Would you like to know how to form an LLC in California? A Limited Liability Company (LLC) is a form of business ownership that blends elements of a sole proprietorship and a traditional C corporation. An LLC isolates business assets from creditors, like a C corporation, but is generally taxed on a flow-through basis with business income flowing through proportionally to the owners' tax returns.IRS.gov: Limited Liability Company (LLC) The LLC can also elect to be treated as a corporation for tax purposes, instead of a flow-through entity, by filing Form 8832 with the IRS.IRS: What is a Limited Liability Company? California will treat the LLC for tax purposes in the same manner the company elected with the IRS.State of California Franchise Tax Board: Limited Liability Company (LLC) This guide will walk you through the steps necessary to form an LLC in the state of California.

An LLC is a relatively simple form of corporate ownership that can help a business owner keep their business separate from their personal affairs, providing protection that goes beyond that provided by commercial insurance policies. It is not available to all businesses in California, however.NOLO Now: Online California LLC FAQ The following are two important things to know about forming an LLC in California:

1. A California LLC can be formed even if a business has only one owner.NOLO Now: Online California LLC FAQ
2. California law prohibits certain businesses from limiting their liability with an LLC. Banks, insurance companies, architects, accountants, doctors and licensed health care workers are all prevented from operating as an LLC.NOLO Now: Online California LLC FAQ

The paperwork involved in creating an LLC in California is fairly straightforward. Here are some guidelines:

1. File the articles of organization form (FORM LLC-1) at the California Secretary of State's office.NOLO Now: Online California LLC FAQ
2. Pay a $70 filing fee.California Business Portal: BPD Forms, Samples & Fees
3. Make an $800 tax payment to the California Franchise Tax Board. This is an annual cost of doing business. The first payment is due within three and a half months of incorporating. Subsequent payments of $800, as well as an annual fee based on the income of the business, are due by April 15th for calendar year filers.NOLO Now: Online California LLC FAQ
4. Within 90 days of filing the articles of organization, the company needs to file a statement of information (Form LLC-12) that includes information about the officers and the company. There is a $20 filing fee associated with this form, which needs to be updated every two years.California Business Portal: Statement of Information
5. Some businesses require additional licenses or permits to operate; when you file for them with city, county or state governments, be sure to use the name you selected for the LLC.

• In order to complete form LLC-1, you'll need the following information:

1. Name of the organization
   • The company's name must end with the words Limited Liability Company, and cannot include the words bank, trust, trustee, incorporated, inc., corporation, corp., insurer, or insurance company. The abbreviations LLC, L.L.C., Ltd. and Co. are permitted.California Business Portal: BPD Forms, Samples & Fees
2. Agent for service of process
   • The agent for service of process is the designee who will accept service of process if the company is sued. This can be a corporation or an individual who is a resident in California, and who has agreed to serve in this role.California Business Portal: BPD Forms, Samples & Fees
3. Manager
   • Will the company be managed by one person, more than one person, or all of the limited liability partners? Any of these are acceptable.California Business Portal: BPD Forms, Samples & Fees

• An operating agreement details the business arrangement between the owners of the company, and governs how the business is operated. Although not required to be filed with the Secretary of State, it is an important document that should be created when the company is established. The operating company lays out the rights and responsibilities of the owners. If you do not have an operating agreement, state law will govern these arrangements.NOLO Now: Online California LLC FAQ Unlike the articles of organization, which are simple to file yourself, the operating agreement should be drafted by an attorney.

• A federal tax identification number will be needed if you have elected for the LLC to be taxed as corporation, or if you have employees and need to withhold and pay employment taxes.IRS: What is a Limited Liability Company?

• Congratulations! You now have an official LLC, and your personal assets are protected from business creditors. Be sure to make your annual tax payment to the franchise tax board, and file an updated statement of information with the Secretary of State to ensure your company remains in good standing.

The content in this page is not a substitute for professional financial advice. Please contact your financial adviser before using the information presented here.