How Much Does an LLC Cost in California? (All The Fees)
LLC has become one of California's most popular business structures because it offers flexibility and minimizes taxes and costs.
As a Mergers and Acquisitions specialist and Master's Degree holder in tax law, I helped multiple clients form LLCs and establish joint organizations in several states.
After consulting with our team of professionals in the state, we will provide you with a comprehensive explanation of the cost - including the fees of creating a California LLC.
Quick Summary
- An LLC in California costs $70 for filing the Articles of Organization and a $20 Statement of Information Fee.
- Upon approval of the business, additional expenses you may incur include a registered agent service, licenses, franchise tax, taxes, and other documents.
- According to the California Secretary of State, about 70% of new businesses take advantage of the $10 name reservation option to secure their preferred business name for 60 days.
- Compared to other states, I can attest that a California LLC is costlier to maintain, but is well worth it considering the economy.
Cost to Start an LLC in California
Before a business can legally operate in the state, you have to cover the fees associated with forming an LLC in California.
1. LLC Formation Filing Fee ($70 - Mandatory)
Filing the Articles of Organization costs $70.
The standard processing time is 3 to 5 business days. Expedited service is available for $750 (same-day approval), $500 (4-hour turnaround), and $350 (24-hour delivery).
Although there's an expedited service option, I advise clients who are budget-conscious to file by the standard options since there is only a 3 to 5 day difference.
See our article for more information on how long it takes to open an LLC in California.
2. Statement of Information Fee ($20 - Mandatory)
Before you can start your LLC, you need to pay the $20 fee to the Secretary of State to file the Statement of Information. The document is paid every two years plus notary charges.
3. Registered Agent Service Fee ($80-$300 Annually - Optional)
The state mandates all LLCs to appoint a registered agent to receive service of process on behalf of the company.
You can act as your registered agent or designate a qualified member of your LLC. Alternatively, you can employ a registered agent service for $80 to $300 per year.
According to data from the American Business Association, around 65% of small LLCs opt to employ external registered agent services for their reliability and expertise in handling legal documents.
I advise new business owners to employ a professional registered agent service for at least a year before acting as their own representatives.
4. Name Reservation ($10 - Optional)
To reserve a business name, I had to file an application for name reservation and pay the corresponding $10 fee. The name may not be made available to other companies for 60 days.
According to the California Secretary of State, approximately 70% of new businesses utilize this reservation process to protect their desired business name while preparing their formal registration documents.
Expenses Following the Approval of Your LLC
Here are the additional costs that may arise once your LLC has been registered and approved.
1. Business Licenses (Depending on the Line of Business - Mandatory)
The fees for business licenses vary depending on the city and the type of industry, so it is best to check with your local government.
When starting an LLC in California, I make sure that my clients apply for the proper license since the state has very specific business laws.
2. Franchise Tax ($800 - Mandatory)
All LLCs are required to pay an annual franchise tax of $800.
Each year, the California Franchise Tax is due on or before April 15th. I make it a practice to file on time to avoid late fees and penalties, and ensure the LLC remains compliant with state business laws.
3. Taxes (Depending on Income Bracket - Mandatory)
LLC tax in California varies according to the annual earnings of the LLC.
The table below summarizes the tax levied based on the income [1].
| Income | Amount |
| $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 |
4. Operating Agreement (Mandatory)
The state requires LLCs to draft an operating agreement, which should be kept at the company's office. The Secretary of State offers a downloadable LLC Operating Agreement Form that you can use.
To ensure the document's legality, I advise clients to hire an attorney to draft the document since it would be used to outline the management, structure, and procedures of the company.
Online LLC formation services can provide your entity with an operating agreement for $100 to $200.
5. EIN ($0 - Optional, but Recommended)
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.
The Internal Revenue Service issues an EIN free of charge on their website. Alternatively, you can employ an LLC formation service to process the application on your behalf.
When helping entrepreneurs form LLCs in California, I advise them to obtain an EIN once the company has been approved since it is necessary to open a business bank account and hire employees.
"An EIN Number, also referred to as an Employer Identification Number (EIN) or a Federal Employer Identification Number (FEIN), serves various purposes such as filing California income taxes, opening an LLC bank account, and hiring employees if necessary."
- Jon Morgan, CEO, Co-Founder & Editor-in-Chief of Venture Smarter
6. Professional Fees (Variable - Optional)
You have the option to employ professional help to run and manage your LLC.
Attorney fees vary depending on the circumstance. A reasonable attorney will charge between $100 - $300 per hour.
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.
FAQs
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 Happens If I Pay California Taxes Late?
If you pay California taxes late, you will be charged 5% of the amount due and an additional 0.5% for each succeeding month.
References:
- https://www.ftb.ca.gov/file/business/types/limited-liability-company/index.html
