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California is a center of technology, entertainment, innovation and businesses that are changing the world. Some of the biggest brand names have started their business in California — from Dollar Shave Club and Snapchat to the big tech giants such as Facebook, Apple and Google. California is at the forefront of technology, and is brimming with top employee talent and beautiful locations to live. If you’re inspired to start your own business in California, one of the best ways to do so is by forming an LLC. Limited Liability Companies (LLCs) are a business entity designed for startups, and small- and medium-sized businesses.
LLCs are simple and inexpensive to set up in California. They provide you with many of the protections and advantages of larger corporations without all the rules, regulations and compliance issues common to other types of California business entities. First, let's understand the advantages of forming an LLC in California:
LLCs in California have many benefits...
Your California LLC must have a designated business address. That could be your home address (if you’re running the company from your residence) or where your office is located. You can’t use a PO Box, the address must be a physical street address.
Every California LLC must have a "registered agent". That could be you, the managing director, owner or a dedicated registered agent service. The registered agent in California is someone who receives official legal and tax correspondence and has responsibility for filing reports with the California Secretary of State.
At Incfile, all of our packages include a "Registered Agent" service free for the first year and $99 per year thereafter. We also have a dashboard you can login to and easily view any document your registered agent has received on your behalf. Here are a few reasons you might want to appoint Incfile as their registered agent service...
There are more considerations, but this should help you with your decision to use a Registered Agent service.
The LLC members are the individuals who own and run the business. They typically withdraw profits from the business to pay themselves. California requires you to list the names and addresses of all managers or members when you register the LLC. You can register these addresses as street addresses or P.O. boxes.
Once you've gathered all the information together for your LLC, you’ll need to file formal documents with the California Secretary of State. Incfile can also do this on your behalf.
An LLC should have an Operating Agreement. This defines how the business runs, how managers and members are chosen, rights and duties of members and several other key areas. Here’s how to create your Operating Agreement. If you’re interested in having your Operating Agreement created for you, Incfile will draft a general Operating Agreement within most of our online business formation packages. It can also be selected as an add-on option in our Silver package. This Operating Agreement will be a basic template that you can make changes to anytime you see fit.
You can find lots more useful information on how to form an LLC here. It answers questions like:
Incfile provides a cost-effective service to help you create your LLC. We guide you through the process and handle most of the administrative steps, such as filing the articles of organization on your behalf. Our basic package also provides a free registered agent service for the first year. If you're looking for help to start an LLC, our comprehensive services provide outstanding value.
*Note that some types of businesses cannot be formed as LLCs in California so you will need to choose a different business structure if you are one of these types of businesses.
Choosing the right name for your California LLC is vitally important. It helps you tell your suppliers, customers and employees what your business does. In California, there are several rules and regulations about what you can call your new business. Let’s explore what they are:
In addition to the rules above, it’s also vital to see if your name might infringe on the trademark or service mark of another business. For example, it might not be a good idea to call yourself “iPhone Repair Services,” since iPhone is a trademark owned by Apple.
The easiest way to see if your proposed business name infringes is to carry out a trademark search. You can do that via the United States Patent and Trademark Office. You should also bear in mind that your business entity name cannot be substantially similar to an existing trademark or service mark.
You can search the database of the California Secretary of State for your proposed business name to see if it's unique.
You will find the following:
Finding the perfect name can be tough. You want a business name that:
Fortunately, we’ve got some good advice on seeking out the perfect business name for your California LLC. Check out our guidance here to get inspired.
As the most populous state in the union, California has no shortage of cities where you can start your LLC. Here’s some of the key information on each city to help you make an informed choice.
Los Angeles certainly has plenty going for it as a great place to start your LLC — warm beaches, the hub of the entertainment industry and a prominent influence for the fashion industry. Many startups and businesses have chosen L.A. as home base, including Hulu, Demand Media and Snapchat. Here is information helpful to starting your business in L.A.:
The ten biggest industries in LA, in descending order of revenue are:
As a central hub of technology, innovation and culture, San Francisco is the city to start up a tech-based LLC, if you can afford the high cost of living. Despite San Francisco being the most expensive city in the United States to live, it has opportunities other cities might not have because so many entrepreneurs choose it as their home base. These opportunities include access to investors, unparalleled networking opportunities and shared housing opportunities for entrepreneurs. Here are some stats on what it's like to live and start a business in San Francisco:
San Francisco has a number of big industries including:
As the largest city in the Bay Area, San Jose is home to many tech startups and businesses across a range of sectors. But watch out, San Jose also made the list of most expensive cities in the world to buy housing.
As home to “Silicon Valley,” San Jose is a national leader in the tech industry. It is also well represented in:
Another popular choice for California startups, San Diego is worth a look. It might not be a metropolis like it's sister San Francisco and brother L.A., but San Diego has it's perks. Namely, 70-degree, year-round weather and a laid-back beach vibe.
San Diego’s biggest industries include:
Every LLC — whether it’s registered in the state of California or elsewhere — needs to have a “Registered Agent.” A registered agent is a person or business you choose who can accept legal notices for your Limited Liability Company (LLC) on your behalf. If you choose a person to be your registered agent, they must reside in California. If you choose a business as your registered agent, they must be able to conduct business in California.
If you don’t have a physical presence in the state where you’re registered, you do need an agent to accept important documents on behalf of your business. Please note that a secretary of state does need the address of your registered agent and it needs to be a street address, not a PO Box.
A registered agent might also be known as a “Corporate Agent,” "Resident Agent," “Agent for Service of Process” or "Statutory Agent."
If you permanently reside in the state of California, you can choose to be your own registered agent, however you may decide not to be, for several reasons:
There can be significant issues if you fail to provide a registered agent, these include:
Here at Incfile, we have an expert registered agent service. We provide the first year of this service completely for free if you choose to form your LLC with us. After the first year, it’s only $99 for subsequent years — a small price for your peace of mind. Here’s what our service provides:
When you’re forming your LLC in California, there are certain forms, requirements and legalities you will need to get in place. Below is a rundown of what you’ll need to do, together with details on each form required for your California LLC. Some of these forms you’ll only need to submit once, while others must be filed on an annual or biannual basis. It's important to set reminders in your calendar to filed the forms annually or biannually if you're filing yourself — if you file with a service such as Incfile, we'll take care of form renewals for you.
Although setting up an LLC is very easy, managing one can be more complex. One way to make sure all the founders, owners, members or managers have a common understanding is by creating an Operating Agreement. An operating agreement defines how your business works and typically includes areas like:
Legal Standing: Stating the legal standing of your LLC, declaring the LLC was formed in California and including dates, formation details and other important legal information.
Ownership: Stating how ownership of the LLC is split between its members. This can influence how the business is run, voting rights and several other areas.
Ownership Percentages: How much each member has invested and the percentage of ownership of each California LLC member.
Management Type: Stating whether your LLC will be managed by its members (owners) or managers (people the owners appoint).
Management Relationships: Defining the relationship between the members and the managers of your California LLC.
Roles, Rights and Responsibilities: What each of your members is expected to do as an owner of your California LLC.
Decisions and Voting Powers: How high-level decisions will be presented, discussed and acted on, including the voting rights of each LLC member.
LLC Rules: Defining the policies, rules and procedures the LLC will follow for adding, removing, amending and making other changes to members and managers. This includes moving ownership between members.
Profit and Loss Allocation: How profits and losses will be split and allocated between California LLC members.
You are not required by federal or California state law to have an Operating Agreement for your LLC, but we recommend one for several reasons. An Operating Agreement:
Strengthens your legal standing as an LLC and adds credibility
Clearly states how your business will operate, so there’s no confusion
Reduces misunderstandings and disagreements between LLC members
Allows you to create your own rules for your LLC, rather than being subject to the default California state rules for an LLC
Reduces the need for every member of an LLC to approve and sign off on every decision
Your Operating Agreement only needs to be created once and updated if significant changes are needed. The good news is, Incfile provides an Operating Agreement with most packages and it can also be individually added to our basic Silver package. Our Operating Agreement provided will be a general template that covers the top 20 most common provisions for any new business. As your business evolves, you can make changes anytime as you see fit as this is an internal company document for LLC members and not filed with the state or IRS.
Depending on the type of business you’re running, you will need to obtain various business licenses and permits:
Various cities in California have slightly different rules and fees for permits and licenses. Check with your local city administration to see what their rules are. You will need a separate permit or license for each city your California LLC operates in.
Depending on the type of business you are running, you may need to get additional permits and licenses from the city, county or state of California. You can get a complete list of the licenses you will need to obtain from the CalGold website, based on your type of business and industry. The frequency of how often you need to file permits varies depending on the permit type.
If you’d rather have someone do the research for you, Incfile offers a Business License Research service for $99 additional fee to your online formation package of choice. With his add-on, a licensing specialist will determine all of the permits and licenses required for your specific industry and city-, state- or county-level jurisdictions.
You may need a Certificate of Good Standing (also known as a Certificate of Existence) from the California Secretary of State. This certificate proves the credibility of your LLC and might be needed if you’re seeking credit, working with a vendor or need to open a business bank account.
This certificate proves the following:
You can find details of how to get your Certificate of Good Standing here. You can get your Certificate of Good Standing as needed. If you are a newly formed business entity, you don’t generally need a Certificate of Good Standing. However, you may need it as validation of being in good graces with the state after your business has been in existence for a period of time.
The Articles of Incorporation are the formal documents filed with the California secretary of state to create your LLC. They are a “charter” and state certain information about your business. Once they are filed with the secretary of state, they legally create your business as an LLC in California. Here’s what’s typically included in the Articles of Organization:
Here at Incfile we automatically create and file your Articles of Organization on your behalf when you form your business with us. There is a fee levied by the secretary of state of California to cover your filing.
You only need to file your articles once.
You will also need to file a Statement of Information within 90 days of forming your LLC and then file an additional statement every two years. However, you won’t need to mark these dates on your calendar, because we’ll take the guesswork out and provide reminders for you. If you file with us, we’ll send you a courtesy email reminder as the 90-day and two-year due dates near. Additionally, we can assist you with filing your Statement of Information, or you can file it yourself directly with the state.
The statement contains basic information about your business including:
There is a filing fee of $20 and you can file your California Statement of Information directly with state, or Incfile can assist with filing it for you. You need to file your California Statement of Information every two years.
You must file a franchise tax report with the Franchise Tax Board in California. You will need to file the first one within three months of incorporating and thereafter on a yearly basis. There is a minimum fee of $800 associated with filing this report. You need to file and pay this fee every year.
Note that if you start your business in the last 15 days of the year (on or after 16 December), you will not be charged a fee for that year.
As you can see, there are several forms and permits you need to conduct business, both initially and that you’re required to submit on an annual or biannual basis.
Here’s a breakdown of the likely taxes and fees you’ll incur when you start and run an LLC in California:
Incfile provides a cost-effective service to help you create your California LLC. We guide you through the process and handle most of the administrative steps, such as filing the articles of organization on your behalf. Our basic package also provides a free registered agent service for the first year.
Each state requires different forms such as your business annual reports and state franchise tax reports to be filed at different times. It’s important to understand when each form needs to be filed and when you need to refile the form. Complying by the form filing requirements keeps your business in good standing with the state. Failure to file these reports can lead to the company being revoked or administrative business dissolution. Incfile includes lifetime company alerts with courtesy email reminders to inform clients of an upcoming filing requirement with all of our state filing packages.
Due Date: During six-month period ending on last day of anniversary month of incorporation or qualification.
Filing Fee: $20
Important: The initial Statement of Information filing is due within 90 days of the entity formation date.
Franchise Tax Fee: $800 (minimum)
A trademark is an essential asset for your business because it protects the brand name and identity that you worked so hard to create. When you secure a federal trademark for your business brand, it gives you exclusive rights to use your business name, logo or slogan once the trademark is approved. Federal Trademark Protection also prevents other businesses from using your brand name and brand identity. Incfile is happy to help with conducting a trademark name search on your business name. Our partnered attorneys will do the research to make sure the mark isn't already taken, ensure the filing is properly prepared and submitted to the government office, and provide sound legal advice throughout the entire process.
Benefits of Incfile's Trademark service include:
Once you form your LLC in California, there are important next steps to ensure your business finances and accounting are organized for tax season and peace of mind, and that your personal and business finances are kept separate to ensure safety of your personal assets. With the right accounting steps, your business will run smoothly and be set up for increased profits and success.
The right business checking account for your business should have minimum fees, so that your money goes into the business or your own checking account instead of spending on hidden, tricky bank fees. According to NerdWallet — who looked at the 10 biggest banks in the U.S. and some additional online banks — these are the best four free business checking accounts for your LLC:
|Best Free Business Checking Accounts|
|U.S Bank Silver Business||Allows 150 transactions a month for free. Has 3.000 bank branches in addition to online banking.|
|Capital One Spark Business||Online banking with no monthly limit on transactions.|
|Well Fargo Business Choise||Make 10 debit transactions a month and the $14 monthly free is waived. Offers a total of 200 free monthly transactions and no charge for the first $7.500 in cash deposits each month.|
|Bank of Internet Federal Bank Basic Business||Online-only bank that offers 200 free transactions a month and unlimited fee reimbursement for ATMs in the US.|
Once your form your LLC, it’s important to keep your business and personal assets separate to protect your personal assets from liability. It also makes tax season a whole lot easier when you have one clear account with all your business expenses, instead of all expenses mixed up within two accounts that need to be sorted. Once you choose a business checking account for your California LLC, make sure you receive a business checking card or apply for a business credit card that you can use for all business expenses. You can also use a tool like Expensify to track and tag business expenses from your mobile phone.
Choosing the right accounting software will allow you to track your accounts receivable — the money that is flowing in and out of your business. Accounting software will allow you to track bills, invoices, expenses and customers. This is also another important step in simplifying your year-end tax burden. With a clear, separate business checking account and card and an organized accounting software system, you’ll (barely) dread tax season as a business owner.
Here are some favorite accounting software options for LLC business owners:
QuickBooks: This is a top option for a lot of business owners and starts out at only $10 a month. You can automatically important banking transactions, track your customers and vendors and related bills and expenses, and integrate with a lot of other online finance tools. If you hire an accountant or tax support, they will all likely support QuickBooks. You can even use an online version in addition to a desktop version of their software. The drawback is that the learning curve for QuickBooks can sometimes be a bit steep.
Xero: Xero is online accounting software that is a great option for those who find QuickBooks to be too complicated and difficult to understand. Their plans start out at $20 per month.
FreshBooks: Freshbooks is online accounting software that allows you to also track your time, expenses, collaborate on projects and view accounting reports. One drawback is that it doesn’t currently have a way to track invoices that your business needs to pay. But, accounts start out at $15 per month.
Bench: Bench not only allows you to track your accounts receivable, but they include the help of a real-life bookkeeper to run your accounting every month. For a Bench account starting out at $125 a month, this is quite the deal instead of hiring your own bookkeeper.
If you use QuickBooks or Freshbooks, you’ll be able to accept credit cards to pay for invoices. If you have a brick and mortar location for your small business, you want to look into offering payments through a service such as Shopify or Square.
In case your business runs out of cash flow, you want to have a backup option so your business doesn’t go under. You can raise capital from investors, ask friends or family for loans, get a business credit card, take an online business loan, or look into government financing using the SBA & BusinessUSA’s financing tools. Also, it’s important to remember that you can also bootstrap your business — which means, only using the funds you have in your bank account and not expanding until you get more business income.
Having a great online presence for your business is the number one way people will find you. You need to start with buying a domain name using a service such as NameCheap. Then you need to choose a service to host your website such as Sniper Monkey. Finally, design your website using a tool such as SquareSpace or WordPress. Make sure your website includes important business information such as how to contact you and business hours.
Your business needs a phone number so that your customers, employees and and vendors can reach you. A great option is to look into a tool such as Grasshopper, which allows you to get a business phone that actually forwards to your cell phone, so you never miss an important call.
A logo will reflect your business branding everywhere your customers interact with you — on your website, on your invoices, in your email signature, on business cards and more. Instead of trying to design a logo yourself, try a logo making service such as 99 Designs or buy some really high-quality pre-made logos you can customize on CreativeMarket.
Once you have a logo, create nice looking business cards that you can hand out when you’re out networking or even running errands. You never know when a conversation about your business will come up, and you want to be able to give someone a place to research your business and contact you. A great tool to create inexpensive business cards is Vistaprint.
In addition to accounting software, there is a number of online business software options that will lift a number of menial tasks and burdens off your full business-owner plate. Below are important business functions for your LLC and what we think are the best business tools for your California LLC.
If you want to track your progress in getting your new business set up properly, we have a great virtual Start a Business Checklist that includes everything you need to do to launch your business. It even features downloadable PDFs you can access to download and print.
Clear Pricing. No Contracts. No Surprise.
|State Fee||State Filing Time||Expedited Filing Time|
|$100||22 Business Days||10-12 Business Days|
This report is mandatory and must be filed within the specified time frame in order for the entity to remain in good standing with the state. Failure to file this report can lead to the company being revoked or administratively dissolved.
Due Date: During six-month period ending on last day of anniversary month of incorporation or qualification.
Filing Fee: $20
Important:The initial Statement of Information filing is due within 90 days of the entity formation date.
Franchise Tax Fee: $800 (minimum)
$800 payment for the LLC Franchise Tax is due by 15th day of the 4th month after your LLC is filed. The month your LLC is filed counts as Month 1, regardless if you file on the 1st of the month, the last of the month, or any day of the month, really. This means that if you were to file your LLC on March 22nd, then you must pay the $800 fee no later than June 15th (in this example, March is Month 1, April is Month 2, May is Month 3, and June is Month 4). Then, every year after your first payment $800 LLC Franchise Tax will be due by April 15th. You pay the $800 LLC Franchise Tax using Form 3522 called the LLC Tax Voucher.
(We do not assist in the filing of the Franchise Tax Report)
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