Many California entrepreneurs choose to form a limited liability company (LLC) because of the many benefits of this business entity type. An LLC provides liability protection, for instance, so your assets are not at risk if your business is sued or cannot pay debts.
An LLC is a “pass-through entity” for tax purposes, meaning that the LLC itself is not taxed. Instead, income passes through the business to the LLC owners or members, who report it on their tax returns. LLCs also offer flexibility in terms of management and taxation.
Creating an LLC is relatively straightforward, but ensuring it’s done correctly is crucial to getting your California business off on the right foot. The most critical step is filing articles of organization.
What Are Articles of Organization for an LLC?
The article of organization is a legal document filed with the California Secretary of State to form an LLC officially. It will include your business name, address, registered agent information, and more, as detailed below.
First, Select a Registered Agent for Your California LLC
California requires LLCs to appoint a registered agent, a person or company authorized to accept and respond to official business correspondence, such as legal, tax, or financial documents.
The registered agent ensures all important notices and documents are received. In California, the registered agent can be an LLC member, individual, or entity that meets state requirements. In California, a registered agent must:
- Be 18 years or older
- Have a physical address in the state
- Be available during regular business hours
- Be registered to operate in the state, if it’s a business
Many business owners hire a registered agent service to ensure their LLC stays fully compliant and for convenience.
If you choose to be your registered agent, you must be at your registered agent’s address for all business hours. A registered agent service allows you to be wherever you need to be to run and grow your business.
How to Submit Articles of Organization in California
To start, visit the California Secretary of State website and create an account to access the articles of the organization online.
In California, the articles of organization require the following information:
- LLC name
- Principal office address
- Registered agent information
- Registered office address
- Management structure
Next, you’ll indicate if your LLC’s name has been reserved and fill in the LLC name on the form. You’ll then enter your company’s principal, mailing address, and registered agent information.
Then you’ll enter your management structure information.
You’ll be allowed to review all your information before payment.
Normally, the filing fee is $70, but it’s $0 until June 30, 2023. You should receive confirmation in five business days if you file online. The turnaround time for filing by mail can be up to two weeks.
Some entrepreneurs hire an LLC formation service like ZenBusiness to handle this step, saving time and ensuring the process is done correctly.
Draft an Operating Agreement
California requires that you have an operating agreement. It’s not filed with the state but must be kept in your records. It’s a crucial document that defines members’ ownership percentages and profit allocations. Those are the two key elements, but it should also include the following:
- Each member’s rights and responsibilities
- Management structure and roles
- Voting rights of each member
- Rules for meetings and voting
- What happens when a member sells their interest, becomes disabled, or dies
You can find operating agreement templates online, but it’s best to have them drawn up or reviewed by an attorney. The language of an operating agreement is crucial and can often help determine how member disputes will be resolved. Here you can obtain a free operating agreement template for your California LLC.
Contact Information for the California Secretary of State
California’s Secretary of State Website
California Secretary of State
Business Programs Division
1500 11th Street
Sacramento, CA 95814
There’s only one way to create an LLC in California: successfully filing articles of organization. If you make any mistakes, you’ll likely have to refile, so be sure to do it right the first time and set your business up for serious success!