To form an LLC in California, you file Articles of Organization (Form LLC-1) with the Secretary of State and pay a $70 filing fee. That single filing brings the company into existence, but it isn’t the whole job. Within 90 days you owe a Statement of Information, and every LLC on the state’s books owes an $800 annual tax whether it earned a dollar or not. California is one of the more expensive states to run an LLC in, so it helps to see the full sequence and the full cost before you file.
Pick a Name That Will Clear
Your LLC’s name has to be distinguishable from every other business entity already on file with the California Secretary of State. Search the Secretary of State’s online business database before you file to check availability. The name must also carry a designator so the public knows what kind of entity it is: “Limited Liability Company,” “LLC,” or “L.L.C.” California allows abbreviating “Limited” to “Ltd.” and “Company” to “Co.”1California Secretary of State. California Code of Regulations – Business Entity Names
Words that suggest a regulated industry — banking, insurance, and the like — draw closer scrutiny and can trigger additional requirements or rejection. The safest choice is a straightforward business name followed by “LLC” that doesn’t imply a license you don’t hold.
Name a Registered Agent
Every California LLC must continuously maintain an agent for service of process in the state. The agent receives lawsuits, subpoenas, and official government notices for the company. It has to be either an individual who lives in California or a California-registered corporate agent.2California Legislative Information. California Code Corporations Code 17701.13
If you name an individual, the Articles require a California street address. If you use a corporate agent, you list only the agent company’s name because its address is already on file with the state. Owners often name themselves to save money, but that puts your home address on the public record. A corporate agent service keeps your address private and guarantees someone is there during business hours to accept legal documents.
File the Articles of Organization
Form LLC-1 is the only document you file with the state to create the LLC. Submit it electronically through the Secretary of State’s bizfile Online portal or mail a paper copy to Sacramento. The filing fee is $70.3California Secretary of State. Limited Liability Companies Online filings typically process within a few business days and return a file-stamped copy as proof of formation. Paper filings take longer. For in-person expedited processing, the Secretary of State charges an additional $15 special handling fee.
The form is short. It asks for the LLC’s name, a standard purpose statement confirming the company is organized for any lawful activity, the registered agent’s information, and your management structure. The management choice matters: you pick either member-managed, where all owners run the business, or manager-managed, where one or more designated managers handle operations while other members are passive investors. That selection goes on the public record and affects how banks and vendors decide who has authority to act for the company.
Get an EIN From the IRS
Once the Articles are accepted, apply for an Employer Identification Number from the IRS. An EIN functions as a Social Security number for the business. You need it to open a business bank account, file federal and state tax returns, and hire employees. Multi-member LLCs must have one. Single-member LLCs need an EIN too if they plan to hire employees or elect a different tax classification.
The IRS issues EINs for free through its online application at irs.gov, and the number is delivered immediately at the end of the session. The application asks for the LLC’s exact legal name as it appears on the Articles of Organization, the responsible party’s Social Security number, the business address, and the LLC’s formation date. Match every detail to the state filing. Mismatches between EIN and state records create problems at the bank and at tax time.
Write an Operating Agreement
California doesn’t technically require a written operating agreement, but going without one is a mistake that catches up with most owners. The Corporations Code defines what an operating agreement governs when one exists: relationships among members, the rights and duties of managers, how the business operates, and how the agreement itself can be amended.4California Legislative Information. California Code CORP 17701.10 – Operating Agreement Without a written agreement addressing those topics, the default rules in the California Revised Uniform Limited Liability Company Act fill the gaps, and those defaults rarely match what the members actually intended.
A workable operating agreement covers each member’s ownership percentage, how profits and losses are split, what happens when a member leaves or a new member joins, and who has authority to sign contracts or take on debt. For single-member LLCs, the agreement still earns its keep by documenting that the LLC operates as a separate entity from you personally, which strengthens the liability protection you formed the LLC to get. Banks often ask to see one before opening a business account, especially for multi-member LLCs.
File the Statement of Information Within 90 Days
Within 90 days of formation, you must file a Statement of Information (Form LLC-12) with the Secretary of State. After that, it’s due every two years on a schedule tied to your original registration date.5California Secretary of State. Instructions for Completing Form LLC-12 The form asks for the names and addresses of your managers or members, depending on management structure, and a brief description of your business activity.
Missing the deadline triggers a $250 penalty, and continued failure to file can lead to the Secretary of State suspending your LLC.5California Secretary of State. Instructions for Completing Form LLC-12 A suspended LLC cannot legally conduct business, enforce contracts, or defend itself in court. Reinstatement means filing every overdue document and paying every back penalty and tax. Put the 90-day deadline on your calendar the day the file-stamped Articles arrive.
Pay the $800 Annual Tax and, If You Cross the Threshold, the Gross Receipts Fee
California charges every LLC an annual tax of $800, no matter what the business earned. The tax applies as long as the LLC exists on the Secretary of State’s records and only stops once you formally cancel the LLC. For the first taxable year, it’s due by the 15th day of the fourth month after you filed the Articles of Organization. In every year after that, it’s due by April 15 for calendar-year filers.6Franchise Tax Board. Limited Liability Company – Section: Annual Tax
On top of the $800, California charges an additional fee on LLCs whose total income exceeds $250,000. Total income is defined broadly to include gross income plus cost of goods sold. The tiers are:
- $250,000 to $499,999: $900
- $500,000 to $999,999: $2,500
- $1,000,000 to $4,999,999: $6,000
- $5,000,000 or more: $11,790
Those fees stack on top of the $800 annual tax. An LLC with $1.5 million in total income pays $6,800 to the Franchise Tax Board before any income tax.7Franchise Tax Board. FTB Pub. 3556 – Limited Liability Company Filing Information Because the fee is based on total income rather than profit, high-revenue businesses with thin margins feel it hard.
Choose a Federal Tax Classification
The IRS doesn’t recognize “LLC” as a tax classification. It assigns a default based on how many members the LLC has. A single-member LLC is treated as a disregarded entity, so all income and expenses flow directly onto the owner’s personal return via Schedule C. A multi-member LLC is treated as a partnership, filing an informational Form 1065 and issuing each member a Schedule K-1.
You can override the default. An LLC can elect S corporation tax treatment by filing IRS Form 2553 within two months and 15 days of formation to take effect for the first tax year. S-corp status can lower self-employment taxes once the business is profitable enough to justify a reasonable salary plus distributions, but only after the tax savings outweigh the added payroll and compliance costs. Run the numbers with a CPA before electing. An LLC can also elect C corporation status by filing Form 8832, though C-corp income is taxed twice — once at the entity level and again on distribution — which usually makes it a poor fit for small businesses.
File the FinCEN Beneficial Ownership Report
The federal Corporate Transparency Act requires most LLCs to report their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). A beneficial owner is anyone who directly or indirectly owns 25 percent or more of the company or exercises substantial control over it. The report includes each beneficial owner’s name, date of birth, address, and an identifying document number such as a driver’s license or passport. Companies formed on or after January 1, 2025, generally must file within 30 days of formation.
Willful failure to file or providing false information carries civil fines of up to $500 per day and criminal penalties of up to two years in prison and $10,000 in fines. The CTA has faced significant legal challenges, including court injunctions that temporarily paused enforcement. Before you file your Articles, check fincen.gov/boi for the current deadlines and enforcement status. This area of law has been shifting.
Open a Business Bank Account and Keep Records Separate
With the file-stamped Articles of Organization and the EIN in hand, open a dedicated business bank account. Mixing personal and business funds is the fastest way to lose the liability protection the LLC provides. Most banks ask for the Articles, the EIN confirmation letter, a government-issued photo ID, and often the operating agreement. Bring everything on the first visit.
Keep the business’s finances and records separate from day one. The IRS recommends retaining general business and tax records for at least three years and employment tax records for at least four.8Internal Revenue Service. Common Questions About Recordkeeping for Small Businesses Seven years covers most audit scenarios. Clean records also become your best evidence that the LLC operates as a genuine separate entity if anyone ever tries to pierce the corporate veil.
If You Plan to Hire Employees
If the LLC will have employees, federal law requires you to complete Form I-9 for each new hire within three business days of their start date.9U.S. Citizenship and Immigration Services. Completing Section 2, Employer Review and Attestation You also register with the California Employment Development Department for state payroll taxes, including unemployment and disability insurance.
On the federal side, employers pay unemployment tax under the Federal Unemployment Tax Act at a base rate of 6 percent on the first $7,000 of each employee’s annual wages, though credits for state unemployment taxes paid typically reduce the effective rate to 0.6 percent. Between state and federal payroll obligations, workers’ compensation insurance, and California’s labor laws, the first employee adds real complexity. Many owners start as single-member operations and bring on contractors or employees only after revenue is consistent.