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CALIFORNIA

Why Form a Limited Liability Company (LLC)?


$49 + State Fee & 1st Year FREE Registered Agent

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​California Taxes and Fees for Your LLC

Here’s a breakdown of the likely taxes and fees you’ll incur when you start and run an LLC in California:

California LLC Fees

  1. California LLC Formation and Filing Fee: When you first from your LLC in California, you will need to pay a fee of $70 to file your Articles of Incorporation. However, counter service and courier walk-in fees can also apply in order to process your order more quickly.
  2. California Statement of Information Fee: You will need to pay an initial fee of $20 and then a further $20 every two years when you file your Statement of Information.
  3. California Permits and Licenses: You will need to pay licensing and permit fees on a regular basis depending on the type of business you are operating and where you are located. These do vary from city to city and industry to industry.

California LLC Taxes

  1. California State Business / Franchise Tax: The state or franchise tax you pay will depend on a couple of factors:
    • If you pay regular state and federal income tax (i.e. you are not taxed as a corporation), you will pay a minimum of $800 a year (this fee is waived for the first year for corporations, but not for LLCs). This fee may increase depending on your LLC’s profits, ranging from an additional $0 to $11,790 a year. If you need additional information about California tax rates or a tax calculator, you can find this information on the State of California Franchise Tax Board website.
    • If you are an LLC choosing to be taxed as an S Corp, you will need to pay a 1.5 percent franchise tax on your income, with a minimum tax of $800. Check out Incfile's S Corp Tax Calculator for additional help understanding tax payments.
  2. California State Income Tax: Income from your California LLC “flows through” to your income tax return, so you will be levied state and federal income tax on your earnings. You can find your California state tax income bracket online. Note that you will be able to deduct your business expenses from your income when working out how much California state tax you owe.
  3. California State Sales Tax: If you’re selling products or services in California you may need to pay the state sales tax of between 7.25 to 9.75 percent.

Federal Taxes

  1. ​Self-Employment Tax: You will need to pay self-employment tax (also known as FICA, Social Security, Medicare tax) on your earnings. This is at a rate of 15.3 percent. You will be able to deduct your business expenses from your income when working out how much self-employment tax you owe. Note that if you are an LLC electing to be treated as an S Corp, you can reduce your self-employment tax.
  2. Federal Income Tax: You will also need to pay regular federal income tax when you file your tax return every year. You can see the federal tax bands here. Note that you will be able to apply your standard deduction, personal exemption and business expenses to this tax.

Ready to Start your California LLC?

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.

Understand Your Ongoing LLC Filing Requirements

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.

California’s Ongoing File Requirements:

STATEMENT OF INFORMATION

Frequency: Biennially
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.

CALIFORNIA FRANCHISE TAX:

Frequency: Annually
Franchise Tax Fee: $800 (minimum)

Finances & Accounting for Your California LLC

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.

Choose a Bank for Your California LLC

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:

Create a chart like this:

best banks.png

Separate Business & Personal Expenses

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.

Set Up Accounting Software

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.

Determine How You’ll Accept Credit Cards

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.

Look Into Business Funding Options

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.

Business Operations & Marketing for Your California LLC

Build a Business Website

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.

Choose a Virtual Phone System

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.

Design a Business Logo

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.

Get Business Cards Created

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.

Choose the Best Business Tools to Run Your California LLC

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.

  • Project Management: Asana, Basecamp, Trello
  • Productivity: Todoist, Evernote
  • Collaboration: Google Docs, Dropbox, Box
  • Social Media Management: Hootsuite, Buffer, Sprout Social
  • Communication: Skype, Grasshopper, Slack, Yammer
  • Email Marketing: MailChimp, CampaignMonitor
  • Marketing Automation: HubSpot, Hatchbuck
  • Customer Relationship Management (CRM): SalesForce, Insightly, Zoho
  • Customer Support: ZenDesk, GetSatisfaction, SurveyMonkey
  • Human Resources: Gusto, Back Ops
  • Legal: DocuSign
  • Ecommerce: Shopify, Recurly, Vendio, Square
  • Website Development: Sniper Monkey, SquareSpace, WordPress, Jira
  • Analytics: Google Analytics, SumAll
  • SEO: SemRush, KWFinder, AHREFS
  • Hiring: Bullhorn Reach, Plum, ZipRecruiter

Get a “Start a Business Checklist” to Follow

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.

Only $49 + State Free To Launch Your Business

Clear Pricing. No Contracts. No Surprise.

What are the fees and requirements to form a business in California?

Filing Time and Price

The state charges this amount to file a new business entity. This fee goes directly to the Secretary of State.

State Fee State Filing Time Expedited Filing Time
$100 15 Business Days 10 Business Days

Compliance Requirements

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.

Statement of Information

Frequency: Biennially

Due Date: During six-month period ending on last day of anniversary month of incorporation or qualification.

Filing Free: $20

Important:The initial Statement of Information filing is due within 90 days of the entity formation date.

 

California Franchise Tax

Frequency: Annually

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)

Learn more about starting a business in California

Additional resources, guides, and articles for better decision making.

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