LLC in california laws [Fact-Checked]

Last updated : Aug 8, 2022

WHAT ARE LLC requirements in California?

Creating your LLC in California requires two separate filings: Articles of Incorporation, and a Statement of Information. Your Articles of Incorporation form your business in California and the Statement of Information is a periodic filing first required within 90 days of formation.

What can you do with an LLC in California?

You can form an LLC to run a business or to hold assets. The owners of an LLC are members. LLCs protects its members against personal liabilities. An LLC must have the same classification for both California and federal tax purposes.

How do I avoid LLC tax in California?

Can I avoid the California Franchise Tax? There's no way for a registered business to legitimately avoid the California Franchise Tax. Sole proprietors and general partnerships don't have to pay the California Franchise Tax, but they also don't have any personal liability protection.

Do all LLC have to pay the $800 California?

Yes, it does. The California LLC franchise tax exemption from Assembly Bill 85 only covers the LLC's 1st year. Your California LLC needs to pay the $800 franchise tax payment in its 2nd year and for all years afterward.

Is it worth having an LLC in California?

The key benefit of forming a limited liability company (LLC) in California is limited liability protection. Limited liability can protect your personal assets in the event your business is sued or can't pay its debts. Other California LLC benefits include: Pass-through taxation.

Is an LLC in California worth it?

Is LLC Worth It in California? Having an LLC in California offers liability protection, which is worth the additional costs. In addition, an LLC protects all of your assets should your business get sued or be unable to pay its debts.

What is the downside to an LLC?

Disadvantages of creating an LLC States charge an initial formation fee. Many states also impose ongoing fees, such as annual report and/or franchise tax fees. Check with your Secretary of State's office. Transferable ownership. Ownership in an LLC is often harder to transfer than with a corporation.

How do I spend money from my LLC?

Instead, you pay yourself by taking money out of the LLC's profits as needed. That's called an owner's draw. You can simply write yourself a check or transfer the money from your LLC's bank account to your personal bank account. Easy as that!

What can you right off with an LLC?

What expenses can you write off as an LLC? There is a long list of expenses that you can deduct as an LLC. Some of the main operating costs that can be deducted include startup costs, supplies, business taxes, office costs, salaries, travel costs, and rent costs.

Should I pay myself a salary from my LLC?

Do I need to pay myself a salary? If you're a single-member LLC, you simply take a draw or distribution. There's no need to pay yourself as an employee. If you're a part of a multi-member LLC, you can also pay yourself by taking a draw as long as your LLC is a partnership.

Why are LLCs so expensive in California?

Every business pays the $800 annual franchise tax, which is applied to taxes owed, but LLCs are the only ones subject to California Gross Receipts tax. This is one of the biggest reasons why a California LLC is so expensive.

What happens if you don't pay LLC tax California?

Non-Payment Penalties If franchise taxes go unpaid for more than a year, the penalty can be up to 25% of the original tax bill. The Franchise Tax Board will eventually refer your business to a collection service (and their fees will be tacked on to our bill) and file a lien against your business.

How does an LLC avoid paying taxes?

A general Corporation making a Subchapter “S” Election or an LLC with or without a Subchapter S Election pays no federal tax on its taxable income and no employment taxes on its distributions to stockholders.

Do I have to pay taxes on an LLC that made no money California?

LLC Corporations It is mandatory for all corporations to file annual tax returns, even if the business was inactive or did not receive income.

Can LLC Get tax Refund?

Do LLCs get tax refunds? Generally, no. However, LLCs can elect to be treated like C corporations for tax purposes by filing Form 8832. If an LLC elects C corporation status and makes quarterly estimated payments higher than its tax liability for the year, the LLC can receive a tax refund.

What are the 2 main advantages of having an LLC?

• Limited Personal Liability.
• Less Paperwork.
• Tax Advantages of an LLC.
• Ownership Flexibility.
• Management Flexibility.
• Flexible Profit Distributions.

Is there anything better than an LLC?

In general, corporations have a more standardized and rigid operating structure and more reporting and recordkeeping requirements than LLCs. LLC owners have greater flexibility in how they run their business.

Can one person own an LLC?

A single-member limited liability company is an LLC with only one owner (called a “member”). It functions much as any LLC would. In fact, as far as the government is concerned, single-member LLCs are just LLCs. The paperwork to create an LLC and a single-member LLC is the same.

How much does California charge for an LLC?

California LLC Fees and Taxes The CA LLC fee is $85, payable to the secretary of state. In addition, a California LLC fee is also due for the statement of information, a document that must be submitted within 90 days of LLC formation and carries a filing cost of $20.

Does an LLC need a business license in California?

LLCs, Corporations, LPs, LLPs, or GPs operating in California need to register and form their legal entity with the California Secretary of State's Office, file appropriate taxes, register as an employer, and obtain business licenses and other permits from appropriate cities or counties.

Check these related keywords for more interesting articles :
Where to file LLC in texas
What is an LLC tax classification types
LLC student database management
LLC lookup in pennsylvania
How to start an LLC in connecticut
Yearly cost of LLC in illinois form
Buying a car through llc
Oregon LLC certificate of good standing
Register LLC in michigan lara
LLC state of ohio lookup
LLC number california
Can i make an llc online
What tax return does a LLC file
Start LLC business in michigan
How fast can i get an LLC

Write a comment

the following information is provided for educational purposes only and in no way constitutes legal tax or financial advice for legal tax or financial advice specific to your business needs we encourage you to consult with a licensed attorney and/or CPA in your state the following information is copyright protected no part of this lesson may be redistributed copied modified or adapted without prior written consent of the author a limited liability company is a hybrid between a corporation and a partnership an LLC protects your assets in the event of a lawsuit in order to form your LLC you must file LLC formation documents with the Secretary of State once your documents are approved and sent back to you your LLC is now in existence and authorized to do business in the state we have spent considerable time to make the details of this video simple and easy to understand however we cover a lot of ground and you are going to hear a lot of new terminology would you recommend that after you watch this video you watch it a second time in order to fully comprehend all the information provided please make sure you have watched the first lesson on researching your LLC's name your desired LLC name must be available for use before you proceed with filing your LLC formation documents your LLC is required to list a registered office and a registered agent within your LLC formation documents the registered office is a physical address it cannot be a Pio box that is located in the state where your LLC is formed a registered agent is a person or a company who agrees to accept legal mail and important documents on behalf of your LLC the registered agent is located at the registered office and is generally accessible during normal business hours as we mentioned a registered agent can be a person or a company who has an address in the state where your LLC is formed you as an individual can be your LLC's registered age however your LLC cannot be its own registered agent for individuals who have an address in the state it is most common that they serve as the LLC's registered agent having said that the individual person you choose as the registered agent does not need to be a member of the LLC it can be a friend or a family member or frankly anyone you know who agrees to accept service of process on behalf of your LLC service of process is the delivery of legal mail and important documents sent from the state or a law firm to your LLC correspondence from the state can include items such as annual report notices late notices and copies of formation documents legal documents can include items such as subpoenas and/or complaints for legal action again the purpose of designating a registered agent is to authorize someone to accept service of process on behalf of your LLC however agrees to be your LLC's registered agent must agree to do so some states require that they sign your LLC formation documents the California does not require this you will just need to list their name and address within your LLC formation documents takeaways the purpose of a registered agent and its registered office is to be a point of contact for the state and to accept service of process for your LLC you or someone you know can be your LLC's registered agent so long as you have an address in the state if you don't have an address in the state that you can use or don't want to serve as your LLC's registered agent you can hire a commercial registered agent using a commercial registered agent will also help protect your privacy as the information listed in the LLC formation documents will become public record a commercial registered agent is a company that specializes in receiving service of process on behalf of businesses nationwide they typically charge between 100 and 300 dollars per year if you decide to use a commercial registered agent we recommend Northwest registered LLC they have been in the business for more than two decades and have built up a solid reputation their fees are among the most affordable and their support is top-notch we've joined forces with them in order to provide registered agent services nationwide to our clients there's a link below this video where you can find instructions on how to sign up for their registered agent services now let's discuss your LLC formation documents the name of the LLC formation document for the state of California is called the articles of organization this document is not complicated and contains basic information including listing your registered office and registered agent we will walk you through the details of the articles of organization in just a couple minutes and we will make sure you get it filled out correctly once your articles of organization are completed you will need to submit them to the state along with the filing fee you will find the filing fee amount accepted forms of payment and the address where to send your articles of organization to below this video your articles of organization do not need to have original signatures you can file your original or you can file a copy if you prefer it is a good idea however to keep a copy for your business records once you mail the filing fee along with your articles of organization the state will review and process your paperwork if there are any issues with your articles of organization the state will mail back a letter with instructions on what needs to be corrected if there are no issues with your filing the state will mail back a stamped and approved copy of your articles of organization within approximately 10 to 15 business days once you receive your stamped and approved articles of organization your LLC is now a legally formed business in the state of California please keep a copy of this document with your business records do not order your EIN also known as your federal tax ID number or start to use your LLC for any business purposes until you have this approval California has additional ongoing requirements and fees that must submitted in order for your LLC to remain in compliance failure to file these items on time will result in the state charging late fees and they may dissolve or shut down your LLC the first of these requirements is the initial statement of information it is due within 90 days of approval of your LLC and the filing fee is $20 your next requirement will be your annual LLC Franchise Tax your annual LLC franchise tax will be due every year and will be a minimum of $800 then every two years you will have to file an updated statement of information the cost will remain the same at $20.00 these additional filing requirements are discussed further in lessons 5 & 6 don't worry we will walk you through completing the paperwork for both we are now ready to fill out the articles of organization you can download this document below the video let's get started here we are inside the articles of organization this is a one-page PDF document the form can be filled out on the computer or it can be printed and then filled out by hand if you fill it out by hand please use blue or black ink make sure to print the document on white paper that is letter sized

Thanks for your comment Cameron Treiber, have a nice day.
- Yaeko Hochschild, Staff Member

do I have to pay California's $800 franchise fee for my LLC Amanda here from the business finance coach where I'm simplifying accounting taxes and business planning if this sounds like something you're interested in you can subscribe to my youtube channel while still watching this video by clicking the watermark in the bottom right corner of your screen back to the California Franchise Tax fee of $800 so do you really have to pay this fee you can see the state web site behind me you just search ftb.ca.gov and you can just search FTB $800 LLC California and up will come the links for this site it does sound a little confusing as you'll see in this graph here where they talk about the annual California fee and then they talk about incomes greater than two hundred and fifty thousand dollars now just to verify I actually called and spoke to the state and part of why this is confusing is because there's two fees or taxes that apply to your LLC if you have an LLC in the state you have to pay the $800 franchise tax fee every year everyone really pays the $800 fee for any LLC formed in the state the second aspect is if you have an annual LLC fee which is in addition to that $800 fee which you pay every year as long as the income is less than 250,000 in your business you don't have to worry about an additional tax but once your gross income sales goes above 250,000 then you will have an additional tax to pay to the state of California the next thing I want to show you is the amount of that additional tax here we are in the instructions and this is where you'll see the amounts of the second feed two hundred fifty thousand to four hundred and ninety nine nine nine nine a dollar short of five hundred thousand pay $900 five hundred to a million right before million pay twenty five hundred dollars a million to almost five million pay six thousand dollars and then the next bracket over five million pay eleven thousand seven ninety like many things taxes you know it's like the person making 1 million is paying the same as the person making four point five million so you know is it fair I don't know but regardless this is the tax for California and then you can see that they give a an example down here and they go through for each business the annual tax which is that eight hundred dollar fee plus the LLC fee so the annual tax is eight hundred and the LLC fee is based on if you earn more than two hundred fifty thousand and your income and so I know that that's a little confusing I'd love to hear any questions you have in the comments below if you enjoyed this video let me know otherwise subscribe I'll see you next time have a beautiful day bye

Thanks Ronny your participation is very much appreciated
- Yaeko Hochschild

About the author

Yaeko Hochschild

I've studied toxicology at University of Northwestern Ohio in Lima and I am an expert in historical archaeology. I usually feel ashamed. My previous job was environmental research analyst I held this position for 23 years, I love talking about kung fu and hacking. Huge fan of Danny Devito I practice surfing and collect jersey cards.