How to Start a California LLC Business


Starting a Limited Liability Company (LLC) business in California could be very time-consuming and costly.

The good news is that here at Mollaei Law, we can help guide you in the right direction.

But first...

what kind of LLC business do you want to start?

Definition of a Limited Limited Liability Company (LLC)

LLC provides its owners and investors with limited liability for company debts. This means that your personal assets remain untouchable to cover business debts, claims or lawsuits to a greater extent than what you invested in the company.

This makes LLCs a more attractive investment because if the business falls through or has a low profit period, the investors possessions, such as a car or home, cannot be touched by creditors such as lenders or landlords.

You can avoid double taxation. Double taxation means that the corporation and the investor's business profits experience taxation. In an LLC, the initial profits are not considered income and therefore you are not required to pay self-employment taxes on them.

LLCs have the advantage of flexible income distribution, which makes it “easier to allocate profits and losses for tax purposes,” reports Reference for Business. In a corporation, it is required that shareholder's income and shares are proportionally related.

In an LLC however, the members get to decide how to split up income, although they must still follow the IRS's partnership income distribution rules.

LLC comes in many shapes and forms, including:
•    Single Member LLC - owned by one person or domestic partners.
•    Multiple Member LLC - owned by multiple owners.
•    Member-managed LLC - run by members or owners of the company.
•    Manager-managed LLC - mostly elected managers like investors that have the power to control the business.
•    Domestic LLC - if the business is created and operated in its home state.
•    Foreign LLC - if the business is created and operated in different states or areas.


The steps to starting a California LLC business...

1. Select a name for business that is not already taken

Select at least 3 possible names for your California LLC business. Make sure that it ends with the words LLC, L.L.C. or Limited Liability Company.

Once you decided on the name, check and see if that name is still available by checking on the California Secretary of State Business Name Search. If a name that you chose is already taken, you can try your other 2 possible names.

There should also be a second pre-clearance name check made by the federal government level. This is to make sure that there are no copyright infringement or trademark issues with other companies. You can also check it at United States Patent and Trademark Office to see if the name is still available.

We strongly recommend that you chose a name that you can reserve in a domain name or in an email address for clients to recognize your name faster and it's most professional companies do.


2. File an Articles of Organization

You would need to file an Articles of Organization using the Form LLC-1 Articles of Orgnaization. This would be the details of your organization, including the name, address, its purpose, management information and the details of your registered agent.

A $70 non-refundable fee would be charged, and is payable to the State Secretary. There would be an additional fee of $15 for service fees if you hand deliver the form instead.


3. Assign a Dedicated Registered Agent

An LLC must a have a Registered Agent. Registered Agent is an individual or organization who resides in your state of formation who accepts legal documents on behalf of your company.

You can purchase a California Registered Agent here.


4. Organize an LLC Operating Agreement

An Operating Agreement is not a required document however it is considered as an important document in the LLC Business.

The Operating Agreement would vary, depending on the type of LLC you have. The basic details should include the type of LLC, the duties and the rights of the members, maintenance of bookkeeping records, the numbers of members, etc.

Make sure that the LLC Operating Agreement should be done by someone who is very knowledgeable with the LLC business (typically a business lawyer) or else it might cause unnecessary and unintentional penalties in the future. It is recommended that it would be prepared by a California business lawyer that knows which rules can be amended in the said agreement.


5. File a Statement of Information

Once you filed your Articles of Organization, you it is required to file a Statement of Information (Form LLC-12) within a 90 day period. This can be filed online via mail and there is a filing fee of $20.

The Statement of Information requires the name of your LLC and the file number, the addresses of the company as well as other details.


6. Make a Payment for your State Tax Obligations

You need to pay for your annual minimum tax if your LLC is has business in California and other additional taxes. To know more about the latest in annual fees and taxes, kindly check the California Franchise Tax Board, the California Secretary of State and the California Board of Equalization.

The LLC Return of Income should be paid every 15th day of the 4th month after the taxable year end.


7. Apply for an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is also known as a Federal Tax Identification Number, and is used to identify a business entity. Generally, businesses need an EIN.

An EIN is used for a number of business needs including: filing taxes, opening a bank account, and applying for business licenses.

If you have a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), getting an EIN is fast and easy by applying online using IRS’s website. This is a free service offered by the IRS and provides you with an EIN immediately.

Keep in mind that the business’s “principal officer” must have a U.S. Social Security Number to apply for an EIN online. This principal officer must be someone who, “controls, manages, or directs the business.” In other words, you need to have a Social Security Number or ITIN to apply for an EIN online.

However, if you do NOT have a Social Security Number, you can hire a business lawyer to act as your third-party designee to apply for your EIN on your behalf.


What about Foreign LLCs in California?

Even if your LLC is outside of California but you are doing business in California, you still must register your business in California.

In order to do so, you must obtain and file an Application to Register a Foreign Limited Liability Company (LLC) Form LLC-5 with the California Secretary of State.

Please note that there is a $70 filing fee. A business lawyer can help you file this.


How Can a Business Lawyer Help Start Your California LLC?

If you would like to start a California LLC, please contact Sam Mollaei, Esq., business lawyer. We help entrepreneurs start their business in California.

You can contact Sam Mollaei, Esq., business lawyer, directly via email at or via phone (800) 755-5264.