Forming a limited liability company in California is accomplished by following the requirements of the secretary of state and Franchise Tax Board. Both agencies provide the necessary forms online. Although the filing instructions for these forms make them relatively simple to prepare and do not require the services of an attorney, whether or not a limited liability company is the best way to structure your business is a question that should be made in consultation with your attorney or tax adviser.
Fit your business needs with the right LLC package
Contact the secretary of state's office regarding name availability for your limited liability company. You cannot form a limited liability company if its name is identical or very similar to a name already on record with the secretary of state. The name has to end with the abbreviation “LLC” or the phrase “Limited Liability Company.” Name availability inquiries are done by mail, and you can download a form letter from the secretary of state's website (see Resources). The inquiries are free. If you will not be forming your limited liability company immediately, you can also reserve a name for 60 days by submitting the appropriate form with a fee, which is $10 as of November 2010.
Download Form LLC-1, called Articles of Organization (see Resources). Complete the form online and print it out, or print it first and then fill it out. The form requires the name of your limited liability company, and the name and address of the agent for service of process for your limited liability company -- which can be you. This agent will receive legal communication on behalf of the LLC. Mark the box regarding the number of managers for your limited liability company -- either one manager, more than one manager or all members of the company may act as managers.
Sign and date the completed form at the bottom. File the form with the secretary of state’s Sacramento office, either in person at 1500 11th Street, 3rd Floor, or mailed to the Document Filing Support Unit, P.O. Box 944228, Sacramento, CA 94244-2280. The filing fee is $70 as of November 2010. Include two copies of the form with a self-addressed stamped envelope. The secretary of state will certify them and return them to you at no additional cost.
Download Form LLC-12, called Statement of Information (see Resources). This form must be filed within 90 days of filing your Articles of Organization, and provides basic information about your company, such as its principal address, a description of its business type, and the name of the chief executive officer and managing member. File it with the secretary of state, either in person at 1500 11th Street, Sacramento, or mailed to the Statement of Information Unit, P.O. Box 944230, Sacramento, CA 94244-2300. The filing fee is $20 as of November 2010.
Pay the $800 annual tax required by the Franchise Tax Board, or FTB. The deadline is three and one-half months after filing your Articles of Organization. There are two exceptions to this requirement: if you elect to have your LLC taxed as a C corporation, or if you file for and receive approval for tax-exempt status from the FTB. In the latter case, you must submit an attachment with your Articles of Organization indicating the basis for requesting tax-exempt status.
Tips & Warnings
It's a good idea to prepare an operating agreement when forming a limited liability company; however, this document is not filed with the state nor is it required by law. Unlike the filing forms, an operating agreement is best prepared with the assistance of an attorney -- especially if the company will have more than one member. The operating agreement includes provisions regarding important aspect of your business, such as how decisions are made among the members.
References & Resources
- California Secretary of State: Name Availability
- California Secretary of State: Business Entity Name Regulations
- California Franchise Tax Board: Instructions for Form FTB 3522
- California Tax Service Center: Filing Requirements and Related Questions
- California Secretary of State: Statement of Information (Form LLC-12)
- California Secretary of State: Name Availability Inquiry Letter
- California Secretary of State: Name Reservation Request
- California Secretary of State: Articles of Organization (Form LLC-1)