Starting a new business or LLC can be an exciting time in one’s life, but the formation process can be complicated and time-consuming. It might be difficult to determine what types of permits or tax documents are needed to legally operate in the state of California. However, working with a California business attorney can help you start your LLC efficiently.
What Is an LLC?
An LLC is a limited liability company. This company is a separate legal entity from the people who own it, which affords certain legal and financial protections for the owners. An LLC can help protect the owner’s personal assets from being affected by their business and is typically taxed more leniently than other businesses. Creating an official LLC can help prove to customers that your goods and services are legitimate.
Steps for Forming an LLC
An individual can file an LLC on the California Secretary of State’s website. In order to do this successfully, however, there are some steps that need to be followed beforehand. Here is a rough checklist you can use before filing to make the process smoother:
- Create a Name: The California Secretary of State’s website has a search function to see if there are any other businesses that have a similar name as yours. It might also be helpful at this stage to purchase an online domain name for your LLC’s website.
- Determine the Registered Agent: A registered agent collects documents for your LLC. They have to have a physical address and be available during business hours. While a registered agent does not have to be an attorney, it can be helpful to assign an attorney as a registered agent so that they can look over the LLC’s legal paperwork and give you legal guidance and advice.
- File the Paperwork: Once the specifics of your LLC are figured out, the next step is to file the official documents. The filing fee is $70 and can be paid on the Secretary of State’s website.
- Develop an Operating Agreement: Every LLC in California must have an Operating Agreement. This is a document that outlines certain aspects of the business and those running it, including:
- How much of the business each member owns
- How decisions are voted on and who has what responsibilities
- How profits and losses are divided
- The structure of management and whether or not members can manage the LLC
- How to add owners or remove them after the LLC is created
- Acquire an EIN: An Employer Identification Number, or EIN, is assigned to your LLC by the IRS after submitting an application on their website. This number is used for most financial matters, including paying and hiring employees and opening a separate bank account for your business. This ID can technically be an owner’s social security number, but it’s a good idea to keep your business and your personal finances separate.
- Understand Your Tax Obligations: Many new businesses are required to pay taxes for things like sales tax, payroll tax, unemployment insurance, and worker’s compensation. There is also an annual tax fee of $800 for any business operating in California. To find more information on what fees apply to you and your LLC, contact a business attorney.
- Gather Licenses and/or Permits: Some businesses require permits to operate, depending on the goods and services they provide. The California Secretary of State has information on specific requirements, but a small business lawyer can give you guidance on what specific permits or licenses you need for your LLC.
This is not an exhaustive list of practices, but completing these steps can create a solid foundation for your LLC. It is also important to maintain documents like statements of information, which update key business facts like new owners, contracts, and permits to ensure that they do not expire. An experienced business lawyer can help you form your LLC and maintain a positive business relationship with the state of California.
FAQs
Q: How Do I Start an LLC in California by Myself?
A: An LLC can be started online on the California Secretary of State’s website. There are three separate forms to fill out, depending on where the business is located in California or whether it is moving from another state to California. The forms have an online processing fee of $70. While forming an LLC in California can be done without an attorney, it is highly recommended to seek legal counsel to determine what licenses and contracts you will need.
Q: Does an LLC Have to Be Represented by an Attorney in California?
A: In California, an LLC can be created without an attorney. However, this can create problems down the line, especially if the business needs to go to court for any reason. Because an LLC is a legal entity, you cannot represent your own LLC without an attorney in court. Hiring an attorney to help form an LLC in the beginning stages can help prevent complicated legal headaches in the future.
Q: Is the First Year of an LLC Free in California?
A: Most LLCs in the state of California must pay an $800 annual tax. Due to Assembly Bill 85, businesses formed from January 1, 2021 – January 1, 2024, are not subject to the first year’s fee. If the LLC is closed before its first year, the fee won’t be assessed. This fee increases if the LLC makes more than $250,000 in a year. To determine the exact fees required to open and maintain your business, contact a small business attorney.
Q: Who Handles LLCs in California?
A: In California, LLCs are managed by the Business Programs Division of the California Secretary of State Office. They manage the creation and registration of businesses as well as the development of trademarks. They also maintain all the rules, regulations, and codes that specific businesses need to follow. For legal questions regarding your LLC, contact a business lawyer to obtain advice that’s relevant to your specific business.
Attentive Representation for Your LLC
The Myers Law Group has decades of experience serving our clients in the realm of business law. Regardless of the size of your business, our team can help you effectively create and maintain your LLC. Schedule a consultation today to learn how The Myers Law Group can help you.