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:
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:
Appointing yourself registered agent also has various disadvantages, such as:
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:
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:
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:
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
A critical component of opening a business is the necessary licenses and permits. The state, county, and city-level authorities provide what your business needs. Failing to complete this step can result in catastrophe.
California does not require all businesses to get a general license or permit. But they have an extensive list of commercial activities that need extra approval.
Review California’s Professional Licensure Guide. It can help you find out if your business needs a State license or permit before operating.
All businesses operating within El Cajon city limits must get a Business License. This applies to mobile vendors and home-based businesses as well. The City’s online application helps streamline the process so you can get up and running in no time.
Some businesses need to get special operations licenses or building permits. These depend on the activities the business is engaged in. To ensure your business gets what it needs, reach out to the City of El Cajon officials for help.
San Diego County regulations also apply to El Cajon LLCs. The County offers a variety of permits. They cover things like building modifications and food vendors.
A general Business License is also available from San Diego County. They only apply to entities in unincorporated areas.
Launching a new business is often full of unpredictable situations. To find successful solutions, reach out to the local business community for support. Experienced leaders can share valuable advice to propel your business ahead.
Here is a list of local organizations dedicated to helping businesses thrive:
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.