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.
In California, certain professions are restricted from forming LLCs. These are professionals providing defined services, and they typically need to be specially licensed. In California, businesses engaged in the following activities are considered professional service organizations — this has the impact of:
These professions include:
Note that three types of professional services — law, public accounting and architecture can be formed as Limited Liability Partnerships (LLPs), however these do not provide the same protections as an LLC.
Incfile provides a complete Business License Research Package that will tell you all of the licenses and permits necessary for your new professional LLC.
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.
|State Fee||State Filing Time||Expedited Filing Time|
|$75||15 Business Days||5 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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