To start a company in California, you file formation documents with the Secretary of State — $70 for an LLC, $100 for a corporation — and then budget for the state’s $800 annual franchise tax, which every LLC and corporation owes whether or not the business makes any money. Between those two milestones sits a short list of choices and filings: picking your entity type, clearing a name, getting an EIN, filing a Statement of Information, and lining up whatever licenses your industry and city require.
Choose Between an LLC and a Corporation
The entity you pick controls your personal liability, how you’re taxed, and how much paperwork you carry every year. Sole proprietorships and general partnerships don’t require any Secretary of State filing, which makes them cheap to start, but neither protects your personal assets if the business gets sued or can’t pay a vendor. Your house and savings are exposed.
Most people forming a California company choose an LLC or a corporation. An LLC gives its owners (called members) liability protection and flexible management. By default, the IRS treats a single-member LLC as a disregarded entity (taxed on your personal return) and a multi-member LLC as a partnership, though you can elect corporate tax treatment.
Corporations offer the strongest liability shield and are the standard structure if you plan to raise outside capital. A C-corporation pays tax at the entity level, and shareholders pay again when dividends are distributed. An S-corporation passes profits and losses through to shareholders’ returns, avoiding the double layer, but comes with limits on the number and type of shareholders. In California, C-corporations pay 8.84% on net income; S-corporations pay 1.5%.1California Franchise Tax Board. Business Tax Rates
Pick and Clear a Name
Your name must be distinguishable from every other entity already on file. Search the Secretary of State’s business entity database before you commit or print anything.
California layers naming rules on top of availability. An LLC name has to include “Limited Liability Company” or an abbreviation like “LLC” or “L.L.C.,” and it can’t include words like “corporation,” “incorporated,” “bank,” or “trust.”2California Legislative Information. California Code Corporations Code 17701.08 – Name Corporation names need a designator like “Inc.,” “Corporation,” or “Incorporated.”
Planning to operate under a different brand than your legal entity name? You’ll file a fictitious business name statement with the county clerk where your principal office is located. That one is a county-level filing, not a Secretary of State filing.
File Your Formation Documents
The Secretary of State provides standardized forms for both entity types on its business filings page.3California Secretary of State. Forms, Samples and Fees
Articles of Organization (LLC)
The Articles of Organization must include the company name, a standard purpose statement declaring the LLC will engage in any lawful activity, the principal office street address (and mailing address if different), the name and California street address of an agent for service of process, and — if applicable — a statement that the LLC will be manager-managed rather than member-managed. These requirements come from Corporations Code Section 17702.01.4California Legislative Information. California Code CORP 17702.01 – Formation of Limited Liability Company
Articles of Incorporation (Corporation)
The Articles of Incorporation require the corporate name, the name and address of an initial agent for service of process, and the total number of shares the corporation is authorized to issue. Multiple share classes? The articles have to specify the number and characteristics of each class.5California Legislative Information. California Code Corporations Code Section 202
Fees and Timing
File online or by mail. The fee is $70 for LLC Articles of Organization and $100 for Articles of Incorporation.6California Secretary of State. Business Entities Fee Schedule Your company legally exists once the Secretary of State files the documents. Processing times shift with the SOS workload, and you can check current dates on the Secretary of State’s site.7California Secretary of State. Current Processing Dates Online filing is generally faster, and expedited processing is available for an extra fee.
Get an EIN From the IRS
After formation, apply for a federal Employer Identification Number. You’ll use the EIN to file taxes, open a business bank account, and hire employees. The application is free on the IRS website and takes only a few minutes, with the number issued immediately upon approval.8Internal Revenue Service. Get an Employer Identification Number Skip the third-party sites that charge for this. There is never a fee for an EIN.
Budget for the $800 Franchise Tax
This is where California gets expensive. Every LLC and corporation doing business in the state or organized here owes an $800 annual franchise tax to the Franchise Tax Board, regardless of revenue.9California Franchise Tax Board. Limited Liability Company The first $800 is due by the 15th day of the fourth month after you file with the Secretary of State, which for most new businesses means roughly four months in. It’s due every year after that. A first-year exemption for businesses formed between 2021 and 2023 has expired.
LLCs face an extra layer. Once total California income reaches $250,000, an additional fee kicks in, running from $900 at that income level up to $11,790 for LLCs earning $5 million or more, paid on top of the $800.
For corporations, the income tax rates (8.84% for C-corps, 1.5% for S-corps) apply with the $800 franchise tax as a minimum floor.1California Franchise Tax Board. Business Tax Rates If the calculated tax comes out below $800, you still owe $800. And if the business doesn’t work out, the annual tax keeps accruing until you formally cancel or dissolve the entity with the Secretary of State.
File Your Statement of Information
Every California corporation and LLC has to file a Statement of Information with the Secretary of State. Corporations file within 90 days of formation and then annually.10California Legislative Information. California Code CORP 1502 – Statement of Information LLCs file biennially. The statement lists officers or managers, the principal office address, and the agent for service of process.
Missing the filing brings penalties from the Franchise Tax Board and eventual suspension or forfeiture of the entity’s right to do business.11California Secretary of State. Statements of Information Filing Tips Reinstatement after forfeiture means back taxes, penalties, and additional filings.
Line Up Licenses and Permits
Filing with the Secretary of State creates your legal entity. It does not authorize you to operate. Depending on industry and location, you may need state licenses, a city business license, zoning approval, or health permits before you open.
If you sell physical products in California, you’ll generally need a seller’s permit from the California Department of Tax and Fee Administration.12California Department of Tax and Fee Administration. Do You Need a California Seller’s Permit? (Publication 107) Some professions — contractors, cosmetologists, accountants, real estate agents, and others — require separate state professional licenses. Your city or county will typically require a general business license as well. Requirements vary a lot by location and industry, so check with your city clerk and any relevant state licensing board before launching.
Put Internal Governance in Place
Operating Agreement for LLCs
California requires every LLC to have an operating agreement, but you don’t file it with the state. You keep it with the LLC’s records.13California Secretary of State. Starting a Business – Entity Types The agreement spells out how profits and losses are split, who manages the company, how decisions are made, and what happens if a member leaves. Even single-member LLCs should have one. Without a written agreement, California’s statutory defaults govern your LLC, and those defaults won’t always match what you intended.
Bylaws for Corporations
Corporations adopt bylaws as their internal rulebook. Bylaws cover how meetings are called and conducted, how directors are elected, which officers the corporation will have, and how proxies work.14California Legislative Information. California Code Corporations Code 212 – Organization and Bylaws Bylaws aren’t filed with the state either, but they matter for clean governance, especially if you ever need to show that the corporation is a legitimate entity separate from its shareholders.
Open a Separate Bank Account
Open a dedicated business bank account as soon as you have your EIN. Mixing personal and business funds is the fastest way to undermine the liability protection you just paid to create. Courts can pierce the corporate veil and hold owners personally liable for business debts when the entity looks like a personal piggy bank. Clean separation also makes tax time simpler and gives you a credible paper trail in an audit.
Federal Beneficial Ownership Reporting
The Corporate Transparency Act originally required most new companies to report their beneficial owners to the Financial Crimes Enforcement Network. As of March 2025, FinCEN exempted all entities formed in the United States from this requirement, so only foreign-formed entities registered to do business in a U.S. state still need to file.15Financial Crimes Enforcement Network. Beneficial Ownership Information Reporting A California-formed company with U.S. owners does not need to file a beneficial ownership report.