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How to Form an LLC in CA

Portrait of the owner of a clothing store at the entrance of the new business with the tablet in hand to analyze the sales, new orders to be sent and check the stocks

An LLC, or limited liability company, is a standard business structure that affords protection from individual liability for business owners while offering the pass-through taxation enjoyed by sole proprietors or partnerships. It’s the perfect type of entity for many startup companies. To form an LLC, there are a number of legal hoops to jump through. Below, we explain several of the major steps necessary for forming an LLC in California. If you need assistance building your small business or are dealing with a business dispute in Southern California, call a professional and qualified Ventura business law attorney.

Choose Your Company Name

The first step in forming an LLC is choosing a name. Your company name must be unique; it cannot be the same as, or too similar to, an existing name in the California Secretary of State records. The name cannot be misleading to the public (by, for example, being too similar to an existing company).

Pursuant to California law, the company name must end with either LLC, L.L.C., or Limited Liability Company. Limited can be abbreviated to Ltd. and company can be abbreviated to Co. The company name must not include certain words indicating that the company performs financial or insurance services or that it is a different type of entity (bank, trust, insurer, insurance company, corp., inc., incorporated, etc.)

Pick a Registered Agent

California LLCs must have a designated agent for service of process. The agent is an individual or company that is designated to (and has agreed to) accept legal papers on behalf of the LLC should it ever be sued. The LLC cannot serve as its own agent for service of process, although it is fine for the agent to be a member, manager, or officer of the LLC. Individual agents must reside in California and have a proper California address (P.O. boxes do not count). Alternatively, you can appoint a corporate agent qualified with the California Secretary of State as your agent.

File California Articles of Organization

In order to create and register your LLC, you must file the Articles of Incorporation, Form LLC-1, with the California Secretary of State. The articles must include certain pertinent information about the LLC, including the company’s name, its purpose, information on how it will be managed, the name and address of the company’s agent for service of process, and the company’s own address.

Draft an Operating Agreement

California law requires LLCs to file an operating agreement when forming an LLC. It is an agreement among the owners of the business as to how the company will be governed. The operating agreement is to the LLC what bylaws are to a corporation: It lays out how the LLC will operate, including the management structure, how the LLC will make major decisions, how membership interests will be transferred, how the company will be managed, and how the LLC can be dissolved.

Get Your EIN

EIN stands for “employer identification number.” It’s a nine-digit number assigned by the Internal Revenue Service (IRS) to identify businesses for tax purposes. The EIN operates like a federal social security number for your business. You need an EIN to open business bank accounts, file your taxes, and hire employees.

These are just the major steps necessary to form an LLC. There are many additional steps necessary to keep the business going, including filing the appropriate reports with the California Secretary of State, paying corporate taxes, and complying with other tax and regulatory requirements. Talk to a seasoned California business attorney to ensure that you get your business off the ground efficiently and effectively.

Experienced Advice and Representation from a Southern California Business Law Attorney

If you are forming a new business or if you need advice or assistance concerning any business matter, contact Rounds & Sutter for considered legal advice and effective representation.