California LLC Formation

Forming a California Limited Liability Company for your business can be excellent decision. LLC's enjoy both the simplified pass through taxation of partnerships and the limited liability of corporations. An LLC has fewer formalities after formation than a corporation--meaning you can focus on your business and not on paperwork.

One caveat: California does tax LLCs more heavily than most other states do, with a minimum franchise tax of $800 per year. As your company's revenue increases, the franchise tax increases. Note: don't let the term "franchise" confuse you--even if your business is not a franchise (e.g. McDonald's, Subway, etc.), you are still liable for the tax. Protecting your assets and projecting a professional image for your business might be worth it, but understand that having an LLC in California is more expensive than in other states.

If you neglect to incorporate your business, you could be held personally liable for business debts and lawsuits. Find out about forming a legal California Limited Liability Company and start your business off on the right track.

A California LLC is formed by filing an Articles of Organization form with the California Secretary of State office.

LLC Name Requirements

The name must end with the words “Limited Liability Company,” “Ltd. Liability Co.,” or the abbreviation “LLC” or “L.L.C.” The name of the limited liability company may not contain the words “bank,” “trust,” “trustee,” incorporated,” “inc.,” “corporation,” or “corp.,” and must not contain the words “insurer” or “insurance company” or any other words suggesting that it is in the business of issuing policies of insurance and assuming insurance risks.

License Requirements

California does not permit foreign or domestic LLCs to perform professional services.

Registered Agent

The person named as agent must be a resident of California or a corporation that has filed a certificate pursuant to Section 1505.

California LLC Filing Fees

The fee to file California LLC Articles of Organization is $70.00.

California LLC Taxes

California has a minimum franchise tax of $800 on all LLCs that are taxed as partnerships (i.e. pass through taxation). This applies to foreign and domestic California LLCs.

California places an additional tax on domestic LLCs based on the LLC's worldwide income. If the majority of your income is outside the state of California, you might want to reconsider whether you should incorporate or form your limited liability company in California or in another state where the bulk of your business takes place.

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