How to Start an LLC in California (2024 Guide)

You’ve made the decision to form your California LLC, congratulations! Before you dive into the formalities of filing paperwork with the Secretary of State’s office, it’s a good idea to do a little research and business planning to set yourself up for success.

• Do your market research. Look at similar businesses in your area so that you can create a solid roadmap to beat your competition
• Decide on a strategy. Set some benchmarks for when your company will reach profitability and create a strategy that will get you where you need to be
• Create a business plan. Put everything into practice with a business plan that includes information about market research, funding, marketing strategy and other important details that will help your new company be successful

LLC Requirements in California

In California, forming an LLC involves several steps, including preparing necessary documentation. Here are the key documents and a brief description of each:

• Articles of organization: This foundational document officially establishes your LLC in California. It includes basic information such as the name of the LLC, its purpose and the name and address of the registered agent.
• Operating agreement: While not mandatory in California, an operating agreement is highly recommended. It outlines the operating procedures and ownership structure of the LLC.
• Employer Identification Number (EIN): Obtained from the IRS, the EIN is essential for tax purposes and is required if the LLC has employees or multiple members.
• Statement of information: Filed with the California Secretary of State, this document provides updated contact and managerial information about the LLC.

Before filing these documents, you should ensure the chosen name of the LLC is unique and complies with California’s naming guidelines. It’s also crucial to appoint a registered agent for the LLC, who will be the official point of contact between the state and the LLC.

LLC vs Other California Business Entity Types

You likely know a limited liability company is the right business structure for you, but how does it stack up against other entities? The most common business entities are sole proprietorships, partnerships, LLCs and corporations. One LLC definition is that it is a hybrid of the other business entities, as it offers the liability protection and tax benefits of a corporation without the formalities (similar to a partnership).

Sole Proprietorships and General Partnerships

Sole proprietorships and general partnerships are the most informal type of business structures — you’re not required to file any paperwork with the state. They’re also known as “pass-through” entities for tax purposes, meaning business income isn’t taxed directly, but passes through to the members, or owners, and is taxed as personal income. These business structures don’t have liability protection in place, so your personal assets are at risk if the business fails.

LLCs, on the other hand, do require formal registration with the state but are still pass-through entities for tax purposes. By definition, they feature limited liability for the activities of the business.

Corporations

Corporations have more formation and maintenance requirements than LLCs, such as the requirement to be owned by shareholders and hold regular meetings. They are subject to “double taxation,” meaning the business pays corporate taxes and the owners still pay personal income tax. Owners of corporations enjoy limited liability as well. LLCs have fewer administrative requirements but more friendly tax treatment, however, LLCs can elect to be taxed as corporations.

For more information on a sole proprietorship vs. LLC, LLC vs. S-corp or corporation vs. LLC, check out our answers to the most frequently asked questions at the bottom of this article.

What is The Best Way to Form an LLC in California?

Making your Limited Liability Company (LLC) official is as simple as filing the correct form with the state — but this can require substantial planning and research. Depending on how expansive you envision your LLC to be, you may need a little help ensuring you file correctly the first time. Take our quiz at the top of this page to determine which of the three following formation methods is right for you.

Do it Yourself California LLC

For straightforward business plans that don’t require special licensure, multi-state authorization or dealing with investors, you can navigate the filing process without paying extra for help. Our guide will walk you through the filing process.

Insider’s Tip: LLC formation companies often offer free DIY help as well.

Best LLC Formation Service in California

Even owners of simple businesses may want a little help to take the stress out of filing correctly. An LLC formation company offers an array of services, from registered agents (to receive your important legal and tax documents) to tax advice and preparation. Many offer varying package levels and add-ons so you can customize the type of assistance you get. For example, Incfile, Northwest Registered Agent and LegalZoom LLC formation companies all allow you to customize your formation package.

Check out our comparison of the best LLC services in California below.