The LLC’s business name must be different from all other LLC, corporation, or other business entity authorized to do business in the Golden State. This applies to entities originally formed in California, as well as those originally formed elsewhere but authorized to conduct business there.
The LLC’s name must include “Limited Liability Company” or the abbreviations “LLC” or “L.L.C.” at the end; and the words “Limited” and “Company” may be abbreviated respectively as “Ltd.” and “Co.” The LLC’s name may also include the name of one or more members. The LLC’s name is not allowed to contain the words bank, trust, trustee, incorporated, inc., corporation, corp., insurer, insurance company, or any other language implying or suggesting that it is in the business of issuing insurance policies or assuming insurance risks.
State Incorporation Timelines
The filing time for California LLCs is 4 weeks, and the expedited filing time is 10 business day.
State Incorporation Filing Fees
The filing fee starts at $70, and can be expedited for an additional fee of $75.
Articles of Organization and Operating Agreement
After the business has a name, the next step is to file articles of organization with the California Secretary of State’s office which must include the following:
- Management: Whether the LLC will be managed by one or more managers, or by its members.
- Additional Provisions: The articles may also include other provisions that the members decide on, as long as they are not inconsistent with state law.
- Name and Registered Agent: The LLC’s name, and the name and address of the initial registered agent. See California’s registered agent requirements below.
The operating agreement is also very important, it can be modified in a way that’s specified by the agreement itself, or however the law of the state permits. In the same way as a corporation’s bylaws, having an operating agreement isn’t mandated by the state, but is a very important internal document that officially states how the LLC will be run. It should list:
- The LLC’s members
- How much each one has invested
- How the profits will be divided
- How much weight each member has when matters come to a vote.
- The operating agreement may also specify requirements for meetings and other operating procedures, but it is not required to. This is one benefit for forming an LLC instead of a traditional corporation. Normally, however, the operating agreement does include state requirements, and it can contain limits on members’ authority to adopt, change, or repeal an operating agreement. If the LLC has more than one member, the operating agreement must be initially approved by all the members in writing.
The owners of an LLC in California are called “members” instead of “shareholders” or “partners” as in a corporation. An LLC must have at least one member, who may be an individual, a corporation, a partnership, another LLC, or any other legal entity.
Members may acquire an interest in or become a member when they are first forming an LLC in California, in a method stated in the operating agreement, or when the majority of the LLC’s members approve by voting. Unless otherwise specified in the articles of organization or operating agreement, the LLC’s members vote in proportion to their profit interests in the LLC.
A member normally needs to pay cash, make a contribution, or transfer property to the LLC in order to become a member. However, an individual may be admitted as a member without acquiring a membership interest if there is such a provision in the articles of organization or operating agreement, or if all the LLC’s members consent and the admission is documented in the official records.
California LLCs must designate a registered agent in California to receive official state correspondence. An LLC’s registered agent can be a resident individual in California State, a corporation, or a corporation originally formed in some other state that is authorized to transact business in the Golden State. It is allowable but not required for the registered office to be the LLC’s place of business.
Your LLC is considered organized once the articles of organization are received by the California Secretary of State’s office with the appropriate filing fee, and are found to be in compliance with state requirements. One certified copy of the articles of organization will become a public document, and the other certified copy will be returned to the organizer or members.
Ongoing Filing and Compliance
California LLCs must make an annual statement regarding its financial conditions to both its members, and the California Department of State.
You will need to file your Statement of Information, which is due within 90 days of the initial formation of your LLC. The state’s Franchise Tax report is due annually.
An LLC is considered to be dissolved when any of the following events occur:
- Event(s) occur which are specified in the articles of organization or operating agreement as requiring dissolution.
- A majority of the members or groups of members agree to dissolution.
- An event that makes it illegal for the LLC to continue.
- A judicial order mandates dissolution.
An LLC has some tax advantages compared to a corporation, including more potential tax deductions. Also, an LLC does not have to be a separate tax entity like a corporation; instead, it can be considered a “pass-through entity,” so that the LLC owners report business losses or profits on their personal tax returns, as sole proprietorships, in the same way that a partnership does. This means that the LLC itself does not pay taxes and does not have to file a tax return.
California state taxes vary depending on taxable income. However, California LLCs are subject to an annual minimum franchise tax of $800 per year, and the first payment must be made within three months of the LLC’s formation.
Bizlauncher will send you email reminders as the due dates approach for California’s ongoing requirements for LLCs when you start your business with us.