LLC has become one of California's most popular business structures because it offers flexibility and minimizes taxes and costs.
After extensive research, our team of legal experts and professionals will provide you with a comprehensive explanation of the cost - including the fees of creating a California LLC.
- In California, an LLC costs $800 in annual franchise tax alone.
- Limited Liability Companies are registered with the California Secretary of State and not the California Franchise Tax Board.
- California LLC fees include state filing fees, LLC statement of information, business licenses, and permit, and LLC taxes.
Bare Minimum Cost to Start an LLC in California
The bare minimum cost to start a California LLC is $70 - filing fee - and a county filing fee depending on which area the entity operates.
California state law requires businesses to file LLC paperwork regularly with the California Secretary of State to keep their status active.
California filing fees are relatively inexpensive compared to other states at $70 for the initial filing fee and an annual corporate tax payment of about $800 annually, which you need to take into account when calculating the cost of starting an LLC.
This bare minimum cost only accounts for the California LLC filing fees and annual tax to maintain California LLC status.
California does not separate minimum taxes from maximum taxes, which can lead California businesses to be fined a small amount for underpayment of California corporate income tax since it is based on profits.
California's corporate tax brackets range from 1.5% to 8.84% of California state income tax. California does have filing deadlines that need to be met to maintain California LLC status.
How Much Is LLC Tax in California?
LLC tax in California varies according to the annual earnings of the LLC.
The table below summarizes the tax levied based on the income .
|$250,000 - $499,999||$900|
|$500,000 - $999,999||$2,500|
|$1,000,000 - $4,999,999||$6,000|
|$5,000,000 or more||$11,790|
The California franchise tax board calculates the amount of tax to be paid by an LLC annually.
Still, some factors are taken into consideration to determine how much you will have to pay.
Regardless of whether their business generates revenue or not, all LLCs are required to pay an annual franchise tax of $800.
Each year, the California Franchise Tax due is on or before April 15th. If you fail to file by the deadline, the state may charge you late fees and penalties, and your LLC may be dissolved. It applies even to foreign LLC entities.
If your company's annual revenue is less than $250,000, you won't have to worry about this extra payment.
A business must register with a Board of Equalization and may be required to charge sales tax on its transactions when the following criteria are met:
- The seller has gross receipts from all taxable property sold in California
- The seller's principal business activity is "the sale or lease of tangible personal property."
- The property is sold in California
Additional Costs to Set Up an LLC in California
Additional costs to set up a California LLC include a $20 LLC Statement of Information document fee paid every two years plus notary charges.
California is one of the few states to require an annual report, which is due during the anniversary month of the LLC's registration date.
The legal presiding fees are another consideration that can go beyond attorney charges, especially if there are complex business transactions.
Fees for Business Licenses
The fees for business licenses vary depending on the city, so it is best to check with your local government.
The state of California charges $800 for a limited liability company, including the filing fee, the formation fee, and the name search fee.
California Attorney Fees
California attorney fees vary depending on the circumstance. A reasonable attorney will charge between $100 - $300 per hour, which could cost you tens of thousands of dollars in legal bills if your case is complicated.
California Accountant Fees
To accurately determine how much taxes you need to pay and when it is ideal to employ an accountant. California accountant fees range from $300 - $900 a year.
How Do I Start an LLC in California?
To start an LLC in California, first, you have to determine the business structure of your LLC. In any case, you must follow California Secretary of State filing rules.
To do this, you will need assistance from a California registered agent service that can help submit the paperwork.
You can apply directly through LegalZoom's online application service to get started and file your Articles of Organization and pay the necessary fees. It takes about 4-6 weeks to complete the filing.
The California Secretary of State provides a downloadable "Certificate of Information" form that you must file with your Articles of Organization to register your business name and create an official record for your company in California.
The Articles will not be processed until this step is completed and can take about 2-4 weeks after filing to receive by mail.
See our article for more information on how long it takes to open an LLC in California.
Here Are Some Steps You Need to Take To Form a California LLC
The steps you need to take to form an LLC in California include the following:
1. File the Articles of Organization
Your business will need to file its articles of organization with the California Secretary of State (SOS).
The filing fee is about $70, and the form may be filed online or over the counter at any Secretary of State branch office.
You'll need to include your name, the name of your LLC, and the county where you'll be doing business.
2. Draft an LLC Operating Agreement
After filing your articles of organization, you'll need to create an California LLC operating agreement.
This should include the management structure of your company, distribution of profits - how profits and losses will be allocated, and other key information.
You can use a template created by Nolo, or an attorney may draft one for you.
As soon as the operating agreement is complete, it should be signed by all members of your LLC.
The person who signs the documents must have general authority to do so on behalf of the LLC.
3. File a Federal Tax ID Form and Pay the Annual Franchise Tax
After filing your articles of organization and creating an operating agreement, you'll need to file a Federal Tax ID form with the California Secretary of State as well as a separate application for an EIN from the IRS.
Once you've completed all of these steps, the last thing to do is pay your annual franchise tax.
Prepare an Operating Agreement
Prepare an operating agreement and file the document along with the Articles of Organization.
An operating agreement is a legal document that establishes the members' rights, powers, duties, and liabilities.
In California, it is necessary to maintain an operating agreement to protect members from personal liability and establish a separation of personal assets from the company.
The California Secretary of State offers a downloadable California LLC Operating Agreement Form that you can use to prepare your California LLC operating agreement.
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What Is the Cheapest Way to Get a California LLC?
The cheapest way to get a California LLC is by filing the formation documents yourself and acting as your own registered agent. This way, you won't have to hire an attorney or a service provider to establish the entity on your behalf.
What Is the Best Way to Get an LLC?
The best way to get a California LLC is through LegalZoom. Legal Zoom charges $119 to register your business with the state and includes a free registered agent service for one year, which costs $69 extra if you try to do it separately.
Be sure not to miss out on any special offers as they usually run promotions during certain times of the year.
Is LLC Worth It in California?
LLC is worth it in California. By setting up an LLC, you are providing yourself and your company with limited liability to protect your assets.
Be sure to fill out all the necessary paperwork and register your business with the state, as this is where people who might sue you will try to find you first.
So, How Much Does an LLC in California Cost?
A California LLC costs a basic fee of $1,040 just to keep the business actively registered. The amount is compounded by additional fees - California state fee, statement of information, annual franchise tax, registered agent fee, and Gross Receipts Tax.
In California, forming an LLC will cost you not just money but also time and effort; therefore, hiring a service company like ZenBusiness will take care of the process for you.