Organizing a new business as a limited liability company, or LLC, can be highly beneficial for a new business owner. A California LLC has the protection of limited liability, which prohibits an LLC investor from being held personally responsible for an LLC’s debts in most circumstances. California LLCs also receive the benefit of pass-through taxation, where the LLC does not pay taxes on profits until the profits are “passed on” to individual owners of the LLC. Creating an LLC requires filing a form, called an “articles of organization,” with the California Secretary of State.
Choose a name for your LLC. California law requires an LLC to include the phrase “limited liability company,” or the abbreviations “LLC” or “L.L.C.” at the end of the name. The name of your California LLC must also not be identical to the name of an existing California corporation, or be similar enough to the name of an existing California corporation as to be likely to deceive the public. Use the California Secretary of State's free online search of business entities registered in California to determine if the desired name for your LLC is already taken (see Resources).
Designate a registered agent for your LLC. As part of your California articles of organization, you must specify a registered agent for your LLC. If someone sues your LLC, the registered agent designated in your articles of incorporation will receive service of process of the lawsuit. Under California law, a registered agent may be either a person or a business. If you are a California resident, you may designate yourself as the registered agent for your LLC if you are willing to list your home address and contact information on your articles of organization. If you want to keep your personal information off of your articles of organization, which is a private record, you have the option of hiring a registered agent service which will receive service of process if your LLC is sued.
Obtain an LLC-1 form. You have the option of filing articles of organization with the California Secretary of State by mail or in person. Both methods require you to use an LLC-1 form, which is available either on the California Secretary of State's website (see Resources) or at their offices in Sacramento and Los Angeles.
Fill out the LLC-1 form. You must list the name of your LLC and the name and address of the registered agent of your LLC. You must also disclose if one manager, more than one manager or all LLC owners -- called "members" -- will manage your LLC. For the purposes of filling out your articles of organization, the person managing your LLC is the person who makes day-to-day business decisions about the operation of the LLC. While many small LLCs are managed by their members, other members may choose to passively own their LLC and hire another person -- called a "manager" -- to actually run the business. Your LLC-1 form must be signed and dated by at least one LLC member.
Send in your completed LLC-1 form and submit payment. You have the option of mailing in your completed LLC-1 form or submitting it in person to the California Secretary of State’s offices in Sacramento or Los Angeles. The California Secretary of State is able to process LLC-1 forms submitted in person about a month faster than those submitted by mail. As of 2010, the fee for registering your LLC with the California Secretary of State is $70 for filing by mail, $85 in person.
While creating a California LLC is easy, consult with an attorney about the tax implications of operating a business as a California LLC.
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