Starting a business in California can be an exciting and rewarding experience, but it also comes with a certain amount of paperwork and costs. If you’re thinking about starting a limited liability company (LLC) in California, you’ll be happy to know that the initial filing fee is only $70. However, there are several costs to consider.
In this post, we’ll discuss all the main fees you’ll likely have to pay while running an LLC in California and walk you through how to properly set up an LLC so that you can prevent paying unnecessary fees. We’ll discuss:
Let’s get started…
What Is An LLC?
LLCs separate your business and personal assets. If you lack this protection, you become responsible for any liabilities or debts your company assumes, and if your company experiences hardship or you get sued, your personal assets, like your home and car, may be in trouble.
An LLC designation also lets you adopt the tax status of any other legal structure, including sole proprietorships, S corporations, and C corporations. The IRS will designate your business as a disregarded entity, unless you choose to be taxed as a corporation. In other words, you’ll share the same tax benefits as a sole proprietorship, while also enjoying liability protection.
Cost To Reserve Your LLC’s Business Name
Before you can become an official LLC, you need a business name that’s not already taken. Since California’s population is currently hovering at a little under 40 million people, and there’s been a substantial increase in entrepreneurs in the state, you can’t skip this step.
Do a business entity name search on the State of California’s government website. Your business name is required when you fill out legal documents. Typically, business owners also use their LLC’s name to establish brand identity and name recognition. If it’s not a name you plan to use during everyday conversation, you can also get a “Doing Business As” (DBA) name. The cost for DBA designation depends on which municipality you live in.
California LLCs require you to include either “Limited Liability Company,” “LLC,” “L.L.C.,” “LC,” or “L.C.” as part of your organization’s official name. You cannot include the following words:
You also cannot include anything that implies a government affiliation, like “bureau,” “commission,” or “agency.”
Once you’ve got your name, double-check with the Trademark Electronic Search System (TESS) database before applying for your LLC license. If another business entity uses your name, you risk infringing on their trademark.
If you’re worried your business name may get taken while you’re still setting up, don’t be! In California, you can fill out a name reservation request form and reserve your name for up to 60 days for only $10. While not required, we also recommend looking up your business name’s URL availability. If your business name is “Carlton’s Pet Supplies” but www.carltonspetsupplies.com is already taken, you may confuse people trying to find you online.
Total cost: $10Cost To Register An LLC In California
The initial cost to start an LLC in California is a $70 filing fee, which is more affordable than most states. For example, Delaware LLC costs a $140 filing fee—double California's. If you want to learn how to start an LLC in NY, your filing fee troubles California, costing $210. Also, if you start an LLC between now and June 30, 2023, the filing fee is waived entirely!
Total cost: $70
What Does the Filing Fee Entail?Your filing fee is for your Articles of Organization. Your articles of organization are a legal document that includes the basic information about your LLC, such as:
Double-check this document before submitting it. If you accidentally make a typo or leave something blank, you could face legal repercussions in the future.
Mail your Articles of Organization to the Secretary of State at: Business Entities Filings, P.O. Box 944228, Sacramento, CA 94244.
What Is A Registered Agent?
A registered agent is someone who accepts all legal and government correspondence for your LLC. It can be you, one of your LLC members or partners, or a business entity authorized to conduct business in California.
Your registered agent must also have a physical registered address in California, not just a P.O. Box. Their address becomes public record once your organization becomes an official LLC. For privacy protection, many LLC owners opt to use a business entity as their registered agent, or sites like California Registered Agents, where you can get a designated registered agent for $49/yr.
Total cost: Free, if you do it yourselfLLC Cost In California: Creating An Operating Agreement
In California, you’re required to draft and maintain an operating agreement. This agreement is a legal document that outlines the ownership, rules, and regulations of your LLC. Think of it as your organization’s constitution. When your membership signs this document, they agree to the terms and conditions outlined in it. In California, your operating agreement should include:
Creating an operating agreement is free, and can save you from costly legal disputes your business may encounter down the road. If you end up in a legal or financial dispute without one, the courts may end up responsible for finding a viable solution, and their decision may not be in your or your LLC’s best interest.
Total cost: $0
Cost Of Setting Up LLCs In California: Your Employer Identification Number (EIN)
For your last official setup cost, you need to get an EIN from the IRS by filling out an online EIN application. It’s free to do, and it’s essential. You can’t hire employees or open a business bank account without one.
Total cost: $0Cost To File LLCs In California: Business Licenses And Permits
Depending on where you’re located and what industry you’re in, you may need to obtain local, state, and/or federal business licenses to operate in California. Check the Secretary of State’s website, as well as your local government’s website, to learn what licenses or permits you may require.
Additional Cost Of LLCs In California After Getting Your LLC License
The majority of LLC fees you’ll incur will not be experienced until after your business is up and running.
First off, all California LLCs pay an annual $800 tax. If you started your business during the last fifteen days of the tax year, you’re exempt from paying this tax during your first year in operation.
In addition, California LLCs are required to file a biennial report, which you can do by filing either the Statement of Information or the Statement of Information No Change forms. The filing fee is $20.
Finally, if your annual revenue exceeds $250,000, your business also has to pay a franchise tax of $900. The franchise tax fee swells to $2,500 if you make between $500,000 and $999,999, $6,000 if your revenue is between $1,000,000 and $4,999,999, and $11,790 if your revenue exceeds $5,000,000.
Total costs: $800 annual fee, $20 biennial fee, and franchise taxes, depending on your revenueTotal LLC Cost In California
To recap, here’s the total list of costs for forming an LLC in CA:
Item | Cost |
|---|---|
Reserving a business name | $10 |
DBA name reservation | Varies |
LLC filing fees | $70 |
Registered agent fees | $0, unless you go with an organization |
Additional business licenses and permits | Varies |
Annual tax | $800 |
Biennial fee | $20 every other year |
Franchise taxes | $900, $2,500, $6,000, or $11,790 |
Your total cost to register LLCs in California can be as little as $70, and then $800 per year with a $20 fee due every other year. That’s not bad—especially when you think about all the benefits you’ll enjoy as an LLC!
Additional FAQs
Do you still have questions about the costs to form an LLC in California, or inquiries about LLCs in general? We’ve got answers!
Your single-member LLC California costs are identical to a multi-member LLC. Even though your entire operation may only be one member, you’re required to fill out everything a multi-member LLC has to, including your operating agreement.
There’s much debate about which state to start an LLC in. For many, it's the state in which you'll be doing business. However, some states, like Delaware, come with unique LLC benefits worth exploring.
The process is pretty similar. For example, if you want to learn how to start an LLC in Virginia or might even start an LLC in Missouri, you’ll notice the general process always includes:
Paying yourself from an LLC is pretty easy. Simply transfer a portion of your LLC’s cash reserve from your company account to your personal account. If multiple members share the profits, make sure each member gets the agreed-upon amounts transferred to their account, which is usually outlined in your operating agreement or similar document.
To dissolve an LLC, you must:
For additional resources, visit the State of California’s Franchise Tax Board website.
Conclusion: California LLC Costs
Are you ready to start an LLC in California and enjoy all the fantastic benefits the golden state has to offer? By identifying how much starting and maintaining your LLC will cost, you’re well on your way to success!
Are you ready to capitalize on that success? Check out The Lazy Man’s Guide to Living The Good Life, and learn how to play to your strengths when running a thriving business!