Setting up an LLC can be a confusing process. There are a lot of steps required in California to do so. Though it is one of the best things you can do for your new California business, it is necessary to work through the process properly, avoiding any missteps along the way. The best way to do that is to understand the entire process, including all the costs related to the process.
How much does it cost to register an LLC in California? There are a few different costs likely throughout the process. While establishing an LLC can be difficult and expensive, knowing what to do or using an LLC formation service can help eliminate at least some of that frustration. The costs paid vary significantly from one state to the next. Here’s a look at what you can expect to pay in California for an LLC establishment.
Making the decision to form an LLC is the first step. Once you realize the benefits of doing so, you then need to go through several steps under California law that govern the process. Here is a short look at what the process entails and the costs that are typically a part of that process. Keep in mind that there’s more to it than just this information.
One of the first things you need to do is name your LLC, which may be different from the name you are operating under now. There is no cost for a name search, but this is a step you need to work through to ensure that the name you select is, in fact, available to you. The Business Name Search is available on the Secretary of State website in California.
The name you choose must comply with California’s requirements. It must include “limited liability company” or some abbreviation of it (like LLC or L.L.C.), and you cannot include any words that could be confusing, such as words that imply your business is related to the government.
Once you determine your name, you can then reserve it. That means you get 60 days to move forward with your LLC arrangements. You need to take the steps necessary to obtain your name and register your LLC in that timeframe.
There is a filing fee for this service. In California, you will pay $20 to complete this process in person or $10 to do so through the mail. You will need to complete the Name Reservation Request form to mail or bring to your in-person meeting.
Also, consider the need to complete a “doing business as” (DBA) in California. This is a fictitious business name. That is, you may want to operate your business under a different name from that which you are registering as your LLC name. To do this, first go through a business name search like you did previously. You must file the DBA within 40 days of creating your business.
What makes it a bit more confusing is that DBA is regulated by the state of California, but the process of obtaining one is done through the county offices. Look for your county’s website portal to do this. Though costs and requirements can change and vary, the filing fee is $40 for a fictitious business name in most cases.
It is important to ensure this process is completed properly. If you are unsure how to do so, call your county clerk’s office for more information and guidance.
Articles of Organization is the form that needs to be filed to complete an LLC registration in California. The first step in this process is to download and complete the necessary forms. Do this on the California Secretary of State website. You will need to register to gain access to this portal if you plan to complete the process on your own. Keep in mind that you can complete it online, or you can download it, print it, and then take it to the Secretary of State’s office. It is also possible to drop it off in person.
There is a cost associated with this process. The cost of just submitting the Articles of Organization is $70. However, if you file it in person, an additional $15 fee is added to this.
In addition, you need to complete a Statement of Information in California. This will include the name of your business and the Secretary of State’s file number for it. This must be done within 90 days of submitting your Articles of Organization. There is a $20 filing fee to complete the Statement of Information in the state of California.
The next step in the process is to determine who your registered agent will be. You can do it yourself. If that is the case, you do not have to pay for the service itself. Keep in mind, though, that if you are using a registered agent service, you will pay a fee. Our fee is $199 yearly cost.
There are variable benefits to using a registered agent service. It is important to consider the value of taking that step over doing it yourself.
You do not legally have to create an operating agreement while you are creating your LLC. However, it is recommended to virtually all companies. It can be valuable as it provides a wide range of details to outline how your company will be managed and the process by which you will maintain it. It sets the ground rules for how decisions will be made in your company, the management of the company, and how profits are allocated to stakeholders.
You can do this yourself. Though you must understand the process and create legally binding agreements, it is possible to do it yourself and not pay anything for this service. However, many companies choose to use a lawyer to handle this process for themselves, in which case costs will vary.
Additionally, you can use our operating agreement service. If you go this route, you can include it in your LLC formation when we provide that service for you.
Depending on your business structure and overall goals, there may be more costs associated with setting up your LLC and managing it over time. Here is a look at some of those.
The California annual franchise tax is another one of the common costs of operating a business in the state. This is a tax that you pay to the state each year. If you have a business operating in the state, you need to pay this. It is a special type of business tax that is required of most businesses operating in the state.
As an LLC, you will need to pay this tax each year. While some factors may affect how much you pay, you can expect this to cost around $800 each year.
Depending on the industry you operate in as well as the type of work you do, you may need to obtain a permit or a business license to operate in the state. The state itself does not require this to start a California business, but many counties and some cities will require you to obtain the necessary permits to operate in the state. You can learn more about the business licenses and permits in California to know what to expect.
For business licenses, check out the CalGold website. This is a resource that helps you learn more about local requirements. Additionally, permits, often issued by local governments, often include taxing, zoning, health, alarm, building, signage, and occupational permits.
The costs for permits and business licenses vary significantly. It is important to check with local authorities to determine what you need to pay to do business here.
Another cost of business is your annual report. This is similar to the Statement of Information. In general, you need to file this report each year and pay the annual fee for it to keep the state up-to-date on your business information. It may seem tedious, but it is a part of keeping on top of the business’s requirements to operate in California. This costs $20 to complete each year. Keep in mind that there are fines of $250 if you fail to complete this report on a timely basis.
Another cost associated with operating in the state is the LLC fee. If an LLC makes over $250,000 annually, you will need to pay this fee. The amount you have to pay is dependent on the amount you earned each year. This fee must be paid to avoid fines.
Fee vs. Income | |
Total Rounded California Income | Fee Amount |
$250,000–$499,999 | $900 |
$500,000–$999,999 | $2,500 |
$1,000,000–$4,999,999 | $6,000 |
$5,000,000 and up | $11,790 |
All of these fees can seem to add up quickly, and that can be frustrating for many LLC owners, especially if you have a smaller business you are just getting off the ground. One bit of good news is that you may be able to deduct some of these LLC formation costs. They may be tax-deductible for your business at the federal level.
Some potential write-offs that you may have include the following:
Keep in mind it is always important to speak to an accountant to determine your specific situation. The type of tax deductions you qualify for may differ from what is listed here – and even the accountant’s fee for service can reduce your costs.
Take a look at the common LLC costs in California. Remember that costs may differ for your business in some areas.
Common LLC Costs in California | |
LLC filing fee | $70 |
Statement of Information | $20 |
Business license | Varies by the municipality from $50–$100 |
Registered agent (optional) | $199–$400 |
Reserve business name (optional) | $20 |
Filing a DBA (optional) | $40 |
Operating agreement (optional) | $0–$1,000 |
Franchise tax (annual) | $800 |
Annual report | $20 |
With all these costs, creating an LLC may seem expensive and complex. However, in nearly all situations, it is worth creating your LLC to help form your business and operate it in the best way possible. Do not overlook the importance of doing so.
Remember, too, that as complex as it may seem, it is possible to reduce a lot of those frustrations by using an LLC formation service like ours. When you do, you get that expert insight and guidance you need – eliminating all the frustrations you feel. In addition to this, you also likely can write off the costs for our service on your taxes, making this an easy decision to make for most of today’s business owners.
Learn more about the LLC formation process in California by utilizing our services today. It is fast and easy to get your business in place.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness. It also does not indicate any affiliation between Tailor Brands and any other brands, services or logos.
Products
Resources
@2024 Copyright Tailor Brands