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How to Form a California LLC (without a lawyer)

2020-09-15 20:47

Here’s the process I’ve used to start several California LLCs. I hope it’s helpful if you’re considering starting a business.

Disclaimer: I’m not a lawyer. This is not legal advice.

Benefits

There are generally two main benefits to forming an LLC:

  1. Liability protection. You are not personally liable for the debts of the business.
  2. Tax benefits. You can deduct qualified business expenses from the total income of the business. Here’s a simple example: If you spent $1,000 on servers and your website made $10,000, then you’ll only pay taxes on the $9,000 in profit.

How to form the LLC

There are three steps for forming an limited liability company (LLC) in California.

Step 0 - Choose a company name

Make sure that the company name you’d like to use is available for use.

  • Use the California Business Search site to see if the name you want is available.
  • Optional: Use US Trademark Search Database to see if your company name has been trademarked. You may run into trouble if someone has protected the name in the category of business that you’re starting. Also, if you decide to trademark the name in the future, then you’ll want to know it’s still available.

Step 1 – File Articles of Organization

To establish your LLC in California, you need to file Articles of Organization with the California Secretary of State.

  • File Articles of Organization (Form LLC-1).
  • Cost: $70, one-time

Wait for LLC-1 to be returned, which confirms your LLC is active, before completing the following steps.

Step 2 - File Statement of Information

The next step is to file a Statement of Information with the California Secretary of State. This lets California know some basic information about who is operating the LLC.

  • File Statement of Information (Form LLC-12). This step can be completed online here.
  • If your contact info has not changed since the last filing of LLC-12, file Statement of Information No Change (Form LLC-12NC) to save time. This step can be completed online here.
  • Cost: $20, repeat every 2 years
  • Complete this step within 90 days of filing LLC-1

Certain tasks must be completed on an ongoing basis to keep your company in good standing. Filing a statement of information is one such task.

  • RECURRING: Add this to your calendar to repeat every 2 years: Re-file the Statement of Information

Step 3 - Pay annual tax

The next step is to pay taxes. Every LLC in California has to pay an “LLC Fee” of $800 per year, even if the LLC has no profits. Since you now have an active LLC, you must pay the current year’s LLC Fee even though it may be part-way through the year. The exact due date is technically the 15th day of the 4th month after the founding of the LLC.

  • File Annual Tax (Form 3522) This step can be completed online here (select “Web Pay (Business)” and then “Annual Tax (Form 3522)”).
  • Cost: $800, repeat every year
  • Complete this step within approx. 4 months of filing LLC-1

In future years, the due date is April 15. For example: the 2019 LLC Fee is due on April 15, 2019. (Note: This is different than peronal taxes which are due the following year, i.e. for personal taxes, the 2019 taxes are due on April 15, 2020. But for an LLC the 2019 taxes are due on April 15, 2019)

  • RECURRING: Add this to your calendar to repeat every year: File Annual Tax Form 3522

That’s it – you have an LLC!


Source: cll-ainrofilac-mrof/gro.ssoref

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