How to Form a Single-Member LLC in California

Want to form a single-member LLC (SMLLC) in California? Here's what you need to know.



These are the steps to form a single-member limited liability company (SMLLC) in California.  Remember: For most formation purposes, a California SMLLC is considered the same as a multi-member limited liability company (LLC).

1. Name Your SMLLC

The name of a California SMLLC must contain the words “Limited Liability Company” or the abbreviation “L.L.C.” or “LLC.” The word “Limited” may be abbreviated as “Ltd.” and the word “Company” may be abbreviated as “Co.” The name must not contain the words “Bank,” “Trust,” “Trustee,” “Incorporated,” “Inc.,” “Corporation,” or “Corp.” The name also must not contain the words “insurer” or “insurance company” or any other words suggesting that it is in the business of issuing policies of insurance and assuming insurance risks. The SMLLC’s name must be one that the California Secretary of State (SOS) does not find misleading to the public. The name also must be distinguishable on the Secretary of State’s records from other names already registered or reserved with the state

Check to make sure the name you want is available by doing a business name search on the SOS website. For a fee of $10 you can reserve a name for 60 days by filing a Name Reservation Request form. The form must be sent by mail or hand-delivered.

The SOS provides additional, important information regarding business name availability both online and in a downloadable publication (Business Entity: Name Regulations & Additional Statutory Requirements and Restrictions).

2. File Articles of Organization

You create a California SMLLC by filing Articles of Organization with the California Secretary of State. To complete the articles you'll need to provide:

  • the official name of your new SMLLC
  • the initial street and mailing addresses for the SMLLC
  • the name and street address of the SMLLC's registered agent
  • an indication of whether the SMLLC will be member-managed or manager-managed, and
  • a few other basic details.

You can download a blank articles of organization form (Form LLC-1) by going to the SOS website. The current filing fee for articles filed by mail is $70. An additional $15 fee applies for hand-delivered forms.

Every California SMLLC must have a registered agent. A registered agent is an individual or business entity that agrees to accept legal papers on behalf of the SMLLC. A California SMLLC cannot act as its own registered agent. The registered agent can be either an individual California resident or a corporation that has filed the proper certificate (a California Corporations Code Section 1505 Certificate) with the Secretary of State. The registered agent must have a physical street address in California. You can find a listing of companies that will act as registered agent on the SOS website.

All of the paperwork and procedural steps to start a single-member limited liability company in California can be done online using Nolo's California Online LLC Formation application.

3. Prepare an Operating Agreement

California does not require an SMLLC to have an operating agreement. However, even though an SMLLC has just one member, an operating agreement is highly recommended. An SMLLC operating agreement does not need to be filed with the state.

The operating agreement is usually made between the single member and the LLC itself. The agreement typically covers the member’s rights, duties, and obligations, as well as the SMLLC’s management structure. Having an agreement in place can help with liability protection by separating your business from you personally. It also can be useful with lenders and other businesses when entering into business transactions.

In most states, if you don’t state that your SMLLC will be manager-managed when you first register with the state, then your SMLLC will be treated by default as member-managed. The distinction between member-managed and manager-managed can be important so be sure to consider both options before you decide which type of management structure you want for your SMLLC.

For more information and help creating an SMLLC operating agreement, see Nolo's Guide to Single-Member LLCs, by David M. Steingold (Nolo), or use Nolo’s Online LLC.

4. Do You Need an EIN?

An SMLLC that keeps its default tax status of disregarded entity (same as a sole proprietorship) and does not have employees is not required to obtain a federal Employer Identification Number (EIN). Instead, owners of these SMLLCs can report their business profits and losses on their personal tax returns using their own Social Security number or tax identification number.

If your SMLLC has employees or if you choose to have your SMLLC taxed as a corporation rather than as a disregarded entity, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if you are not required to obtain an EIN for your SMLLC, there are often business reasons for doing so. Banks often require an EIN to open an account in the business’s name and other companies you do business with may require an EIN to process payments. In many cases it makes sense to obtain an EIN for your SMLLC even if it is not required for federal tax purposes.

You can get an EIN by completing an online application on the IRS website. There is no filing fee.

5. Register to Pay Taxes

In some cases, for example if you will be selling goods and collecting sales tax or if you have employees, you’ll need to register with the appropriate California taxing authority. For example, if you will be collecting sales tax, you'll have to register with California State Board of Equalization (BOE), which you can do online or in person at a BOE field office. For employer taxes, register with the California Employment Development Department (EDD). For more information on state LLC tax registration, check Nolo's article LLC Annual Report and Tax Filing Requirements: A  50-State Guide.

California imposes an $800 annual tax on typical SMLLCs (those not electing to be taxed as corporations). Be aware that there are special rules regarding payment of an SMLLC's tax for its first year in existence. In addition to the annual tax, California also imposes an annual fee on SMLLCs. Even though an SMLLC may be a disregarded entity for federal tax purposes, the SMLLC is considered a separate, taxable entity for California’s LLC tax and LLC fee and must report its income on a separate state tax return. The tax and fee are payable to the California Franchise Tax Board (FTB). For more information about the tax and fee, including guidance on which forms to use for your particular business, check the FTB website.

6. Obtain Business Licenses

Depending on what kind of business you’re running and where it’s located, you may need to obtain local or state business licenses for your SMLLC. Among other possibilities, these might include licenses related to:

  • your profession or occupation
  • specific goods or services you’ll sell or provide
  • an assumed or fictitious name for your business, or
  • health and safety matters.

You can find detailed information about many state and local business licenses via California’s CalGold website.

7. File Your Statement of Information

The State of California requires you to file an initial information statement within 90 days of filing your articles of organization. To complete the statement, you'll need to provide much of the same information needed for the articles of organization, along with the names and addresses of either your SMLLC's managers or your SMLLC’s member, and a few other pieces of information. The statement can be completed online at the SOS website. You can also download a blank information statement form (Form LLC-12) that you can complete on computer, print out, sign, and file by mail or hand delivery. There is a $20 fee to file the initial statement.

Thereafter, additional statements of information are due every two years by the end of the anniversary month of the filing of your SMLLC's articles of organization. More specifically, there is a filing period that runs for the 6 months prior to the final due date. For example, if you filed your articles of organization on September 15 of an odd-numbered year, you should file statements of information every other year at some point between April 1 and September 30 of each subsequent odd-numbered year. As with the initial report, subsequent reports can be completed online or you can download a blank form and file by mail or hand delivery. The current filing fee for each biennial information statement is $20.

For more information on SMLLCs, see the Single-Member LLCs section of Nolo's website or Nolo's Guide to Single-Member LLCs, by David M. Steingold.

 

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