How to Form a Single-Member LLC in California
These are the steps required to create a California single-member limited liability company ( SMLLC). Keep in mind: A California SMLLC can be used for most purposes as an LLC (multi-member limited liability company).
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.
Brian Wilson is the content manager and founder of LLC Radar.
Brian grew up in North Texas, just outside of Dallas, and has a bachelor’s degree in business journalism from Southern Methodist University. Since graduating from SMU, Brian has gained over 10 years of experience in business writing for several online publications.
Brian resides in Plano, Texas and he can be reached by email: firstname.lastname@example.org
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