What is an EIN Number? 

An EIN (Employer Identification Number) is a unique nine-digit number issued by the Internal Revenue Service (IRS) to businesses such as a California LLC and other entities operating in the state of California or any other state.

An EIN is also known as:

• Federal Tax ID Number
• Employer Identification Number
• EIN Number
• Federal Employer Identification Number (FEIN)

What is an EIN Used For?

An EIN Number (Federal Tax ID Number) is used to identify businesses for tax purposes, similar to how a Social Security Number identifies individuals.

Here are a few situations that may require you to get an EIN for your California LLC:

1. Hiring Employees: If you plan to hire employees for your California LLC, you will need an EIN. This number is necessary for reporting taxes and other employment-related obligations.
2. Opening a Business Bank Account: Most banks require an EIN to open a business bank account. Having a separate bank account for your California LLC helps maintain clear financial records and separates your personal finances from your business finances.
3. Filing Taxes: An EIN is necessary for filing federal tax returns for your LLC. Even if your LLC is a single-member LLC, it will still require an EIN for tax purposes.
4. Applying for Business Permits and Licenses: Many local and state government agencies in California may require an EIN when applying for specific permits or licenses for your LLC.

When Should I Get an EIN?

After you have formed an LLC (Limited Liability Company), it is generally recommended to obtain an Employer Identification Number (EIN) as soon as possible.

How Much Does an EIN Cost?

Obtaining an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) is generally free of charge. The IRS does not charge a fee for issuing an EIN. You can apply for an EIN online through the IRS website or by mail, fax, or phone, and there is no cost associated with the application process.

EIN Services by Northwest 

Do California LLCs Need to Have an EIN?

In California, businesses, including sole proprietorships, partnerships, corporations, and limited liability companies (LLCs), are generally required to obtain an EIN if they have employees or meet certain other criteria, such as withholding taxes on income paid to a non-resident alien. The EIN Number helps the IRS track business activities and ensure compliance with tax laws.

To obtain an EIN Number in California, businesses can apply directly with the IRS by completing Form SS-4 (Application for Employer Identification Number). The application can be submitted online, by mail, or by fax.

Alternatively, businesses can authorize a third-party, such as an accountant, tax professional, or LLC service like Northwest Registered Agent to apply for an EIN on their behalf.

It is important for businesses in California to obtain an EIN Number to fulfill their tax obligations and ensure proper identification for their business entity.

Does a Single Member LLC in California Need to Get an EIN Number?

A single-member California LLC (Limited Liability Company) is generally not required to obtain an EIN (Employer Identification Number) if it has no employees and operates as a “disregarded entity” for tax purposes.

A single-member LLC will need an EIN if you plan to:

Open a Business Bank Account: Many financial institutions require an EIN to open a business bank account. An EIN acts as a unique identifier for the business when conducting financial transactions, including obtaining a business credit card or getting a business loan.

Having a business bank account helps prevent confusion between personal and business finances and ensures that financial records are appropriately attributed to the entity. Having a separate business bank account also simplifies accounting and facilitates the tracking of business income and expenses.

Single-member California LLC: Here are a few key points to consider

1. Default Tax Classification: By default, a single-member LLC in California is treated as a “disregarded entity” for federal tax purposes. This means that the IRS does not recognize the California  LLC as a separate entity, and the owner reports the business income and expenses on their personal tax return using their Social Security Number (SSN).
2. Use of SSN: The owner of a single-member LLC can use their SSN for tax and reporting purposes, similar to a sole proprietorship. The business income and expenses are reported on Schedule C (Profit or Loss from Business) of their personal tax return (Form 1040).
3. Exceptions and Changes: There are certain situations where a single-member LLC in California may need an EIN, such as if the LLC has employees, is required to file certain federal excise tax returns, or chooses to be taxed as a corporation. Additionally, if the single-member California LLC later adds additional members, it will be required to obtain an EIN.

From the IRS: https://www.irs.gov/businesses/small-businesses-self-employed/single-member-limited-liability-companies

Depending on elections made by the LLC and the number of members, the IRS will treat an LLC either as a corporation, partnership, or as part of the owner’s tax return (a “disregarded entity”).

An LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms… Most new single-member LLCs classified as disregarded entities will need to obtain an EIN. An LLC applies for an EIN by filing Form SS-4, Application for Employer Identification Number

A single-member LLC that is a disregarded entity that does not have employees and does not have an excise tax liability does not need an EIN. It should use the name and TIN of the single member owner for federal tax purposes. However, if a single-member LLC, whose taxable income and loss will be reported by the single member owner needs an EIN to open a bank account or if state tax law requires the single-member LLC to have a federal EIN, then the LLC can apply for and obtain an EIN.

How Do I Apply for an EIN Number for a California LLC?

Here is a step-by-step guide on how to apply for an EIN number:

1. Determine Eligibility: Before applying for an EIN number (federal tax ID number), make sure you are eligible. EINs are typically required for businesses, including sole proprietorships, partnerships, corporations, and LLCs. Certain entities, such as trusts, estates, and non-profit organizations, may also need an EIN.

2. Access the Online Application: The quickest and easiest way to apply for an EIN number is through the online application on the Internal Revenue Service (IRS) website. Go to the IRS website and search for “EIN application” or directly visit the “Apply for an Employer Identification Number (EIN)” page.

3. Choose the Appropriate Application Type: The online application will present different options for application types. Select the one that best suits your situation. Common options include “Sole Proprietor,” “Partnership,” “Corporation,” “LLC,” and “Non-Profit Organization.”

4. Provide Required Information: Fill out the online application form with accurate information. You will be asked to provide details about the business entity, such as the legal name, address, and type of organization.

Additionally, you’ll need to provide the name and Social Security number or Individual Taxpayer Identification Number (ITIN) of the responsible party, who is typically the owner or principal officer.

• IRS EIN Online Application: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online
• Form SS-4 (Application for Employer Identification Number): https://www.irs.gov/pub/irs-pdf/fss4.pdf

5. Review and Submit the Application: Double-check all the information you have entered to ensure its accuracy. Once you are satisfied, submit the application electronically. The system will validate the information, and upon successful submission, you will receive your EIN immediately.

6. Print or Save the Confirmation: After receiving your EIN, it is advisable to print or save the confirmation notice for your records. This notice serves as proof of your EIN and can be used for various purposes, such as opening bank accounts or filing tax returns.

7. Understand Additional Requirements: Depending on the nature of your business and state regulations, there may be additional requirements to fulfill, such as obtaining state-level tax identification numbers. Research the specific requirements for your business to ensure compliance.

Federal Tax ID Number Confirmation Letter

Confirmation Letter: Once your EIN is assigned, the IRS will provide you with a confirmation letter. The confirmation letter serves as official documentation of your EIN and includes your entity’s name, address, and the assigned EIN. The letter typically arrives by mail and can take several weeks after receiving your EIN.

Remember to keep a copy of your EIN and confirmation letter in a safe place, as you may need it for various tax-related purposes, such as opening a business bank account or filing tax returns.

Note: If you prefer not to apply online, you can complete Form SS-4, the Application for Employer Identification Number, and submit it by mail or fax to the appropriate IRS office. The processing time for mail or fax applications is longer compared to the online application.

EIN Number vs. Social Security Number: Key Differences

An EIN Number (aka Federal Tax ID Number) and Social Security Number (SSN) are both identification numbers used in the United States, but they serve different purposes and are assigned to different entities. Here are the key differences between EIN Numbers and Social Security Numbers:

1. Purpose:
– EIN Number: An EIN is primarily used to identify businesses, nonprofit organizations, estates, trusts, and other entities for tax purposes. It is issued by the Internal Revenue Service (IRS) and is required for various business-related activities such as filing taxes, hiring employees, and opening business bank accounts.

– Social Security Number: A Social Security Number is a unique nine-digit number issued by the Social Security Administration (SSA) to individuals. It is primarily used for tracking an individual’s earnings and contributions to the Social Security system, determining eligibility for government benefits, and for identification purposes.

2. Entity Type:
– EIN Number: EINs are assigned to business entities, including sole proprietorships, partnerships, corporations, limited liability companies (LLCs), and nonprofit organizations. It is not assigned to individuals unless they are operating a business entity or have specific tax requirements.

– Social Security Number: Social Security Numbers are assigned to individual persons. They are used to track an individual’s employment history, eligibility for Social Security benefits, and for personal identification in various contexts.

3. Issuing Authority:
– EIN Number: EINs are issued by the IRS. Businesses and entities can apply for an EIN through the IRS either online, by mail, or by fax.

– Social Security Number: Social Security Numbers are issued by the Social Security Administration (SSA). They are typically assigned to individuals when they apply for a Social Security card through the SSA.

4. Usage:
– EIN Number: EINs are primarily used for business and tax-related purposes. They are used when filing business tax returns, paying employment taxes, opening business bank accounts, applying for business licenses, and conducting various business-related transactions.

– Social Security Number: Social Security Numbers are used for personal identification and tracking of an individual’s earnings and contributions to the Social Security system. They are required for employment purposes, filing personal tax returns, applying for government benefits, obtaining loans, and other personal financial transactions.

5. Confidentiality:
– EIN Number: EINs are generally considered public information. Once assigned, EINs can be searched and verified by the public through various sources, such as the IRS Business Entity Search tool.

– Social Security Number: Social Security Numbers are considered sensitive and confidential personal information. They should be protected and shared only when necessary for authorized purposes to prevent identity theft and fraud.

It’s important to understand the differences between EIN Numbers and Social Security Numbers to ensure their proper usage and protect personal and business information.

How to Change or Update an EIN Number for Your California Business

Changing or updating an EIN (Employer Identification Number) for your California business typically involves updating the business’s legal and tax information with the Internal Revenue Service (IRS). Here’s a brief overview of how to change or update an EIN number:

1. Understand the Need for Change:
Determine the reason for the change. Common reasons include changes in business structure (e.g., from a sole proprietorship to an LLC or corporation), changes in ownership, or errors in the initial EIN application.

2. Notify the IRS:
Contact the IRS Business and Specialty Tax Line at 1-800-829-4933 to inform them of the desired changes. Explain the reason for the change and provide any necessary documentation to support the request.

3. Obtain Necessary Forms:
Depending on the type of change, you may need to complete and submit specific IRS forms. For example:
– Change in business structure: File the appropriate form to reflect the new structure, such as Form 8832 (for LLCs) or Form 2553 (for S-corporations).
– Change in ownership: File Form 8822-B (Change of Address or Responsible Party – Business) to update the responsible party information.

4. Update Business Records:
Ensure that your business records, including licenses, permits, and financial accounts, are updated with the new EIN and any other relevant changes.

5. Notify Other Agencies and Entities:
Inform other relevant entities and agencies of the EIN change, such as state tax authorities, banking institutions, and business partners.

It’s crucial to consult the IRS and possibly seek professional advice to ensure compliance with the appropriate procedures and requirements for changing or updating an EIN.

Links for Changing or Updating Information:
1.
2. IRS Change of Address or Responsible Party – Business (Form 8822-B): https://www.irs.gov/forms-pubs/about-form-8822-b

California Business Tips

If you’re looking to form an LLC in California, it’s crucial to understand the necessary steps and requirements. To begin, conduct a California LLC name search to ensure the availability of your desired business name.

Once you’ve confirmed its availability, you can proceed with preparing the essential formation documents, including registering your business name and drafting a California LLC operating agreement, which outlines the internal structure and management of your LLC.

Additionally, you have the option to be your own registered agent in California or enlist the services of a professional registered agent. It’s worth noting that the length of time to get an LLC in California can vary, but typically ranges from a few weeks to several months.

To streamline the process, it’s advisable to gather all required information and submit your filings promptly. Furthermore, obtaining a California Employer Identification Number (EIN) from the IRS is essential for tax purposes.

Detailed guides and online resources are available to help you navigate the steps involved, and various California LLC services and registered agents can assist you in forming your LLC efficiently. Additionally, ensure compliance with any necessary business licenses in California, and consider the California LLC cost while budgeting for the formation process.

Lastly, should the need arise, understanding how to change your California registered agent the steps to dissolve an LLC in California is crucial for closing your business properly.

References and Links from the IRS

Limited Liability Companies (LLCs)
Employer ID Numbers
Apply for an EIN Online
Single-Member Limited Liability Companies (LLCs)

Remember to consult a tax professional or visit the official IRS website for the most up-to-date and accurate information regarding the application process for an EIN number.

I explain how to look up an LLC in California with a California business name search on the California Secretary of State website.

Our California LLC name search guide offers essential tips on checking LLC name availability, reservation, and registration, helping you secure a unique and compliant business identity efficiently.

The direct link to look up an LLC in the state of California:

https://bizfileonline.sos.ca.gov/search/business

California Secretary of State bizfile Online Page

https://bizfileonline.sos.ca.gov/

How Do I Look Up an LLC in California? (Summary)

To search the California name database look up an LLC in the state of California, you can follow these steps:

1. Visit the website of the California Secretary of State at California Business Entities search tool
2. On the home page, click on “Business Search” in the “Business Programs” section.
3. In the “Business Search” page, select “Limited Liability Company” from the “Entity Type” drop-down menu.
4. Enter the name of the LLC that you want to look up in the “Entity Name” field. You can also enter the California Secretary of State file number or the registered agent name, if you have that information.
5. Click on “Search” and wait for the results to load.
6. If there are multiple LLCs with similar names, you can refine your search by using the filters on the left-hand side of the page. You can filter by city, county, status, and other criteria.
7. Once you find the LLC that you are looking for, you can click on its name to view its details, including its status, address, registered agent, filing history, and other information.

California Secretary of State: Entity Search

Note that the California Secretary of State’s website provides a free online search tool for looking up LLCs and other business entities registered in the state. However, if you need certified copies or additional information, you may need to submit a request and pay a fee.

How to Conduct a Business Search in California

California Business Name Search: A business name search is the first step in forming an LLC in California or a corporation there. To determine if the name you are interested in is available, this search will check all registered businesses within the state.

Like all other states, California requires that each LLC or corporation registered within the state has a unique business name. Before you start your LLC or Corporation, conduct a search for business entities to confirm that the name is not already registered with the California Secretary-of-State. California business name searches are free.

Step #1: Visit California’s bizfile Online Page

Visit California’s new bizfile Online system for Business Entities and Uniform Commercial Code is now available.

https://bizfileonline.sos.ca.gov/

Step #2: Check California Business Name Search Availability

Visit the California business name search page

https://bizfileonline.sos.ca.gov/search/business

To check the availability of your chosen name, you can use the California Entity Search before you submit your name reservation request. Select the “Search Type” option to perform the best search.

Next, type the name you wish to use. To ensure that you find all similar names, you can search only the first two words of your business name if it is more than one word.

To avoid rejection, make sure you do a thorough search of your documents before you submit them.

Follow the California naming guidelines:

• Your California entity name must contain the phrase “limited liability company” or one of its abbreviations, L.L.C. or L.L.C. ).
• Your name cannot contain words that could cause confusion between your LLC and a government agency (FBI or Treasury, State Department, etc.). ).
• Restricted words (e.g. Bank, Attorney, and University may need additional paperwork, as well as the participation of a licensed individual such as a doctor or lawyer to your LLC.
• You can find more about Califonia’s rules and regulations at California’s Code of Regulations

Step #3 Reserve Your California Entity Name (Optional)

From California’s bizfile Online website,

Online processing fee: $10. Upon approval, a name can be reserved for a period of 60 days. For faster service, name reservations can be submitted online through our enhanced online services at bizfileOnline.sos.ca.gov.

It is not neccessary to apply for a name reservation if you are concurrently filing a California business entity formation or registration.

California Business Name Reservation Page

https://www.sos.ca.gov/business-programs/business-entities/name-reservations

California Secretary of State | Contact Information

Mailing Address

California Secretary of State
P.O. Box 942870
Sacramento, CA 94277-2870

Physical Address

California Secretary of State
1500 11th St., 5th Fl.
Sacramento, CA 95814

Hours: Monday–Friday, 8:00 a.m.–5:00 p.m. PT

Email Contact Form: sos.ca.gov/administration/contact-information/email-administration

Phone: (916) 653-7244

Additional Steps

1. Trademark Search

When searching for a business name, it’s important to note that availability doesn’t necessarily mean the name is free to use if it’s already a registered trademark.

To avoid potential complications down the line, it’s wise to conduct a thorough trademark search using the Trademark Electronic Search System before finalizing a business name.

2. Choose a Registered Agent

After you have chosen an LLC name that is distinctive and unique, you can now choose your LLC’s Registered Agent.

3. Check if the Domain Name is Available

To check if a domain name is available, you can follow these steps:

1. Go to a domain registrar website, such as GoDaddy.com or Namecheap.com.
2. In the search bar on the homepage, type in the domain name you want to check.
3. Click on the search button to see if the domain name is available or not.
4. If the domain name is available, you will be prompted to purchase it. If it’s not available, the registrar will suggest some alternative options or you can try a different domain name.

4. Check if Social Media Name is Available

Check if a social media name is available for a new business name

5. Register California Business Entity

When you complete the required documents for filing a new business entity, you then register your business and business name with the state. The state of California will either approve your business name or reject it.

If you hire a good LLC service like Northwest Registered Agent, ZenBusiness or Incfile, these LLC services have business name tools available for you to do a quick search.

6. Register an Employer ID Number (EIN) With the IRS

An Employer Identification Number (EIN) is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to identify businesses and other entities for tax purposes.

7. Create a Brand Logo

Creating a business logo involves several steps. There are affordable online services that can design a logo for you and assist with the process.

Define your brand: Before you start creating a logo, you need to define your brand’s personality, values, and mission. This will help you create a logo that accurately represents your brand.

8. Write a Business Plan

Writing a business plan involves a comprehensive process that covers various aspects of your business, including the industry, market research, marketing and sales strategies, financial projections, and more.

9. Open a Business Bank Account in California

A bank account is generally required for a new Limited Liability Company (LLC) or corporation to separate personal finances from business finances and to establish a clear record of business transactions.

California Business Tips

If you’re looking to form an LLC in California, it’s crucial to understand the necessary steps and requirements. To begin, conduct a California LLC name search to ensure the availability of your desired business name.

Once you’ve confirmed its availability, you can proceed with preparing the essential formation documents, including registering your business name and drafting a California LLC operating agreement, which outlines the internal structure and management of your LLC.

Additionally, you have the option to be your own registered agent in California or enlist the services of a professional registered agent. It’s worth noting that the length of time to get an LLC in California can vary, but typically ranges from a few weeks to several months.

To streamline the process, it’s advisable to gather all required information and submit your filings promptly. Furthermore, obtaining a California Employer Identification Number (EIN) from the IRS is essential for tax purposes.

Detailed guides and online resources are available to help you navigate the steps involved, and various California LLC services and registered agents can assist you in forming your LLC efficiently. Additionally, ensure compliance with any necessary business licenses in California, and consider the California LLC cost while budgeting for the formation process.

Lastly, should the need arise, understanding how to change your California registered agent the steps to dissolve an LLC in California is crucial for closing your business properly.

California Business Name Search FAQs

1. Why is a business entity name search important in California? Conducting a business entity name search in California is crucial for ensuring your chosen business name is not already in use or too similar to existing names. This is a key step for legal compliance and establishing a unique identity for your business in the state.
2. How can I search for a business entity name in California? You can perform a business entity name search using the California Secretary of State’s online business search tool. This tool allows you to search the state’s database to check the availability of your desired business name.
3. Is there a fee for conducting a business name search in California? Typically, performing a preliminary search for business name availability on the California Secretary of State’s website is free. However, obtaining detailed reports or certified copies of business documents may incur fees.
4. What should I do if the business name I want is already in use in California? If your preferred business name is already taken, you’ll need to choose an alternative name that is unique and complies with California’s business naming rules. It’s a good idea to have several alternative names in mind.
5. Can I reserve a business name in California before forming my company? Yes, California allows the reservation of a business name for a certain period. This process involves submitting a name reservation request form and paying a reservation fee as specified by the California Secretary of State.
6. What guidelines should I follow when naming my business in California? Your business name in California must be distinguishable from other registered business entities and should not mislead the public. Certain business types, like LLCs or corporations, require specific designations in their names. The state provides detailed naming guidelines.
7. How do I ensure my chosen business name complies with California’s legal requirements? To ensure compliance, review the naming guidelines provided by the California Secretary of State. It’s also wise to conduct a trademark search to avoid potential infringement issues.
8. After finding an available name in California, what are the next steps? Once you find an available business name, you can proceed to register your business entity with the California Secretary of State by filing the appropriate formation documents and paying any required fees.
9. Is it possible to operate under a different name than my registered business name in California? Yes, in California, you can operate under a ‘Doing Business As’ (DBA) name. However, this name must be registered and distinct from other registered business names in the state.
10. How often is the California business name database updated? The California business name database is updated regularly to reflect new registrations and changes. For the most current information, it’s recommended to perform your search close to the time you plan to register your business.

Find out more about a Resale Certificate, obtaining one, and other details.

• California Resale Certificate form BOE-230
• California Department of Tax and Fee Administration’s verification webpage

What is a Resale Certificate, and how do you use it?

Retailers often purchase products for resale and don’t have to pay sales tax. Although sales tax is still payable, the retailer will charge sales tax to the customer on the final price of the merchandise. The retailer then sends the collected sales tax to the California Department of Tax & Fee Administration.

A pet shop might purchase dog toys from a supplier to sell in their store. The pet store owner will not normally pay the supplier sales taxes. The retailer will charge the customer sales tax based on the full cost of the dog toy when a customer (or end user) purchases it. The retailer will collect sales tax from all transactions and send it to the state periodically, usually at the end of the month.

The certificate proves that no sales tax was collected on a transaction. A resale certificate can also be called a reseller number, seller’s permit, exemption certificate or wholesale license. To allow tax-exempt purchases, the seller must prove that the buyer intends to resell the product. This can be done by providing a valid certificate.

The exemption from sales tax is for inventory that will be sold and not for tax-free purchases of normal business items such as paper, pens, etc.

Getting Started

A California Seller’s Permit is required before a business can sell products or provide taxable services. Sometimes, the Seller’s Permit can also be called a sales tax permit or a sales tax number.

Is a Resale certificate the same thing as a Sales Tax ID?

Although they may be mistaken for one another, the Resale Certificate and Sales Tax Permit are two distinct documents. The Resale Certificate permits the retailer to purchase tax-exempt products for resale.

Similar: How do I get a California Sellers Permit

The California Department of Tax & Fee Administration will provide a sales tax number after you have registered. This number will appear on the Resale Certificate.

How to complete the California Resale Certificate

Buyers and sellers can create a resale certification if their certificates contain the necessary information. The Department of Tax & Fee Administration offers a Resale certificate (BOE-230), which can be downloaded to help document tax-free transactions.

Although filling out the California Resale Certificate is easy, Form BOE-230 is essential for sellers.

The California Department of Tax & Fee Administration will require that the seller has a BOE-230 Resale Certificate. The seller may end up owing the buyer sales taxes, penalties, and interest if it is not correctly completed.

Fill out the BOE230 California Resale Certificate.

Step 1: Download the California Resale Certificate form BOE-230

Step 2: Enter the number of the seller’s sales permit

Step 3: Describe the seller’s business activities

Step 4: Enter your business name

Step 5: Describe the property that is being sold. Use either an itemized listing or a general description to be descriptive.

Step 6: Enter the name, signature, address, and telephone number of the purchaser

California Business Tips

If you’re looking to form an LLC in California, it’s crucial to understand the necessary steps and requirements. To begin, conduct a California LLC name search to ensure the availability of your desired business name.

Once you’ve confirmed its availability, you can proceed with preparing the essential formation documents, including registering your business name and drafting a California LLC operating agreement, which outlines the internal structure and management of your LLC.

Additionally, you have the option to be your own registered agent in California or enlist the services of a professional registered agent. It’s worth noting that the length of time to get an LLC in California can vary, but typically ranges from a few weeks to several months.

To streamline the process, it’s advisable to gather all required information and submit your filings promptly. Furthermore, obtaining a California Employer Identification Number (EIN) from the IRS is essential for tax purposes.

Detailed guides and online resources are available to help you navigate the steps involved, and various California LLC services and registered agents can assist you in forming your LLC efficiently. Additionally, ensure compliance with any necessary business licenses in California, and consider the California LLC cost while budgeting for the formation process.

Lastly, should the need arise, understanding how to change your California registered agent the steps to dissolve an LLC in California is crucial for closing your business properly.

FAQs

What is the cost of a California Sales Tax Exemption Certificate?

A California Resale Certificate is free.

Is a California Resale Certificate valid for a year?

A California resale certification is valid until it’s revoked by the seller in writing unless it was issued for a specific transaction. Otherwise, the certificate is generally good for one year.

Where can I get the California sales tax exemption certificate?

The seller keeps the resale certificate on file and does not file it with the state.

Do sellers have to accept the resale certificate?

Although sellers are not required to accept certificates of resale, many do. The buyer will be responsible for any sales tax if the seller refuses to accept the certificate. You can file the California sales tax return to get credit for your sales taxes.

California is one of the few states that doesn’t recognize certificates for resale from out-of-state sellers. To purchase tax-free items from sellers in other states, the buyer must register for a sales permit in that state.

What steps should a business take to accept a certificate of resale?

A resale certificate is a document that a seller presents to a business. The seller is responsible for verifying the buyer’s details and keeping these records.

Failure to verify the information could make the seller liable for California sales tax. A seller may be charged with a misdemeanor if they issue a resale certificate to avoid paying a buyer’s sales tax. This could result in a $1,000-$5,000 fine and/or a one-year sentence.

A seller must:

• Check the resale certificates to ensure it is complete.
• Verify the purchaser’s sales permit by visiting the California Department of Tax and Fee Administration’s verification webpage or calling 888-265-5263.
• Sellers must also examine the certificate to determine if the goods are reasonably compatible with the buyer’s business line. The seller might want to look into whether the buyer is looking to buy office supplies tax-free if their business is a dealership of cars.
• Keep a list of the resale certificates.

As of this writing, in 2023, the $800. California Franchise Fee is currently being waived for the first year.

Visit California’s new “bizfile Online” website for more information,

https://bizfileonline.sos.ca.gov/

California Franchise Tax Board

https://www.ftb.ca.gov/file/business/types/limited-liability-company/index.html

Paying your annual tax

Online

Bank account (Web Pay)

Credit card

Mail

Franchise Tax Board
PO Box 942857
Sacramento CA 94257-0631

Use FTB 3522 when paying by mail.

Exceptions to the first year annual tax

For tax years beginning on or after January 1, 2021, and before January 1, 2024, LLCs that organize, register, or file with the Secretary of State to do business in California are not subject to the annual tax of $800 for their first tax year.

California LLC and Corporate Taxes & Fees

Many people are concerned about the LLC fee or corporate tax when setting up a California business.

California’s corporate tax rate is 8.84 percent. This corporate tax rate is comparable with that in many other states that are popular for incorporation.

You can also use exemptions and other deductions to lower your corporate tax rate. Entrepreneurs can also benefit from the many benefits associated with different types corporations.

California Fees for Incorporation

California has a variety of fees that are associated with incorporation. Entrepreneurs will have to pay a fee in order to reserve a name. The fee must be paid to the county or city where the entrepreneur is informing. The fees will differ from one city to the next and from one county to another.

California’s Articles of Incorporation fee is $100.  A handling fee of $15 is required. (As of this writing, there is “no fee” for California’s Articles of Formation.)

An initial report is required, which includes information about your business. An initial report costs $25 and a $75 service fee. California requires that all corporation owners file an annual report every year. The annual report filing fee is $25

A majority of corporations must also pay an annual tax. The California Franchise tax Board receives the minimum annual tax of $800.

You will need to pay fees if you want business licenses to your company. In most cities and jurisdictions, a small business license costs between $50 and $100. The cost of a license varies depending on the industry and type of business.

California LLC Fees & Taxes

The Statement Of Information fee must also be paid by entrepreneurs. LLC owners must submit this document within three month of forming their LLC. The Statement of Information costs $20 to file.

Business license fees are also required for LLC owners. The fees are determined by the jurisdiction or city where the company was founded.

Licenses for small businesses can cost as high as $100. It may also be necessary to obtain business licenses that are specific to your business.

You will be required to pay ongoing fees if you have an LLC. California’s LLC fees schedule includes an annual fee. The annual fee is $800, and due each April 15. This annual fee must be paid by the owners of an LLC formed within 3.5 months .

A single-member California LLC will be treated as a sole proprietorship for tax purposes. A multiple-member LLC, on the other hand is treated as a partnership.

California’s LLC tax fee is calculated based on the LLC’s total income. These income can be from any source in the world. LLCs are not subject to direct taxation by the IRS. The income from an LLC is reported on the individual tax returns for the members.

You may be required to pay an additional fee if your LLC’s annual net income exceeds $250,000.

Your LLC must register for the payroll taxes if it plans to hire employees.

• Insurance for the disabled
• California Employee Withholding Tax
• Unemployment Insurance Tax

 Franchise Tax

California’s annual franchise tax is exactly as it sounds: a tax that state business owners must pay each year. If you register your California business, it is just one of the costs. Franchise tax is a unique business tax that must be paid in California and in about 12 other states.

Your business will be subject to the California annual franchising tax if it is one of the limited liability types, including limited liability company (LLC), C corporation, S corporation, C corp, limited partnerships (LP) or limited liability partnership(LLP). This tax is not applicable to sole proprietorships, general partnerships and tax-exempt nonprofits.

How to pay the California Franchise Tax

The yearly California franchise tax for non-corporate entities is $800 at the time of publication. The minimum franchise tax for corporations is $800. The minimum franchise tax due by the state is $800. For corporations, it’s either the corporation’s net income multiplied with its applicable corporate rate. The tax can be paid online, by mail or in person at the California Franchise Tax Board Branch Offices.

The type of business entity is a factor in the due date for the annual franchise taxes.

The minimum franchise tax for corporations is due in the first quarter of every accounting period.

The first-year annual franchise taxes for LLCs are due on the 15th of the fourth lunar month following the date that you file the business with Secretary of State.

The annual tax is due in subsequent years on the 15th of the fourth month of the taxable year. This is usually April 15. LLPs and LPs have slightly different deadlines. Payments are due on the 15th of the third month of your taxable year.

California Franchise Tax Exemptions

In their first year, newly incorporated corporations do not have to pay the minimum franchise taxes. Businesses are exempt from the minimum tax if they have been in business for less than 15 days and their tax year is not longer than 15 days. LLCs also qualify for the 15-day exemption from the franchise tax.

However, the franchise tax must be paid regardless of whether the entity is active or inactive, whether it files a return for less than 12 months, or whether the company is operating at loss. This rule applies to all business entities that are subject to the franchise tax. It is very difficult to escape this business expense.

The above information gives a broad overview of California’s franchise tax. However, the California Franchise Tax Board is your best source for detailed information. This entity levy and collects the tax. This site has the most current information about your business’s owes, the minimum franchise tax amount, deadlines, filing requirements, and any exemptions your business may be eligible for.

California Business Tips

If you’re looking to form an LLC in California, it’s crucial to understand the necessary steps and requirements. To begin, conduct a California LLC name search to ensure the availability of your desired business name.

Once you’ve confirmed its availability, you can proceed with preparing the essential formation documents, including registering your business name and drafting a California LLC operating agreement, which outlines the internal structure and management of your LLC.

Additionally, you have the option to be your own registered agent in California or enlist the services of a professional registered agent. It’s worth noting that the length of time to get an LLC in California can vary, but typically ranges from a few weeks to several months.

To streamline the process, it’s advisable to gather all required information and submit your filings promptly. Furthermore, obtaining a California Employer Identification Number (EIN) from the IRS is essential for tax purposes.

Detailed guides and online resources are available to help you navigate the steps involved, and various California LLC services and registered agents can assist you in forming your LLC efficiently. Additionally, ensure compliance with any necessary business licenses in California, and consider the California LLC cost while budgeting for the formation process.

Lastly, should the need arise, understanding how to change your California registered agent the steps to dissolve an LLC in California is crucial for closing your business properly.

FAQs

1. What are the initial costs associated with forming an LLC in California? The primary cost when forming an LLC in California is the state filing fee for the Articles of Organization. This fee is set by the California Secretary of State and can vary, so it’s advisable to check their website for the most current rates.
2. Is there an annual fee for maintaining an LLC in California? Yes, LLCs in California are required to pay an annual franchise tax to the California Franchise Tax Board. The minimum amount is set by the state and is subject to change, so it’s important to stay updated with the latest information from the Franchise Tax Board.
3. Does California require any additional filings with fees for an LLC? Apart from the initial and annual fees, California LLCs must file a Statement of Information within 90 days of the Articles of Organization filing and then every two years thereafter. This filing also requires a fee, details of which can be found on the California Secretary of State’s website.
4. What are the costs for a Registered Agent service in California? If you decide to use a Registered Agent service in California, the cost can vary depending on the provider. These services typically charge an annual fee and offer to handle legal document deliveries on behalf of your LLC.
5. Are there any hidden fees or additional costs I should be aware of in California? While there are no hidden fees per se, there could be additional costs depending on the nature of your LLC, such as specialized permits or licenses, or fees for professional services like legal or accounting assistance.
6. Can I reserve an LLC name in California, and what is the cost? Yes, you can reserve a business name for your LLC in California for a specific period before forming your LLC. This requires a Name Reservation Request Form and a reservation fee, which is set by the California Secretary of State.
7. What does it cost to amend LLC documents in California? If you need to amend your LLC’s Articles of Organization, California charges a filing fee for processing amendments. The exact fee can be confirmed on the California Secretary of State’s website.
8. Is there a fee for dissolving an LLC in California? Filing a Certificate of Dissolution to officially dissolve an LLC in California may involve a filing fee. You should check the latest guidelines and fees on the Secretary of State’s website.
9. What penalties exist for late filings or non-compliance in California? Failing to meet filing deadlines, such as for the annual franchise tax or the Statement of Information, can result in penalties and interest charges. It’s critical to adhere to all filing timelines to avoid these additional costs.
10. How can I minimize the costs of running my LLC in California? To minimize costs, consider handling some tasks yourself, like acting as your own Registered Agent if you have a physical presence in California. However, always balance the potential savings against the effectiveness and compliance risks of professional services.

DBA stands for “doing business as.” It is also known as a FBN (fictitious business name) in most California counties. You must file a DBA regardless of the type of business structure that you have set up (sole proprietor, partnership or corporation, LLC or LLC).

If you intend to operate your business under another name than your real name or an existing corporate name, you must file a DBA. California requires that you register your DBA within forty days of your business’s commencement.

Secretary Of State Details

Phone: 916-657-5448
Website: sos.ca.gov

References and Resource

• California Secretary of State Website
• California county registrars and recorders
• Sacramento County Clerk
• Orange County Clerk
• San Diego County Clerk
• San Francisco County Clerk
• California Secretary of State Name Availability

Why is a DBA Needed in California?

Registering a California fictitious address will provide you with additional benefits.

• Ability to open a bank account for your business. Inability to use your personal account to issue or receive checks in your business name. A DBA is required to open a bank account in your startup’s name. Most banks require a certified copy. You can collect checks and pay under the company name once you have opened a business bank account.
• Public advertising. Once you have registered your business name, you can start advertising and marketing publicly under the DBA. This will increase your business’ visibility.
• Establish a separate business identity. Small companies look more professional when they apply for a DBA. They can use the assumed name to create a separate business identity that is available to customers and vendors. This allows you to present the business professionally.
• Refrain from using your name. This will help you protect your brand and deter others from using your name.

1. Decide whether you will need to register a DBA.

First, determine if a DBA is right for you. A few situations are common where registering a DBA is most beneficial.

• Sole Proprietors Let’s say Jane Smith is a graphic artist who works as a sole proprietorship. There are no LLCs or corporations formed. She might want to do business with clients under the name “Designs by Jane” and open a bank account. She could do this by filing a DBA under the name Designs by Jane.
• LLC/Corporations If you already have an LLC or Corporation, you can register another name for the business with the state. Let’s suppose you have an LLC for your auto repair company under the name “L.A. First Auto Repair”, but now want to expand your business into automotive detailing. As a second name for the business, you could file a DBA to “L.A. First Auto Detailing”. This will ensure that you keep the two business activities separate.

2. Select your DBA name.

Next, you will need to choose a name for registration. There are some simple rules that you should keep in mind when choosing a name for California.

1. California has no similarity or exact match for fictitious names. A DBA cannot deceive the public by appearing similar to another business name.
2. A DBA name can’t include corporate indicators, such as Corp or LLC, nor any words that suggest an entity type unless the company has been incorporated either as an LLC or corporation. This is to stop a sole proprietor from posing as an incorporated business.

How can you determine if there is a California DBA name?

Once you have selected a name that meets these guidelines, there are several options you can use to check if it is available for registration. A Google search of similar names in California is one way to start.

Although it does not necessarily prove that the name you are interested in is available, it can help to filter out names that have been taken. It is possible to check if the domain you are looking for is available. You will likely need a domain that matches your company’s name.

3. Find the right office to file.

California does not have a central office that can register fictitious names for businesses. A DBA is filed at the county level, unlike LLCs and corporations that are filed with the state. You may contact the Registrar-Recorder/County Clerk’s Office in the county you wish to conduct business in for more information about registration. The California list of county registrars/recorders will show you the exact location of your office.

4. Prepare the application to register a fictitious company name.

Once you’ve determined that the name is available for registration it is time to file the necessary forms with your county. It is crucial that your DBA be filed in the county where your business will be operated. California counties require the same basic information.

1. Your name and address
2. Your fictitious business name
3. Your business’s address and mailing address. P.O. P.O. Box numbers cannot be used as a business address if they are not combined with a street address.
4. The full name of all registered owners
5. If the DBA is for an LLC or corporation, your Corporation or LLC identification number will be provided by California.
6. You can choose which type of entity you are (Corporation, LLC or other).

After completing the application, you’ll send it to the county registry for approval. Each county has a different fee structure. Los Angeles County charges $26 for the first and $5 for each additional name to file a DBA. Alameda County charges $40, however.

Copy your fictitious company name in a newspaper

California law requires you to publish a statement within 30 days after filing. Sometimes, this publication is called a DBA publication. This is a small legal notice printed in the back of an adjudicated paper.

You can usually find the complete list of acceptable newspapers on the website for your county clerk or by calling them directly.

It is not difficult. The newspaper you choose can often help you navigate the process. Here are the basics to help you get started.

• The newspaper must have a general circulation publication and be published in the county where your fictional business is registered.
• For four consecutive weeks, the notice must be posted once per week.
• Within 30 days after filing your DBA, you must publish
• If you need to re-file your fictitious company name (after the original expires), you will need to publish the DBA notice once again.
• The newspaper will usually charge a publication fee. This fee must be paid.

After four weeks of publication, the newspaper will send you an affirmative statement proving that you have met your publication requirements.

6. Your Affidavit for Publication

Once you have satisfied your publication requirements, the proof of publication (affidavit) that you received from the newspaper publishing the statement must be submitted to the county clerk’s offices where your DBA was registered. Sometimes, the newspaper that you choose will file this filing on your behalf. If they do, make sure you ask them. Remember that you are responsible for filing the proof.

For proof filing, some counties, such as San Francisco, may charge an additional fee. This information can be obtained from the county clerk.

California Business Tips

If you’re looking to form an LLC in California, it’s crucial to understand the necessary steps and requirements. To begin, conduct a California LLC name search to ensure the availability of your desired business name.

Once you’ve confirmed its availability, you can proceed with preparing the essential formation documents, including registering your business name and drafting a California LLC operating agreement, which outlines the internal structure and management of your LLC.

Additionally, you have the option to be your own registered agent in California or enlist the services of a professional registered agent. It’s worth noting that the length of time to get an LLC in California can vary, but typically ranges from a few weeks to several months.

To streamline the process, it’s advisable to gather all required information and submit your filings promptly. Furthermore, obtaining a California Employer Identification Number (EIN) from the IRS is essential for tax purposes.

Detailed guides and online resources are available to help you navigate the steps involved, and various California LLC services and registered agents can assist you in forming your LLC efficiently. Additionally, ensure compliance with any necessary business licenses in California, and consider the California LLC cost while budgeting for the formation process.

Lastly, should the need arise, understanding how to change your California registered agent the steps to dissolve an LLC in California is crucial for closing your business properly.

While there are free templates available online, we recommend getting an LLC operating agreement from a trusted source like Northwest Registered Agent, Incfile, or ZenBusiness. They can provide you with a free template.

Visit any of these LLC services for a free LLC operating agreement template

• Northwest Registered Agent
• Incfile
• ZenBusiness

Making a clear and thorough operating agreement today will help your company succeed down the road. Read on to learn what is covered in this document and how to construct one.

What is an LLC Operating Agreement?

An operating agreement is essential if you’re forming a California (LLC). This legal document offers information about the ownership and routine operations of your company as well as instructions for situations like the dissolution of the LLC.

An operating agreement is an internal document of the LLC. It is not legally required in California for LLC owners to file an operating agreement with the Secretary of State along with the Articles of Organization (the documentation required to formally incorporate an LLC).

An operational agreement is, however, officially recognized by California law, which defines it as “the written agreement which shall be entered into among all of the members as to the conduct of the business and affairs of a limited liability company.”

The state also advises that all LLC members sign into a written (rather than verbal) operating agreement. If you cover all the pertinent concerns, you may rest comfortably knowing that the state will respect your operating agreement.

An LLC Operating Agreement is required in California

Why You Should Have a California LLC Operating Agreement

Protect yourself from liability: An operating agreement aids in separating the members (owners) of an LLC from the corporate body. The operating agreement separates the members’ personal liabilities from the LLC’s obligation in the event that the company encounters legal issues, such as a lawsuit. In the event that the company entity is sued, your personal assets as a member, such as money and property, are safeguarded.

Put verbal agreements in writing: If you’re forming an LLC with partners, you’ve probably already spoken about the specifics of the company, like how much money each partner will put into it. It can be tempting to rely on verbal agreements since you trust your partners, but doing so is a bad idea. It is a fact that disagreements happen in business. In case of disagreements, having information like how much each partner owns in writing will be helpful.

Protection from the state: Without an operating agreement, your LLC will be subject to the “default rules” of California. This protects your agreement against interference from the state. An operating agreement safeguards you by preventing the state from literally interfering with your business.

Consider the division of earnings as an illustration. State law may require that profits be distributed equally among LLC owners when the LLC is dissolved. An operational agreement allows you to determine how profits are allocated in relation to the ownership share each owner has in the company.

Make the most of the flexibility an LLC provides: The most adaptable legal business entity you can create is probably an LLC. Less strict regulations apply to management, reporting, and taxes than, say, to a corporation. The operating agreement, which allows you to specify anything from members’ voting rights to what happens if a member wishes to quit the LLC and what processes are necessary to dissolve the LLC, is the key to this flexibility.

Legitimize your company: An operational agreement gives your company legitimacy by demonstrating to outsiders that it is being run ethically. Before they open a company bank account for you, for instance, the majority of banks will demand to see an operating agreement.

A serious angel investor will also request to see an operating agreement before investing in your company if you are looking for capital from private sources.

What should my California LLC Operating Agreement contain?

There won’t be any duplicate operating agreements. An operating agreement must address the particular needs that each firm will have given its uniqueness. However, any operating agreement in California must unquestionably have a few key elements. How to write a California operating agreement and what should be included in it is described in this section.

Source: From the ZenBusiness website, an LLC operating agreement should include:

1. LLC Name
2. Ownership
3. Management Structure
4. Duties of Members and Managers
5. Voting Rights and Responsibilities
6. Distributions
7. Holding Meetings
8. Buyout and Buy-Sell Rules
9. Succession Planning
10. Dissolution
11. Modifications to the Operating Agreement
12. Single-Member LLC Statue
13. Severability Provision

1. LLC Name

Indicate the company name exactly as it is written in the California Articles of Organization. This document is used to formally create your LLC and is filed with the Secretary of State in California. It is how the name appears in the official state registry and how the state would formally acknowledge it.

Use the full business name, including the words “Limited Liability Company” or an authorized abbreviation (“LLC,” “L.L.C.,” “L.C.,” or “LC”), and avoid using an acronym or nickname.

2. Ownership

Give a breakdown of the percentage of each owner’s ownership in addition to the full names of the members (owners). There are various methods for calculating purported “degrees of ownership.”

Many companies decide to connect ownership with capital investments made by each member. For instance, if you invest $1,000 in the business and your partner contributes $500, you would be entitled to two-thirds ownership as opposed to your partner’s one-third.

If your LLC has just one member, you will own the entire company.

3. Management and Organizational Structure

An LLC may be managed by its members or by its managers. Which management structure you intend to use must be stated in your California Articles of Organization. In a member-managed LLC, the owners—known as members—are in charge of managing day-to-day business operations. In an LLC that is managed by a manager, the owners delegate management of day-to-day activities to the manager.

The management structure and the methods for altering it should be outlined in your operating agreement.

4. Manager and Member Responsibilities

As part of their participation in the LLC, members, and management have a variety of responsibilities to undertake. Your operating agreement should specify the exact responsibilities and rights of management, including what they may and cannot do on the company’s behalf.

Even members who are not active in day-to-day operations must still perform obligations like attending scheduled member meetings and participating in votes as needed.

5. Voting Rights and Responsibilities

The ability to vote on significant business decisions, such as a prospective buyout or the addition of a new member, is often granted to LLC members. It should be stated in the operating agreement who has the right to vote on certain matters.

It is possible to distribute voting rights among members unevenly. The voting power may reflect this and give the two-thirds owner two votes and the one-third owner only one, for instance if one member owns two-thirds of the business and the other one-third.

6. Distribution and Allocations

The division of gains and losses among members is referred to as distributions. Profits may be allocated equally or in accordance with ownership stakes. It’s entirely up to you; however, as profit distribution may sometimes be a source of disagreement among partners, you must make sure it is specified in the operating agreement.

Include details about how and when profits will be transferred, such as to members’ bank accounts at the conclusion of the fiscal year. You might also wish to be aware that each member is liable for paying any necessary taxes on any earnings.

7. Holding Meetings

Like corporations, LLCs are not compelled by law to hold periodic shareholder meetings or similar events. Despite this, it makes sense to schedule monthly meetings for members and management to discuss company developments and future changes.

Include this commitment right away in the operating agreement. You won’t have to worry later about persuading resistant participants. Additionally, members who refuse to fulfill this commitment may be subject to a vote to remove them from the LLC.

8. Rules for Buyouts and Buy-Sells

As your company grows, you can welcome new members or lose long-time members who want to take advantage of other opportunities. Describe the requirements for adding a new member, such as the amount of capital investment required and who will vote to approve them.

Include specifics about what must be done when a member resigns, including what happens to their ownership stake. For instance, the operating agreement can state that the surviving members must be given the first opportunity to purchase the retiring member’s stock in the company.

9. Succession Planning

The term “succession planning” describes what happens if an LLC member passes away or retires. What happens to their ownership stake in the company should be specified in the operating agreement.

Can they give it to their own relatives or friends? Does a current member need to receive their share?

Members may alter their own estate planning records (such as a will) to comply with the operating agreement’s requirements once these recommendations have been made clear to them.

10. Dissolution

A California LLC can exist indefinitely, but circumstances may arise where members no longer wish to continue or the business has a specific purpose that requires dissolution.

It is important to plan for this possibility and have a clear plan in place to make the process less complicated and costly. This plan should include determining who has the authority to initiate dissolution, who must vote to approve it, the required majority vote to move forward, reasons for dissolution, and how remaining assets will be divided after paying off debts and obligations. I

t is also crucial to wind up the business affairs and pay all outstanding debts and obligations to avoid the personal responsibility of the members to the LLC’s creditors.

Steps for dissolving an LLC include,

• Paying all tax liabilities and filing tax returns
• Filing a Certificate of Dissolution with the Secretary of State
• Notifying creditors
• Closing business bank accounts and credit cards
• Canceling licenses and permits

Incorporating clauses into the Operating Agreement can help prepare for the possibility of dissolution.

11. Modifications to the Operating Agreement

Operating contracts are designed to be flexible. For instance, if a new member joins, the operating agreement must be updated to reflect their name as well as any capital contributions, responsibilities, and voting rights.

Include instructions on how to change the operating agreement, and who needs to approve this by voting or signing it. This will serve as your manual for any subsequent updates.

12. Single-Member LLC Statute

It could seem as though many of the aforementioned ideas don’t apply to you if your LLC only has one member. For instance, since you—the LLC’s single owner—will make all decisions, voting could seem unnecessary.

From a legal perspective, the operating agreement still has to specify this! Include a sentence in your operating agreement that states unequivocally that you are the LLC’s single owner, possessing 100% ownership rights, and that you have the power to act on behalf of the LLC without conducting votes or having meetings.

You risk trouble with third parties, such as lenders who provided you with a business loan, if you conduct certain acts without having this stated in an operating agreement.

13. Severability Provision

You may have seen similar legal language like this in other contracts. In essence, it says that if one provision of the operating agreement is declared unconstitutional, the remaining provisions remain legitimate. This makes sure that your operating agreement won’t be completely useless due to a single minor error.

California Operating Agreement FAQs

In California, is an LLC Operating Agreement required?

An operating agreement in California is strongly advised even though it is not legally necessary. Your operating agreement is an internal document, which means you’ll keep it on file with your own business documents.

This important legal instrument makes membership (ownership) and regular activities clear. In the event of liability difficulties, such as lawsuits, protecting members’ (owners’) personal assets by separating them from the corporate entity is important.

Where can I get an LLC California operating agreement?

Most LLC services provide a prepared template for you to draft your operating agreement. However, because every firm is unique, you should speak with a business lawyer to make sure your operating agreement covers all necessary details.

Is an Operating Agreement needed for a single-member California LLC?

Yes. The answers to membership and operational-related questions, which are frequent sources of disagreements between partners, are clarified by an operating agreement. As a single-member LLC, the operating agreement also limits your personal liability, defending you financially and personally in the event that the company encounters legal issues.

Am I allowed to draft my own LLC operating agreement in California?

Technically, this is allowed. With the use of ready-made templates, which offer the pertinent key points and employ necessary legal wording, you may build your own operating agreement for your California LLC. However, you should always have a local attorney evaluate the final document to make sure you haven’t overlooked anything that is particular to your state or business model.

Legally speaking, you are not required to hire a lawyer to draft your operating agreement. However, you should always have your operating agreement reviewed by a business lawyer who is knowledgeable about the legislation in your state. They can draw attention to particular problems unique to your company that isn’t covered by pre-existing templates.

They can also assist you with clauses that provide indemnification for members who might be named in disputes, arbitrations, or investigations as a result of their employment with the company.

References

Small Business Administration (Operating Agreements)
California LLC Codes
IRS: Paying Yourself
California Secretary of State: Starting a Business Entity Guide
IRS: Limited Liability Company (LLC)
ZenBusiness

1. Name your SMLLC

California SMLLCs must have the following words in their names: “Limited Liability Company” (or the abbreviation L.L.C.” Or “LLC.” Or “LLC.” The name of the SMLLC must not be misleading to the public by the California State (SOS). Also, the name must be distinguished from any other names registered or reserved by the state on the Secretary of State’s records.

You can check to see if the name you are looking for is available by searching through the SOS website. You can request a name reservation request form to reserve your name for 60-days for $10. You must send the form by mail or hand delivery.

Additional information about business name availability is provided by the SOS online as well as in a printable publication ( Business entity: Name Regulations and Additional Statutory Requirements & Restrictions).

2. Register Articles of Organization

By filing Articles Of Organization with the California Secretary of State, you can create a California SMLLC. You will need to complete the following documents:

• The official name of your new SMLLC
• The initial street address and postal addresses of the SMLLC
• The name and street address of the registered agent of the SMLLC
• An indication of whether the SMLLC is member-managed or manager-managed.
• A few more details are needed.

Download a blank article of organization form (Form LLC-1) by visiting the SOS website. For articles submitted by mail, the current filing fee is $70. Hand-delivered forms are subject to an additional $15 fee

Each California SMLLC must have registered agents. A registered agent is an individual, business or legal entity who agrees to accept legal documents on behalf of the SMLLC. California SMLLCs cannot be its own registered agents. A California resident can either be the registered agent or a corporation that has filed the appropriate certificate (a California Corporations Code Section 1505 Certification) with the Secretary. A registered agent must be located in California. On the SOS website, you can view a list of companies that will act as registered agents.

3. Prepare an Operating Agreement

California doesn’t require SMLLCs to have an operating arrangement. An operating agreement is highly recommended even if an SMLLC only has one member. An SMLLC operating agreement is not required to be filed with the state.

The LLC and one member usually make the operating agreement. The agreement usually covers the rights, duties, and obligations of the member as well as the management structure of the SMLLC. An agreement can provide liability protection, separating you and your business. This agreement can also be helpful with lenders and other businesses in order to enter into business transactions.

If you do not state that your SMLLC is manager-managed at the time you register, your SMLLC would be treated defaulty as member-managed. The distinction between manager-managed and member-managed can be crucial, so consider both options before deciding which management structure you would like for your SMLLC.

4. Are You a Requirement for an EIN?

An SMLLC with a default tax status disregarded entity, which is the same as a sole proprietorship and does not have employees, is not required to apply for a federal Employer Identification Number. These SMLLC owners can report their business profits or losses on their personal tax returns using their Social Security number, tax identification number, or their own Social Security number.

You must apply for a federal Employer Identification Number from the IRS if your SMLLC employs people or if your SMLLC is to be taxed as an entity rather than a corporation. Although you don’t have to get an EIN for your SMLLC (although it is not mandatory), there are business reasons why. EINs are required by banks to open a bank account. Other companies you work with may also require EINs to process payments. Even though it is not necessary for federal tax purposes, it can make sense to get an EIN for your SMLLC.

An online application can be submitted to the IRS Website to obtain an EIN. There is no filing fee.

5. Register to Pay Your Taxes

You will need to register with the California taxing authority in certain cases, such as if your business involves selling goods or collecting sales tax. For example, if you plan to collect sales tax, you must register with California State Board of Equalization. This can be done online or in person at any BOE field office. Register with the California Employment Development Department to pay employer taxes.

California imposes an $800 annual tax on SMLLCs that are not corporations. California also charges an annual fee to SMLLCs earning a high income in addition to the $800 franchise tax. Although an SMLLC can be considered disregarded for federal tax purposes, the SMLLC must still be reported its income on separate state tax returns. The tax and the fee must be paid to the California Franchise Tax Board. The FTB website has more information on the tax and fees and guidance about which forms you should use for your business.

6. Get a Business License

Depending on the type of business and location, you might need to apply for local or state business licenses. These licenses could include:

• Your profession or occupation
• You’ll be selling or providing specific services or goods
• A fictitious or assumed name for your business.
• Safety and health are important.

California’s CalGold website provides detailed information on many state and local business licensing.

7. Send your Statement of Information

California law requires that you file an initial information declaration within 90 days of filing articles of organization. The statement must contain the same information as the articles of organization. It also needs to include the names and addresses of your SMLLC member’s managers and members. You can complete the statement online on the SOS website. Download the blank information statement form (Form LQ-12), which you can fill out on your computer. You can print, sign, and send it by mail or hand delivery. The initial statement must be filed for $20.

Additional statements of information will be due each year by the end of the month following filing your SMLLC’s articles. The filing period runs for 6 months before the due date. If you file your articles of organization on September 15, an odd-numbered year ago, statements of information should be filed every two years between April 1 and September 30 of the next odd-numbered years. Like the initial report, you can complete online, download an empty form and mail it or hand deliver it. Each biennial information statement costs $20.

California Business Tips

If you’re looking to form an LLC in California, it’s crucial to understand the necessary steps and requirements. To begin, conduct a California LLC name search to ensure the availability of your desired business name.

Once you’ve confirmed its availability, you can proceed with preparing the essential formation documents, including registering your business name and drafting a California LLC operating agreement, which outlines the internal structure and management of your LLC.

Additionally, you have the option to be your own registered agent in California or enlist the services of a professional registered agent. It’s worth noting that the length of time to get an LLC in California can vary, but typically ranges from a few weeks to several months.

To streamline the process, it’s advisable to gather all required information and submit your filings promptly. Furthermore, obtaining a California Employer Identification Number (EIN) from the IRS is essential for tax purposes.

Detailed guides and online resources are available to help you navigate the steps involved, and various California LLC services and registered agents can assist you in forming your LLC efficiently. Additionally, ensure compliance with any necessary business licenses in California, and consider the California LLC cost while budgeting for the formation process.

Lastly, should the need arise, understanding how to change your California registered agent the steps to dissolve an LLC in California is crucial for closing your business properly.

This business structure is favored for its simplicity, flexibility, and ease of setup. However, navigating the specific requirements in California is crucial for a successful launch.

This article provides a comprehensive guide on how to establish a sole proprietorship in the Golden State, from the initial planning stages to the legalities of setting up your business.

What is a Sole Proprietorship in California?

A sole proprietorship is the simplest form of business under which one can operate a business.

In California, this means the business is not separate from the owner, and the owner bears personal liability for the business’s debts and obligations.

This structure offers the advantage of direct control and decision-making but comes with the responsibility of personal liability.

Summary: Starting a Sole Proprietorship in California can be summarized in these simple steps:

1. Choose a Business Name: Decide on a unique name for your sole proprietorship. Ensure it’s not already in use by checking with the California Secretary of State’s Business Search.
2. File a Fictitious Business Name Statement (if needed): If your business name is different from your legal name, file a ‘Doing Business As’ (DBA) with your local county clerk’s office.
3. Obtain Necessary Licenses and Permits: Research and acquire the required licenses and permits. Use resources like CalGold Business Permits Made Simple to identify what you need based on your business type and location.
4. Set Up Your Business Finances: Open a business bank account to keep your personal and business finances separate. This step is crucial for managing your business effectively.
5. Understand and Plan for Taxes: Familiarize yourself with the tax obligations for a sole proprietor in California. Consider consulting a tax professional for advice, especially about potential self-employment taxes and estimated tax payments.

Planning Your Business

Before diving into the legalities, it’s crucial to lay a solid foundation with a well-thought-out business plan. This plan should include market research to identify your niche in California’s diverse economy and an analysis of your target customer base. When choosing a business name, ensure it’s unique and resonates with your brand.

In California, you can check the availability of your desired business name through the California Secretary of State’s website (California Business Search).

Legal Steps to Establish Your Sole Proprietorship

To officially start your sole proprietorship in California, you may need to register your business name, particularly if it’s different from your own name. This is known as a “Doing Business As” (DBA) name. The DBA registration process varies by county, and you can find specific information on your local county clerk’s website.

Obtaining the necessary permits and licenses is the next critical step. These requirements can vary significantly depending on your business type and location. The CalGold Business Permits Made Simple website is a valuable resource for identifying the specific licenses and permits you’ll need.

Tax registration is also an essential part of setting up your sole proprietorship. While sole proprietors in California don’t need a unique tax identification number (TIN) for the business (they can use their Social Security Number), they may need an Employer Identification Number (EIN) if they plan to hire employees. For state tax requirements, visit the California Department of Tax and Fee Administration.

Also, be mindful of local zoning laws, especially if you’re launching a home-based business. Your city or county’s zoning office can provide information on any restrictions that might apply to your home business.

Setting Up Your Business Finances

Opening a business bank account is a crucial step in establishing your sole proprietorship. This helps in keeping your personal and business finances separate, which is vital for tax purposes and financial management. For accounting and bookkeeping, consider using software designed for small businesses, which can simplify tracking your income and expenses.

Tax planning is another critical aspect. As a sole proprietor in California, you’ll be subject to self-employment taxes. It’s advisable to plan for quarterly estimated tax payments to avoid any surprises during tax season. The IRS Self-Employed Individuals Tax Center offers helpful guidance on this front.

Resources

How to Form an LLC in California

How to Search Available Business Names in California

California Registered Agent

Visit CalGold for more information

FAQs

1. Do I need to register my sole proprietorship in California?

• In California, sole proprietorships do not require registration with the state as a business entity. However, if you are using a fictitious business name (one that is different from your own name), you must file a Fictitious Business Name Statement with your local county clerk’s office.

2. What kind of taxes do I need to pay as a sole proprietor in California?

• As a sole proprietor, you’ll need to pay federal and state income taxes on your business earnings. You are also responsible for self-employment taxes (Social Security and Medicare). It’s recommended to pay estimated taxes quarterly to avoid penalties. California may have specific state tax obligations, so check with the California Department of Tax and Fee Administration for details.

3. Do I need a business license for a sole proprietorship in California?

• Yes, most California cities and counties require businesses, including sole proprietorships, to obtain a local business license. The requirements vary depending on your business type and location. Check with your local city or county government office.

4. Is my personal liability separate from my business liability in a California sole proprietorship?

• No, in a sole proprietorship, there is no legal distinction between the owner and the business. This means your personal assets could be at risk if your business incurs debt or is sued. It’s often advisable to have appropriate insurance to mitigate this risk.

5. How do I open a business bank account for my sole proprietorship in California?

• To open a business bank account, you’ll typically need your Social Security Number (or Employer Identification Number if you have one), a copy of the Fictitious Business Name Statement, and possibly other documentation depending on the bank’s requirements.

6. Can I hire employees as a sole proprietor in California?

• Yes, you can hire employees as a sole proprietor. However, you will be required to obtain an Employer Identification Number (EIN) from the IRS, register for state and federal employment taxes, and comply with employment laws and regulations.

7. What should I do to ensure my business name is unique in California?

• Before selecting a business name, search the California Secretary of State’s Business Search and conduct an internet search to ensure the name isn’t already in use. Remember, a unique name helps in establishing your brand and avoiding legal issues.

8. How do I handle zoning laws for a home-based sole proprietorship in California?

• For a home-based business, check with your local city or county zoning office to ensure your business activities are allowed in your home. Zoning laws vary by location and can affect where and how you operate your business.

9. What insurance should I consider for my sole proprietorship in California?

• It’s advisable to consider general liability insurance, professional liability insurance, and property insurance, depending on the nature of your business. If you’re hiring employees, you will also need workers’ compensation insurance as required by California law.

10. Are there any specific state-level resources for sole proprietors in California?

• Yes, the California Governor’s Office of Business and Economic Development (GO-Biz) offers resources and assistance for starting and operating a business. The California Small Business Development Centers (SBDC) also provide valuable guidance and support to entrepreneurs.

11. Can a sole proprietorship in California have a business credit card?

• Yes, a sole proprietor can apply for a business credit card. This is a useful way to separate personal and business expenses. The application may require your personal credit history since the business and personal finances are legally the same.

12. How do I manage contracts and legal agreements as a sole proprietor in California?

• As a sole proprietor, any contract or legal agreement you enter into is personally binding. It’s important to read and understand all terms of a contract before signing. Seeking legal advice for contract drafting and review is often beneficial to protect your interests.

References

IRS: Sole Proprietorships
IRS: Income & Expenses
California Franchise Tax Board: DBAs
California Secretary of State: Business Entity Types
California Secretary of State: Business Entity Types
California Franchise Tax Board: Sole Proprietorship
California Department of Tax and Fee Administration
Office of Business and Economic Development: CalGold
California Office of the Small Business Advocate: Fictitious Business Names

California nonprofit corporations can be used for charitable, educational, or religious purposes. It is easy to learn how to create a nonprofit in California with the right information. This guide will show you how to create a nonprofit in California and help you apply for tax-exempt status.

Reference Links for California Nonprofits

• California Secretary of State – New Business Checklist
• California Attorney General – Guide for Charities
• California Employment Development Department
• California Tax Service Center
• California Secretary of State – Business Entity Forms
• California Secretary of State – Business Entity Resources
• IRS – Information for Charities & Nonprofits
• IRS – Required Provisions for Organizing Documents
• IRS – 990 Series for Tax-Exempt Organizations
• IRS – Applying for Tax-Exempt Status
• IRS – 501(c)(3) Compliance Guide
• Small Business Administration – License and Permits

Step 1: Choose the initial directors

California law requires at least one director. However, to form a committee you must have at most two board members. Although there are no residency or membership requirements for the state, it does have term limits. Unless there are no members, terms last for one year. Directors can serve only four terms, but can serve as directors up to six years. While the Internal Revenue Service requires that nonprofits have at least three members on their boards, it does not have any restrictions regarding term limits.

Step 2: Select a name

Before choosing a name, make sure you review the California non-profit corporation naming restrictions. California’s Secretary Of State won’t permit you to choose misleading names. Your name cannot be identical to the names of existing corporations or foreign companies that do business in California. You cannot choose a name already owned by another corporation. California does not require that you include Incorporated, Inc., and LLC in your name.

To check for name availability, search California’s business names database. Check to see if any domain names are available that match your chosen nonprofit name. The domain name service may be able to assist you with this. You can also reserve your business name for 60-days so that you don’t lose the name while you decide if it’s what you want.

Step 3: Select a California Registered Agent

In California, a registered agent is also known as an agent for service of process.

Your agent will notify you of any lawsuits or other important documents and ensure that they reach you promptly. A registered agent must be appointed by corporations and LLCs to serve as the primary contact for Secretary of State.

Agents must be located in California and have a public address. They also need to be available during business hours. For service of process, you can be your own agent. It may not be possible to be at the address you have on file during regular business hours.

Step 4: Filing Articles of Incorporation With California

When you file your California Articles of Incorporation, your California nonprofit corporation becomes legally established. These articles define the purpose and name of your nonprofit corporation. Your agent must be listed for service of process. This includes their name and address. If the address is different, your articles should include it. Your corporation must also have appropriate dissolution clauses and dedication clauses in order to limit its operations.

Out-of-state or out-of country organizations can be considered foreign nonprofit corporations. These corporations must file a Statement & Designation by Foreign Corporation with California’s Secretary of State in order to do business in California. With their application, they must attach a Certificate Of Good Standing from the agency in which their corporation is located.

Step 5: Filing a California Statement of Information

Within 90 days of incorporation in California, new nonprofit corporations must submit an Initial Declaration of Information (Form Si-100) to the Secretary of State. This statement will update the contact information and membership information of your nonprofit, as well as its principal officers and agent for service. Your Statement of Information can be filed online or via mail with a $20 fee. A $20 fee is required for each new statement.

Step 6: Establish corporate bylaws

Your corporate bylaws must include the specific purpose of your nonprofit, often called your mission statement, as well as your core values. The rules will govern the organization’s activities and affairs. A list of officers for your corporation is usually included in bylaws. California law requires that there be a president, secretary, and treasurer. Your bylaws may also contain the following:

• The power of the board
• Director’s duties
• How directors are elected
• The board can take actions
• Board meeting details
• Each officer’s responsibilities and duties
• Authorizations for non-board and board committees
• If applicable, details about voting rights and procedures
• Level of legal protections provided to directors/officers/employees
• If applicable, reports to directors and members

Step 7: Call an organizational meeting of the board of directors

The board adopts the conflict-of-interest policy and bylaws at its first meeting. They also establish a fiscal calendar, elect authorized directors and appoint officers. They must also approve:

• Application for tax exemptions in the federal and state levels
• Opening a bank account
• Start-up expenses refunded
• Compensation of the president/CEO/treasurer/CFO, executive directors, etc.

Directors can also consent to electronic transmissions by signing written consents. This is required by California law in order to conduct official business electronically.

Step 8: Create a corporate records binder

Keep copies of all corporate proceedings and records in your corporate records binder. It doesn’t need to be extravagant. Many companies use a three-ring binder. Alternatively you can save your records on a flash drive or computer hard drive. Your records binder usually includes:

• Articles of incorporation
• Bylaws
• Approval letter from IRS 501(c),(3)
• Permit(s) or business license(s).
• Annual and biennial reports
• Board member list
• Minutes of meetings in chronological order

Step 9: Get your tax ID numbers

After your nonprofit corporation has been legally established, you can apply for a Federal Employer ID Number (EIN). EIN assistance is available to assist you in applying for your Federal EIN online. You will need a State Employer Identification number if your nonprofit has employees. Once you have received your FEIN number from the IRS, you can apply for your SEIN via the California Employment Development Department.

Step 10: Apply to California permits and licenses

California businesses need a general business license to be able to operate. Licenses can be issued at the local level. Contact the city if your business is located in an incorporated municipality. Contact the county if your business is located in an unincorporated region.

You may require additional permits or licenses for your nonprofit. The law requires permits and licensing. Failure to comply with requirements can result in late fees, penalties, and loss of tax-exempt status. CalGOLD, an online permit assistance tool, may help you locate local, state, and federal permit information. However, some licensing is specific to the industry.

Step 11: Apply for tax-exempt status

It is difficult to establish your IRS tax exemption status for a 501(c),(3) nonprofit organization. It is difficult to comprehend the application because it contains lots of legal jargon. Your application can be filed electronically at Pay.gov. For Form 1023, there is a $600 fee, and for Form 1023-EZ, $275.

Once you have received your 501(c),(3) federal determination letter, the California Franchise Tax Board can grant state tax exemption. The FTB will usually accept your exemption from state income tax as of the effective date for your federal tax exemption. The filing of Form 3500A does not cost anything. If you do not have a federal 501(c),(3) determination letter, you will need to file Form 3500A and pay $25 for the application fee.

Step 12: Register with the state as a charity

To register as charity, charities must file Form CT-1 to the California Attorney General’s Register of Charitable Trusts. Your Articles of Incorporation, bylaws, and applications must be submitted within 30 days of receiving your charity assets. Assets can include property, public donations, grants from the government, and any other contribution of value. There are annual renewals and reporting requirements.

Step 13: Get insurance for your non-profit

Insurance for nonprofit organizations is not the same as traditional insurance. The type of organization and other factors will determine your insurance requirements. To determine the right insurance policy for you, speak to an insurance agent.

You may be interested in general liability, professional liability, product liability, director and officer coverage, and property and auto insurance. Additional insurance is required for employees. You will need to have workers’ compensation, unemployment insurance, or disability insurance.

Step 14: Open an account with a bank

To open a bank account in California for your nonprofit corporation, use your FEIN. A copy of your Articles of Incorporation or bylaws may be required. You should check with your bank to determine if there are any additional requirements.

Limit the number of people that can sign checks to protect your nonprofit’s bank accounts from embezzlement and theft. You should also require two signatures for checks above a certain amount. Also, you need to designate different people to deposit money and keep receipts. Regularly reconcile your bank account to ensure that disbursements match the entries in your books.

California Business Tips

If you’re looking to form an LLC in California, it’s crucial to understand the necessary steps and requirements. To begin, conduct a California LLC name search to ensure the availability of your desired business name.

Once you’ve confirmed its availability, you can proceed with preparing the essential formation documents, including registering your business name and drafting a California LLC operating agreement, which outlines the internal structure and management of your LLC.

Additionally, you have the option to be your own registered agent in California or enlist the services of a professional registered agent. It’s worth noting that the length of time to get an LLC in California can vary, but typically ranges from a few weeks to several months.

To streamline the process, it’s advisable to gather all required information and submit your filings promptly. Furthermore, obtaining a California Employer Identification Number (EIN) from the IRS is essential for tax purposes.

Detailed guides and online resources are available to help you navigate the steps involved, and various California LLC services and registered agents can assist you in forming your LLC efficiently. Additionally, ensure compliance with any necessary business licenses in California, and consider the California LLC cost while budgeting for the formation process.

Lastly, should the need arise, understanding how to change your California registered agent the steps to dissolve an LLC in California is crucial for closing your business properly.