How to start your LLC in El Cajon, CA

How to select a name for a California LLC? Get ready for a brainstorming session because the first step in forming an LLC is picking the name.

Before deciding, get familiar with California Corporations Code section 17701.08. This statute spells out what the name must include. For LLCs, this means that your business name must have one of the following:

• Limited Liability Company
• L.L.C.
• LLC

Any business name must be distinguishable from other businesses. Use California’s online Business Search to verify the name doesn’t match an existing one. It’s best to avoid names that are closely related as well.

There are a few items that you cannot use in a business name. Corporations Code section 17701.04 helps navigate these limitations.

For the most part, you can’t hold yourself out as something you aren’t. Unless authorized, avoid anything that indicates you’re part of highly-regulated industries. These include things like legal, financial, or healthcare services.

Finding the right name can be a challenge. It can help to know that you can use doing-business-as (DBA) names. For example, “El Cajon Furniture LLC” can operate under “El Cajon Sofa Supplier.”

Review the available domain name (URL) options, even if you don’t want to launch a website immediately. It’s worthwhile to ensure you can get the rights to domain names that match your business.

What is a registered agent? Under Corporations Code section 17701.13 (a)(2), each LLC needs to appoint a registered agent. This contact receives service of process and other mail.

If your LLC gets sued, the legal paperwork goes to this address. It’s also used for tax documents and other regulatory purposes. The registered agent is a vital part of operating any business.

Business owners may appoint themselves as registered agents. But many seasoned owners choose to hire a registered agent service instead.

Here are some advantages that come from appointing yourself:

• It’s cheap: Save money by handling this duty by yourself.
• It’s simple: You only need to keep one address updated.
• It’s reliable: All essential documents come directly to you.

Appointing yourself registered agent also has various disadvantages, such as:

• No privacy: The Secretary of State’s website lists the registered agent information. The address is public information.
• Junk mail/spam: The address can be targeted by high-volume mail that you’ll have to sort through.
• No breaks: Registered agents don’t get time off. They must be open during all business hours.
• Business interruptions: Getting served with a lawsuit in front of clients can tarnish your reputation.
• It’s your fault if you miss something: There is no one to blame but yourself if things go wrong. Failing to see a notice or making a mistake falls on your shoulders alone.

Because the registered agent is critical, we recommend using a registered agent service. Costing around $100-$150 per year, the service will sort your mail. It also keeps your address confidential. Attorneys can charge up to $500 per year to perform this role.

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.

How to file the Articles of Organization for a California LLC? Now is a good time to stretch or grab a cup of coffee if you’re dozing off. This is the most important step to forming an LLC.

Filing the Articles of Organization with the California Secretary of State transforms your idea into a legal entity.

Some people have the impression that attorneys must complete this step. But in reality, it only requires basic information, and most people can complete it on their own. California provides an excellent fillable PDF to make it easier than ever to form an LLC.

You’ll need to pay a $70 filing fee to the California Secretary of State. And the State will have to process the application before your LLC exists. Here are some of the estimated processing times, depending on the method you use:

• By mail: 5-9 business days
• In-person filings: 5-9 business days
• Online filings: 2-3 business days

You can receive faster processing through the preclearance service or expedited filing service. While extra fees apply, these can get you a quick response, sometimes the same day.

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.

Should I create an operating agreement? In California, there is no choice about it. The State requires all LLCs have an operating agreement.

An operating agreement is a contract between the members. It provides the rules under which the LLC operates, such as the rights and responsibilities of the members.

The best operating agreements cover any situation the LLC could find itself in. It also provides the methods for adding or removing members and the duties of the members and managers.

You can tailor the agreement to serve your best interests, including:

• They determine the rights and duties of LLC members. If one LLC member is responsible for running the business or managing the books, the operating agreement should say so.
• They say whether the LLC has a member or non-member manager and what the manager has the right to do. Managers also have special duties to the company and its members. The operating agreement should state these.
• They outline what the LLC is legally able to do. The operating agreement should also set down how the company is allowed to conduct its business from day to day.
• They say how new members can join the company. They also have rules about how exiting members can leave.
• They set down how and when profits are paid to members. They can also create different types of membership and payment schemes.
• They say whether members or managers are in charge. They also say how to hire and fire managers.
• They say how and under what circumstances the LLC should end. You might not want to dissolve your business now, but you might in the future. It’s best to think about it and plan before it becomes an issue.
• They say how to change the rules. You may need to amend your operating agreement in the future. The operating agreement should set down the rules for making changes.

Taking the time to draft an airtight operating agreement prevents future headaches. Protect yourself and your business by completing this step. The best LLC formation services make it easier than ever by offering templates for as little as $50.

What is a Statement of Information? In California, LLCs must also file a Statement of Information. You need to do this within 90 days of filing the Articles of Organization, then every two years after that.

The Statement of Information provides the most updated information about your company. It also verifies you’re following state law. It has a few more details as compared to the Articles of Organization.

Review California Corporations Code section 17702.09 to see what’s included. A $20 filing fee applies.

Your Statement of Information will contain contact information about your business, its registered agent, and any managers or elected CEO. To make things easier, California provides a fillable form that covers all you need.

Do I need an EIN for my California LLC? Employer Identification Numbers (EINs) are like Social Security Numbers for businesses. The primary function is for the IRS to track your tax information.

The IRS requires a business gets an EIN if any of the following apply:

• the LLC has more than one member,
• it hires any employees,
• or it follows C-corporation or S-corporation taxation.

Even if your business doesn’t fall under the IRS requirements, it’s still a good idea to get an EIN. Banks need them to open a business account and some states use them for tax purposes as well.

The process is quick and easy. To get an EIN, go to the IRS’s website. It only takes around five minutes to compete. There is no reason to pay a third party to get one for you unless it is part of a wider LLC formation package.

Read More: How to get an Employer Identification Number in California