How should you name your LLC? You might have your heart set on a name, but there are important things to consider first. You’ll want to ensure that it follows state rules and isn’t too close to an existing business’s name.
The rules for naming your company in Chico, CA are fairly simple according to Section 17701.08 of the California Corporations Code.
Your California LLC name must end with one of the following:
Corporations Code section 17701.04 also forbids an LLC from being in these types of businesses:
Your LLC name must be unique and easily distinguishable. You want to avoid confusing the public with a name similar to that of another California business.
Let’s say you have your heart set on the name “Chico Air Conditioner Repair, LLC,” but after a search, you find another California corporation named “Chico Air Conditioner Repair, Inc.” The names are too similar even though “Inc.” is a different kind of company.
If you make a simple change to your name such as “Chico Air Conditioner Service, LLC,” you should be okay. Just keep in mind that whether an LLC’s name is “distinguishable” from others or not is up to the Secretary of State.
Whatever name you choose shouldn’t be misleading to the public. This includes using another company’s name or choosing a name that would cause people to confuse it with government entities.
California Corporations Code also bans the use of several words such as:
If your business name implies that you carry any form of professional license, at least one of your members must have that valid license issued by an appropriate government agency.
For example, if your business is named “Chico Private Investigations, LLC,” you’ll need to hold a valid California Private Investigator License.
Before filing your paperwork, check to see if your name is available in California. You can perform a search for the name on the California Secretary of State website.
After naming your company, it’s also legal in California to apply to do business under a fictitious name or DBA(doing business as), but more on that later in this article.
What is a registered agent? A registered agent is an individual or company that receives service of process, legal documents, and official notices on your business’s behalf.
Service of process is a legal term for business letters or legal papers. Your agent is the gatekeeper between you, the state, and the public.
California state law requires that you appoint a registered agent and provide their details at the time of filing your Certificate of Formation. California’s rules for naming and changing registered agents are in section 17701.13 (a)(2) of the California Corporations Code.
Registered agents must meet the following requirements:
A registered agent must also respond quickly in the event of a lawsuit so that your business avoids missed deadlines, fines, or penalties for non-compliance.
Some business owners choose to designate themselves as registered agents because:
However, there are several downsides to this:
For these reasons, most experienced business owners hire companies to act as their registered agents. These services cost between $100 and $150 per year. If you choose to use a law firm, you could spend up to $500 per year.
If you choose to start your LLC by using a business formation company, they often include a registered agent service in their packages. Feel free to take a look at our registered agent recommendations article for more information.
What are Articles of Organization? These documents turn your business idea into an actual legal entity ready to sign contracts and do business. California law states that filing the Certificate of Formation makes it official.
To file, you’ll need the following basic information as listed in 17702.01(d) of the California Corporations Code:
The Secretary’s website contains a simple form (PDF) you can use to make sure that your articles have all of the necessary information.
The cost to file an LLC in California is $70. You can find a complete fee schedule on the Secretary’s website.
As the largest state in the nation, California’s Secretary of State is very busy. Most of the year, the processing time for LLC articles of organization can be 3-5 business days. During December and January, the process typically takes longer, around 6-7 business days.
Due to COVID-19 processing times have been slightly slower than normal. As of January 2022, the Secretary of State reports the following processing times for LLC formation filings:
If you need your LLC filed faster than the times above, the Secretary of State can speed up the process in two ways: (1) Preclearance Service and (2) Expedited filing Service.
This requires an in-person trip to the Secretary’s Sacramento office where the staff will review them for any errors or issues. Obtaining this gives you an official statement that your articles will be approved and minimizes the chances of delay due to mistakes.
There are four levels of preclearance service (PDF), depending on when you need a response from the Secretary of State:
Whether or not you get preclearance, expedited filing service helps you to shortcut the waiting times when filing your articles normally. As with preclearance service, you must file in person.
There are three levels of expedited service (PDF) available:
Class B service is more expensive than Class A due to the preclearance requirement for Class A.
The Sacramento office is the only location that processes expedited filing service requests. You must go to the public counter located at 1500 11th Street, Room 390, on Monday through Friday from 8:00 a.m. to 5:00 p.m.
To save time and avoid the hassle of LLC filings, all seasoned entrepreneurs use LLC formation services. For recommendations, check out our article on the best LLC services.
By law, your California LLC must have an operating agreement. Though you do not have to file this operating agreement with the Secretary of State, Corporations Code section 17701.13 does require you to keep a copy at your company’s office.
What is an operating agreement? An operating agreement is a contract between you and other members of your LLC. It outlines the rules by which your company does business, keeps you prepared for everyday situations, and protects against the unexpected.
Your operating agreement should list each member of the company and how they’re expected to work. It can be as simple or detailed as you’d like to make it.
California does not require a written operating agreement, but we strongly suggest that you write yours out. Without an agreement, the legal system will be responsible for deciding any disagreements, and state laws don’t always work in favor of the business owner.
The benefits of having an operating agreement include:
When it comes to hiring, firing, and everything in between, an operating agreement allows you to customize the rules of the LLC according to your expectations.
The best LLC formation services provide operating agreement templates for as low as $50, and we highly recommend them.
California LLCs must also file a statement of information within 90 days after the articles of organization. After that, you have to file a new statement every two years.
This statement is similar to your Articles of Organization but requires more detailed information.
This law is here to make sure all California LLCs regularly report vital information to the California Secretary of State. That way, the state can enforce its laws and regulations.
Under California Corporations Code section 17702.09, you must include the following items in every statement of information:
This may seem overwhelming and redundant, but the state has made it easy by providing a fill-in-the-blank form: LLC-12 (PDF)
After completing this form, you must pay a $20 filing fee to the California Secretary of State. This state fee applies to both the original filing (within 90 days of formation) and subsequent filings every 2 years following.
What is the difference between a statement of information and the articles of organization?
The California statement of information is designed to give notice to the state and anyone searching the records of the most up-to-date information about your LLC, including any changes to ownership and management.
The articles are historical records and do not need to be updated accordingly.
What is an EIN? EINs are tax identification numbers assigned to businesses by the Internal Revenue Service. They function much like social security numbers, but for businesses instead of individuals. They allow the IRS to keep track of companies that pay taxes.
Here are the most common cases in which your business will need an EIN:
We highly recommend getting an EIN even if they’re not required. Most banks and online payment services require them to open an account.
Obtaining an EIN is easy and can be done in minutes on the IRS website. You can also file via mail or fax.
It’s free of charge and shouldn’t be paid for unless part of a larger LLC formation package.
Certain types of businesses require professional licensing, such as doctors, lawyers, and private investigators, just to name a few.
Check the California Professional Licensure Guide if you have questions about any licensing requirements for your business.
In California, your Articles of Organization serve as the license or permit at the state level. No other documentation is required.
A city business license is required in Chico for any person who transacts, engages in, or carries on any business within the corporate limits of the city. This includes all businesses in Chico and residents working from home.
To apply for a business license online, visit The City of Chico Business Page.
Remember that your business may need specific licenses or permits. Contact the City of Chico if you have any questions.
As a major city in Sacramento Valley, Chico offers plenty of support for your small business. Here are just a few local Chico organizations that can help:
Now that you’ve made it official and formed your Chico, CA LLC, there are a few more easy steps to follow to complete the setup and protect your new business.
There are several advantages to buying a matching domain, even if you don’t plan on building a website just yet.
Competitors can easily buy your domain and its variations to keep you from using them. There are also people who intentionally search public records to find newly registered LLCs to buy and resell them at a higher price.
A domain name from a provider like GoDaddy.com will cost you around $20 to $50 per year. These hosts offer regular specials and discounts that help you save money even if a website isn’t in your immediate future.
California allows you to do business under a fictitious name (also known as a DBA). This means you can operate under a name different from the business’s legal name. It can also help distinguish your company from other similarly named businesses.
For example, your LLC’s legal name is “John’s Air Conditioner Service, LLC” but you want customers to know you as “Chico AC Service,” “Chico 24/7 Air Conditioner Repair,” or anything other than “John’s Air Conditioner Service.”
A DBA in Chico can be easily obtained by filing for a fictitious business name with the Butte County Clerk’s Office. There is no requirement to file with the California Secretary of State.
The certificate should contain:
Walk-in filing: All owners must be present with a valid government-issued ID in order to have the form recorded.
Mail-in filing: Submit a notarized copy of the Assumed Name form along with a self-addressed stamped envelope and cashier’s check.
Their convenient online application can be completed here.
It costs $50 to file for the business name and one owner and $5 for each additional owner.
After the FBN Statement has been filed with the County Clerk, the registrant is required to publish a notice in a local newspaper within 30 days. The notice is to appear once a week for four consecutive weeks.
The State of California requires the filing of an updated Statement of Information every other year. This can be done online at the Secretary of State BizFile Online page.
Also, keep in mind that if your LLC has employees, you are subject to employment taxes and will have to register as a California employer. Retailers will also have to register for and pay California’s sales and use tax.
Keeping your business compliant is vital to avoid fines, penalties, or state sanctions. You’ve come too far to let compliance issues shut you down.
Most importantly, having an LLC will ensure your personal assets are protected if your business cannot pay its debts. Running your business through an LLC can also provide you with better tax treatment. In addition, LLCs have fewer and less complicated reporting requirements compared to other types of businesses, making them particularly suitable for smaller businesses.
It is not strictly necessary to form an LLC in order to start a business. You can engage in business as a sole proprietorship instead. However, in that case, your personal assets may be at risk if your business takes on too much debt or loses a lawsuit in court.
It doesn’t cost much to set up an LLC for your business. In most states, you will need to pay less than $150 to register your new LLC with the local state authorities. In some states, you may need to pay some additional costs later on, for example, when filing an annual report or filing for a DBA.
The time it takes to have your LLC approved can vary wildly depending on the state, the filing method you used and if you opted for expedited filing. In some states, you can have your LLC approved in as little as one day, while in others, it may take weeks or even months.
If you want the fastest possible turnaround time, you should consider using online filing and pay for expedited service, if available.
The IRS and most state tax authorities treat LLCs as “pass-through” entities. This means that your LLC does not pay taxes directly (as corporations do). Instead, the tax burden is passed through to the members of your LLC. The members will then include profits and losses from the LLC’s business on their personal income tax returns.
It is generally best to form your LLC in your home state, where you will actually carry out your business. Some people believe that it is advantageous to form your LLC in Delaware or Nevada. In reality, you would then have to register with the authorities in your home state as a foreign LLC and pay additional fees – without much benefit in return.
You are not generally required to file for a DBA (“Doing-Business-As”). However, most business owners choose to do so anyway. Getting a DBA will allow you to omit the letters LLC from your customer-facing business name. You can also have multiple names for your LLC if you want to run more than one business through your LLC.
Yes, you can form an LLC for your business in any US state. There is no requirement for you to be a US citizen in order to form an LLC, nor do you need the right to reside in the US. If your business is going to own physical property in a given state, you may want to form your LLC in that state.
No, you don’t need to hire an attorney to form an LLC for you. It is generally much cheaper and straightforward to file the necessary paperwork yourself or to hire an affordable LLC formation service to handle the work on your behalf. However, you may want to consider hiring an attorney if your business is very complex.