation Information and Fee This can secure your desired name while you prepare documents.
Fees are paid to the California Secretary of State. You should verify current fees and accepted payment methods (like check, money order, or credit card) on the Secretary of State’s website. Incorrect payment will prevent the LLC’s formation.
Statement of Information
California LLCs must submit a Statement of Information (Form LLC-12) as part of their ongoing compliance. This filing keeps the Secretary of State’s records current.
The initial Statement of Information is due within 90 days of filing the Articles of Organization.9California Legislative Information. California Corporations Code Section 17702.09 (Statement of Information Filing Requirements) After that, statements must be filed biennially, by the end of the month in which the Articles of Organization were originally filed. Timely filing is the LLC’s responsibility, even if reminders are sent by the Secretary of State.
Form LLC-12 requires:10California Department of Industrial Relations. Instructions for Completing Form LLC-12 Statement of Information
- The LLC’s registered name.
- Its 12-digit Secretary of State file number.
- The street address of its principal office (this can be outside California).
- If the principal office is outside California, any California principal office street address must also be listed.
- The LLC’s mailing address, if different.
- The name and California street address of the agent for service of process (this must match state records).
- Names and addresses of all managers or, if none, all members.
- A brief description of the LLC’s principal business activity.
Failure to file the Statement of Information on time can lead to monetary assessments and suspension of the LLC’s rights. This would prevent it from legally operating or enforcing contracts until compliance is restored.