7 Steps to Starting a Successful LLC in California Business:
1. Select a Business Name for Your California LLC.
When starting on your journey to build your business in California, one of the most important first steps is naming your LLC. Not only is this important to set your company apart from competitors and attract customers, but it’s also legally required to have a business name in California.
To create a name for your LLC in California, you can follow some of these steps and guidelines:
- Adhere to the Business Naming Guidelines:
- Your LLC name may not be the same as or similar to the name of another existing corporation or entity authorized to do business in the state of California.
- Do not use a name that could falsely suggest an association with a federal or state government body such as the FBI, FDA, Treasurer, or Department of Revenue.
- If your business is not professionally licensed in a given field (doctor, engineer, lawyer), you are not allowed to use any verbiage that suggests this within your name.
- Your proper legal business name must include the Limited Liability Company or LLC/L.L.C.
- Search the state of California’s business name directory.
You want to ensure it’s available for use within the state. You can start your search for available California LLC names with the below link: State of California LLC search
- Reserve the business name with the state of California.
After finalizing that your business name is available for registration within your state, you should immediately file the necessary paperwork for LLC registration.
- Purchase your domain name.
When you legally finalize the name for your LLC in California, go and purchase the domain name. If you don’t do this right away, you’ll leave your business name susceptible to domain squatters and may not be able to purchase the name or have to pay a high price.
2. Pick out a Registered Agent in California.
If you’re planning to do business in the state of California, you are legally required to have a designated registered agent. A registered agent is a business's liaison with the state, serving as a point of contact for legal documents, such as subpoenas and tax notices.
Here are a few ways you can have a registered agent in California:
- You or any business employee who is 18+ years of age, has a valid address in the state of California, and is regularly available during business hours can become a registered agent.
- You can use a registered agent service provider that acts on your behalf.
3. File the California LLC Certificate of Formation.
Within the state of California, every new business owner wishing to register an LLC will need to file a Certificate of Formation with the Secretary of State, Corporate Division. A certificate of formation is a filing instrument with California to legally registered your LLC.
Here are some basic guidelines you’ll need to follow when filing your Certification of Formation in California:
- Pay the necessary California filing fee
- The LLC name and business address
- The registered agent’s name and physical address
- A short description of the company’s purpose or primary business (and if known, NAICS code)
- List whether the business managed by the members or a manager
4. Finalize Your Businesses’ Operating Agreement.
Although not many states require you to file an operating agreement, it’s important to have one ready to set the rules of your California business legally.
What is an operating agreement?
A business operating agreement is a written contract between the members of an LLC that details how the company will be run and who has decision-making power over specific aspects of the business. It can also include information about what happens if one member leaves the company or if a new member joins. The agreement is important because it protects your interests as an owner and helps ensure that you have control over what happens in your business.
Do you need a business operating agreement in California?
You probably don't need a business operating agreement, but you definitely want one.
A business operating agreement is the document that lays out the ground rules for how you'll run your company. It's the only way to set things up so that you and your partners can avoid conflicts and stay on the same page about big decisions.
Without an operating agreement, it's up to your state's laws and/or general contract law to decide how much control each partner has over the company. That means there's no guarantee about who gets to make what decisions or when they get to make them—and it also means that if you disagree with your partners on something important, nothing is stopping them from deciding without you—or even against your wishes!
But with a business operating agreement in place, everything is spelled out in advance. You know exactly what rights everyone has, so there are no surprises when it comes time for big decisions like hiring new employees or expanding into new markets.
5. Obtain Your California LLC Federal Employment Identification Number (EIN).
Every business in the U.S. is required to file for an EIN with the Internal Revenue Service (IRS). The EIN is a tax ID number that is used for filing taxes. If you are an individual, you can use your Social Security Number as your tax ID number. However, if you are a business, you must use an EIN number.
When you file taxes in California, the government uses your EIN number to identify who owns the company and how much money it makes. This helps them decide how much money they should take from each company and pay out in taxes. If you do not have an EIN, it can be difficult for companies to determine who owns their business and what kind of money they make.
You can file your EIN in two ways:
Do it yourself: If you have all of the necessary paperwork and information ready, you can go directly to the IRS website and apply for your EIN.
Leverage an EIN Service Provider: If you don’t want to deal with the hassle of the IRS and are unsure what information is needed to file for your EIN, you can use one of the following EIN service providers below who will do everything for you!
6. Remember to Always File Your LLC Annual Reports.
This is one of the steps many new LLC owners forget about each year, but is required by the state of California to remain in good standing. You will need to pay a fee each year to the state in which you’ve filed your LLC.
What is an annual report?
An LLC Annual Report is a document that outlines the key facts about your LLC. It is required by law, and helps you avoid legal trouble down the road. The annual report is usually filed with a state agency, which will then make it available to the public. The contents of the report vary depending on where you live, but they typically include information like:
- The name and address of your business (and officers)
- The purpose or mission of your business
- The names and addresses of other businesses that share ownership with yours
7. Comply With Other Tax and Regulatory Requirements.
After you’ve completed all of the necessary steps to legally establish your LLC in California, you may still need to check with your local government on other necessary licenses and permits needed to operate your business.
What are business licenses?
Business licenses are a form of permit that allows you to run your business legally. They're issued by local governments and are used to protect the public from harm, such as unsafe products or dangerous workplaces.
You'll need to apply for a business license if you operate a business out of your home, have employees, or sell products or services.
Here are some other common business licenses and permits needed to operate in California:
- Local business licenses
- Building, Planning and Zoning Permits
- Liquor Licenses
- Peddler’s license
- Landscaping license
- Health license