California LLC Formation Requirements Explained

Written by Suzanne Campbell
June 11, 2025
Business, Global Business Expansion, United States

“California is a place where businesses start big, grow fast, and get penalized quickly if they skip the fine print.”

“California is a place where businesses start big, grow fast, and get penalized quickly if they skip the fine print.”

So, You Want to Start a Business in California?

Let’s be real; California is a magnet for entrepreneurs. Tech, design, content, wellness, media, SaaS, AI, you name it—it’s all thriving here. But building in California means playing by California’s rules. The state doesn’t just let you slide. It expects structure. It expects compliance.

And that’s not a bad thing, it protects you and your business.

So if you’re planning to start your company here, this is your go-to resource, as here, California LLC formation requirements are explained in a way that actually makes sense. Whether you’re doing this from right here or miles away, let’s break down what it truly takes to get it done right.

What’s an LLC, and Why Do So Many People Choose It in the U.S.?

If you’re new to how U.S. businesses are set up and structured, here’s a quick breakdown for you:

The U.S. offers:

Sole proprietorships (no liability protection)
Partnerships (shared ownership, shared risk)
Corporations (C Corp or S Corp—more structure, trickier taxes)
LLCs (Limited Liability Companies)

An LLC hits that sweet spot between ease and protection. It:

Shields your personal assets
Keeps you flexible with how you’re taxed
Requires less formality than a corporation
Works for both solo founders and teams

It’s no surprise it’s the most commonly chosen structure in the U.S. today.

(If you’re still comparing, see: Difference Between LLC and C Corporation in the U.S.)

Why Forming an LLC in California Is Different

California isn’t the easiest state to start in, but it’s one of the most respected.

That reputation brings a bit more paperwork and cost. But if your market is here? Or if you want to be where ideas become industries? California’s worth it.

Just know this up front: California expects organization. Not hustle-only.

And definitely not half-finished filings.

Step-by-Step: How to Handle California LLC Formation

Step 1: Pick the Right Name for Your Limited Liability Company

You’ll need a name that:

Ends with “LLC,” “L.L.C.,” or “Limited Liability Company”
Isn’t already taken (you can check name availability on the California Secretary of State website)
Doesn’t mislead the public (e.g. don’t add “Bank” unless you’re one)

Step 2: Assign a California Registered Agent

You’ll need to appoint a registered agent—someone (or a service) with a California address who’s available during business hours to receive legal mail on your behalf.

Options:

You (as long as you’re based in CA and reliably available)
A professional registered agent ($50–$150/year)

Step 3: File Your Articles of Organization

This is the official form that legally creates your LLC.

Details you’ll need:

LLC name
Registered agent info
Management type (member-managed or manager-managed)
Your signature

Cost: $70

Processing time: Around 1–2 weeks by mail—quicker if you file online.

Step 4: Submit Your First Business Info to the State

Due within 90 days of approval.

It includes:

Your business address
Names of managers or members
Registered agent address again

Cost: $20

Step 5: Create an Operating Agreement

Yes, California legally requires LLCs to have one, even single-member ones.

You won’t file it with the state, but you’ll want to keep it close.

What it covers:

Ownership percentages
Profit sharing
Voting rights
Exit plans (what happens if someone leaves?)

Step 6: Grab Your EIN (Employer Identification Number)

Needed to:

Open a business bank account
Hire employees
File taxes
Register for sales/use tax (if applicable)

Cost: Free

Apply at IRS.gov

If you don’t have an SSN or ITIN, apply with Form SS-4 by mail or fax.

Step 7: Register with the California Tax Authorities (If Needed)

Depending on what you do, your business might need to register with:

California Department of Tax and Fee Administration (CDTFA) — they handle sales tax in the state.
Employment Development Department (EDD) if hiring
Your local city or county office—the go-to spot for getting your business license.

If you’re unsure? Honestly, that’s totally normal.

A Heads Up: California’s tax maze can feel like reading a contract upside-down.

This is one of those moments where chatting with a tax advisor or LLC expert can save you headaches later—especially if you’re planning to scale or operate across state lines.

Do You Need a Local Business License Too?

Yes—probably.

Even if your LLC is registered with the state, most California cities and counties have their own rules. You might need a local business license or tax certificate—especially in places like:

Los Angeles
San Diego
San Francisco
Oakland
San Jose

Pro Tip: Each city has its own process, fees, and timelines, so check with your local city hall or official city website after your LLC is formed.

What You’ll Need to Open a U.S. Business Bank Account

Once your EIN is ready, here’s what most banks (or fintech platforms like Mercury) will ask for:

Approved Articles of Organization
Your EIN confirmation letter from the IRS
Operating Agreement (even if you’re solo)
U.S. address (even virtual works)
Passport/ID and sometimes a utility bill or proof of address

Pro Tip: Some traditional banks may ask for in-person appointments; if you’re abroad, stick to online banks that accept non-residents.

Step 8: Pay Your California LLC’s Yearly Franchise Tax

Every LLC in California has to pay an $800 franchise tax each year—no exceptions.

Yes, even if you didn’t make a dollar.

Due: April 15 annually.

Exception: If you qualify for California’s “first-year exemption” (specific to LLCs formed in 2021 and later), you might skip the first year. Check with your tax advisor.

Step 9: Submit Your Biennial Statement of Information

You’ll need to update your Form LLC-12 every two years, just to keep things current.

Cost: $20

It’s just a way for the state to confirm your info is still valid.

What Is the Total Cost of a California LLC Formation?

Item	Cost
Articles of Organization	$70
Initial Statement of Information	$20
Registered Agent (annual)	~$100 avg
Operating Agreement (DIY or paid)	Free–$99
Franchise Tax (annual)	$800
EIN	Free

Heads up: Plan for at least $900–$1,000+ in your first year (including registered agent and franchise tax). Besides, based on varying factors, the amount of fees can change.

If You Ever Want to Close Your California LLC

Here’s what most people don’t realize:

Even if you stop operating, your LLC doesn’t just disappear.

To shut it down properly, you’ll need to:

File Form LLC-3 (Certificate of Dissolution)
File a Final Statement of Information
Pay the final $800 franchise tax
Close out your taxes with the IRS

Heads Up: California expects a clean exit. Closing a business here is a process, not just turning off the lights.

Non-Residents: Can You Form a California LLC?

Yes, but here’s what you’ll need:

A California registered agent
An EIN
A U.S. business address
Compliance with Form 5472 + Form 1120 if your LLC is single-member and foreign-owned

For global founders, this is where Delaware or Wyoming sometimes offer a lighter path. (See: Why Many Foreigners Choose Delaware for Their LLC)

What About Series LLCs?

California does not allow Series LLCs.

If you want to run multiple businesses or properties under one umbrella with liability separation, look into Delaware or Texas instead.

(Check out: What Is a Series LLC and Is It Right for You?)

Final Thought: Structure Isn’t a Burden, It’s a Signal.

If you’ve made it this far, you already get it—California rewards builders. But it doesn’t reward shortcuts. Not in business, not in compliance.

The good news? Every part of the process—from choosing a name to filing forms—isn’t there to slow you down. It’s there to protect your idea, your assets, and your long-term potential. That’s what the California LLC Formation Requirements are really about: building with intention.

Yes, it takes more steps than other states. Yes, it costs more. But it also puts your business in one of the most respected markets in the world.

So take your time. Do it right.

Because in California, structure isn’t just a legal formality—it’s a sign you’re serious. And if you’re building something meant to last, that matters.

FAQs of California LLC Formation

Do I need to live in California to start an LLC there?

Nope. You don’t have to live in California—or even the U.S.—to register a California LLC. But you do need a California-based registered agent, and you still have to meet all state filing and tax obligations.

What’s the $800 California franchise tax everyone talks about?

It’s a flat annual fee every LLC in California must pay—even if your business earns $0.

It’s due every year by April 15. This is separate from income tax or other filings—it’s just the cost of doing business in California.

Is it okay to use a virtual address for my LLC?

Yes. For your business address, yes—that also varies depending on various factors. But your registered agent address must be a real street address in California (not a P.O. box). Many founders use registered agent services that provide this.

What if I forget to file my Statement of Information?

California doesn’t let that slide.

Your LLC can be penalized or suspended, which can affect your bank, Stripe, and legal standing.

Mark your calendar: it’s due within 90 days of forming your LLC, and every two years after that.

Do I still have to file taxes if my LLC made no money?

Yes. California still expects your filings—even if you earned nothing.

For single-member LLCs, you’ll usually file Form 568 and pay the $800 tax.

Don’t ghost the state—it costs more to fix than to file.

Is California the best state for me if I’m not based there?

Maybe not. If you’re not physically operating in California and don’t have customers or team members there, Delaware or Wyoming might be more cost-effective.

But if California is your market? It’s worth every penny.

(See: Why Many Foreigners Choose Delaware for Their LLC)