To start a limited liability company (LLC) in California, you must file your Articles of Organization with the Secretary of State, designate an agent for service of process, and build in the state's US$800 annual franchise tax from day one. California charges fees most other states don't, which can catch new business owners off guard if they haven't budgeted appropriately.

Below, we'll cover each step of registering an LLC in California, from choosing a name and completing the required filings to understanding the ongoing taxes and fees.

Key takeaways

• California LLCs owe a US$800 annual franchise tax that starts in their first year, whether or not the business has generated revenue

• Forming an LLC in California requires filing Articles of Organization, designating an in-state agent for service of process, and submitting a Statement of Information

• LLC profits in California face franchise tax at the entity level, and members also owe personal income tax on their share of profits

Why should you form an LLC in California?

There are many reasons for starting an LLC in California. If your growth plans depend on venture capital, engineering talent, or business-to-business (B2B) networks concentrated in the Bay Area, Los Angeles, or San Diego, an in-state LLC gives you a direct presence there.

What are the requirements for starting an LLC in California?

Here's what to know about starting an LLC in California:

• Naming rules: Your LLC's name must include "LLC" or "Limited Liability Company" (or an accepted abbreviation) and be distinguishable from every other business name already on file with the California Secretary of State.

• Agent for service of process: Every California LLC needs a designated agent with a physical street address in the state who can accept legal and tax documents on the LLC's behalf.

• Agent options: If you live in California you can serve as your own agent. If you don't live in the state, or if you'd rather keep your home address off public filings, you can hire a commercial registered agent service.

• Management structure: You'll decide upfront whether the LLC is member-managed, meaning the owners run daily operations directly, or manager-managed, meaning the owners appoint one or more managers to handle things.

• Filing system: Every California LLC filing, from name searches to ongoing reports, runs through the Secretary of State's BizFile online portal.

How do you start an LLC in California, step by step?

Here's how to go from an idea to an active LLC in California:

1. Choose and check your LLC name

Search your desired name in BizFile to confirm no one else has already registered it. If you're not ready to file right away, you can reserve your name for 60 days through a name reservation request.

2. Designate your agent for service of process

Select someone to serve as your agent for service of process. They must be 18 years of age or older and have a physical California street address (not a PO Box). Or, you can hire a commercial registered agent service. Single-member LLC owners can start as their own agent, then switch to a service later to keep their home address off public record.

3. File Articles of Organization, Form LLC-1

This is the document that creates your LLC. File it through BizFile with your LLC's name, address, agent for service of process, and management structure, along with a US$70 filing fee.

4. File your Statement of Information, Form LLC-12

In addition to Articles of Organization, you will be required to file a Statement of Information. This includes all pertinent information about your LLC, such as company name, agent name, and address, as well as a short description of your business type.

5. Draft an operating agreement

California expects LLCs to keep an operating agreement on file internally even though you don't submit it to the state. A single-member LLC's agreement mainly documents that you're operating as a separate entity, while a multimember LLC's agreement should spell out ownership percentages, profit and loss allocation, voting rights, and exit terms.

6. Get your EIN and open a business bank account

Apply for an Employer Identification Number (EIN) directly through the IRS, which is free, then open a dedicated business account. Mixing personal and business funds is one of the fastest ways to undermine the liability protection your LLC exists to provide.

What does an LLC in California cost to set up and maintain?

The costs of a California LLC include formation costs, ongoing state fees, and taxes tied to revenue.

Here are the main expenses to consider:

• Articles of Organization filing fee: A one-time US$70 charge paid when you file Form LLC-1 with the Secretary of State.

• Statement of Information fee: US$20, due every two years within the month in which you incorporated.

• Annual franchise tax: California's flat US$800 tax is due by the 15th day of the fourth month of your LLC's tax year. For example, if your tax year begins in June, payment is due by 15 September and each year thereafter.

• LLC fee based on gross receipts: Businesses earning more than US$250,000 owe an additional fee on top of the franchise tax, which scales from US$900 for income between US$250,000 and US$499,999, and up to US$11,790 for income of US$5 million or more.

What are the tax obligations for an LLC in California?

Beyond the US$800 franchise tax and additional scaled fee already explained, California LLCs face two more layers of exposure with state and federal taxes. The IRS treats a single-member LLC as a disregarded entity by default, and a multimember LLC is generally treated as a partnership. This means profits pass through directly to the members' personal tax returns instead of getting taxed at the company level first. Members pay self-employment tax on their share of profits, and can elect corporate taxation, such as S corp status, once revenue grows enough to make that worthwhile.

In addition, the state of California taxes members' share of LLC profits as personal income, separate from the franchise tax the LLC itself already pays. That means money earned through a California LLC can effectively get taxed twice from the state's perspective: once at the entity level through the franchise tax (although this is not an income tax but rather a tax for the privilege of doing business in the state), and again at the individual level when members report their share of profits on their personal returns. Understanding both layers upfront helps you plan accordingly.

How Stripe Atlas can help

Stripe Atlas handles everything you need to legally launch your company – incorporation, employer identification number (EIN), equity setup, and tax filings – so you can fundraise, open a bank account, and start accepting payments in as little as two working days, from anywhere in the world.

Join 100,000+ startups incorporated using Atlas, including startups backed by top investors like Y Combinator, a16z, and General Catalyst.

Get started in minutes with Atlas

The application takes under ten minutes. You'll choose your company structure, confirm your name is available, add up to four cofounders, set your equity split and e-sign. Then Atlas takes it from there, including notifying cofounders to sign their documents electronically.

Banking and payments before your EIN arrives

Atlas files your EIN application automatically after incorporation. You don't have to wait – Atlas enables pre-EIN payments and banking so you can start accepting payments and making transactions right away. US founders with a Social Security Number (SSN) are typically eligible for expedited IRS processing.

Automatic 83(b) tax election filing

Atlas files your 83(b) election for you – US and non-US founders alike – with US Postal Service certified mail and tracking to reduce personal income taxes. You'll get a signed 83(b) election and proof of filing directly in your Stripe Dashboard, with certified mail confirmation.

World-class company legal documents

Atlas provides all the legal documents you need to start running your company, drafted by Cooley, one of the world's leading venture capital law firms, and stores them directly in your Stripe Dashboard. These documents are designed to help you fundraise immediately and ensure your company is legally protected, covering aspects like ownership structure, equity distribution, and tax compliance.

US$2,500 in Stripe credits, plus US$50K+ in partner discounts

Atlas startups get US$2,500 in Stripe product credits for their first year, plus US$50,000+ in discounts on essential tools – Mercury, AWS, Carta, Xero, Perplexity, and more. Delaware registered agent service is also included free for your first year.

Learn more about how Atlas can help you set up your new business quickly and easily and get started today.