While the most seasoned corporate attorney may not be able to predict what type of business structure best fits your company’s goals, he can tell you about the advantages of the limited liability company model. Those advantages include being able to choose the type of taxation and the liability of LLC owners, known as members. Like other states, California LLCs decide for themselves how to divide company profits and losses among members. One distinctive requirement of California limited liability companies is that they form operating agreements that clearly define their management plan.
Fit your business needs with the right LLC package
Decide who among the organizers will run the LLC. Develop an operating agreement that explains how managers will conduct business. Maintain the operating agreement at the same office where the LLC keeps its corporate records.
Contact the Department of Consumer Affairs, or access its website, to determine whether the LLC’s services are classified as professional services. LLCs in California are not permitted to perform professional services.
Choose a name that does not include restricted words. Prepare a name availability inquiry letter and mail it to the California Secretary of State. Ask for verification that the LLC’s name is not currently in use.
Designate a registered agent to receive legal paperwork for the company. If designating an individual, make sure the agent resides and maintains an office in the state. If designating a corporation, make sure the corporation has already filed a certificate pursuant to Corporate Code 1505 that it is authorized to do business in the state and is currently in good standing with the Secretary of State’s office.
Request an employer identification number with the IRS. File online at the IRS’s website. Or, request one by phone, fax, or mail.
Complete the Articles of Organization Form LLC-1 online by accessing the fill-in-the-blank form at the secretary of state’s website, or download and print the form. Send it with applicable fees to the Document Filing Support Unit of the Secretary of State. You can also deliver the completed form in person to the secretary of state’s Sacramento office. Include the company name, registered agent and employer identification number. If you are limiting or restricting the LLC’s business, the secretary of state recommends that you explain those restrictions in a separate statement filed with Form LLC-1. Have the document signed by an attorney, member of the entity or a trustee.
File a Statement of Information Form LLC-12 within 90 days of submitting the articles of organization. Plan to file Form LLC-12 every two years to update the secretary of state’s records with the names of the LLC’s most current operating officers and addresses of its managers.
File an Application to Register Form LLC-5 if the LLC was not created in California. Submit a Certificate of Good Standing that was issued within six months of your filing by the state agency where the company was formed. When completing Form LLC-5, make sure to use the same company name, date and place of formation as stated on the Certificate of Good Standing.
State Taxes and Workers' Compensation Insurance
Request a California employer account number if your company will be hiring at least one employee who earns $100 in a three-month period. Register online at the Employment Development Department’s website (see Resources), or call 888-745-3886. You can also visit an employment tax office to request a payroll tax registration form.
Find an insurer that offers workers’ compensation insurance. Call the Workers’ Compensation Insurance Rating Bureau (WCIRB) at 888-229-2472 and ask which insurer offers policies in your LLC’s specific industry.
File tax forms to pay the state’s required $800 minimum franchise tax. File California Form 100 if your LLC is classified as a corporation, or Form 568 if classified as a partnership. Access the California Franchise Tax Board’s website to find out about payment guidelines for each form, or call the Franchise Tax Board at 800-338-0505.
References & Resources
- California Secretary of State: Limited Liability Companies
- California Department of Consumer Affairs: Licensee Information
- California Secretary of State: Name Availability
- Paralegal Plus: California Code 1505
- California Secretary of State: Instructions for Completing Form LLC-12
- California Secretary of State: Limited Liability Company Filing Tips
- California Employment Development Department: California Employer’s Guide 2011
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