For more information on starting an LLC in California, see our California LLC Formation Guide.
California LLC frequently asked questions
How much does a California LLC cost?
Each state charges a fee for establishing a new LLC or registering an existing out-of-state LLC to do business there. California charges $70 to file Articles of Organization for an LLC. California LLCs must also file a Statement of Information within 90 days of formation and from then on, every two years. The fee for filing a Statement of Information is $20. All California LLCs pay an $800 annual tax, plus additional fees if gross receipts exceed $250,000.
Why create an LLC?
LLCs provide a number of advantages over sole proprietorships, partnerships, or even incorporating. Here's why small business owners frequently choose to form an LLC:
- Personal asset protection: LLC members are shielded from personal liability for business actions and debts. Creditors generally cannot pursue owners' personal assets to satisfy business obligations.
- Flexible taxation: LLCs typically don't pay entity-level taxes. Business income and losses pass through to the owners' personal tax returns; taxes are paid at the individual level. LLCs can also elect to be taxed as an S corporation or C corporation.
- Credibility: An LLC provides a more formal business structure than a sole proprietorship or partnership, which can help establish credibility.
- Easier than incorporating: LLCs face fewer state requirements and ongoing formalities than S corporations or C corporations.
What are the downsides of starting an LLC?
LLC usually costs more to form and maintain than a sole proprietorship or general partnership. There are also ongoing compliance obligations with the state, such as maintaining a registered agent and filing an annual report.
California can be an expensive state in which to do business. California LLCs must file a Statement of Information within 90 days of formation, then every two years after that. The filing fee is relatively low at $20. But California LLCs are also responsible for paying an annual franchise tax of $800. Additional fees apply for LLCs earning over $250,000.
For more information on LLC pros and cons, read our Guide to forming an LLC.
What are the annual and biennial requirements for maintaining an LLC in California?
Every California LLC must file a Statement of Information with the state every two years, and each LLC is required to pay an annual state LLC tax of $800 using Form 3522. Also, an annual report must be filed during the six-month period that ends on the last day of your LLC’s anniversary month.
Conclusion
For small business owners, making the decision to form an LLC is a major step. Since LLC services aren't one-size-fits-all, it's important to identify what your business needs and choose a provider that delivers those essentials. Review what's included in each package, especially "free" options. Some services exclude essentials or add fees later, so understand what you're getting upfront. Choose a provider with a proven track record for accurate, timely filings and clear guidance, and look for companies that guarantee their work against filing errors.
Related resources:
California LLC Formation Requirements
California Corporation Requirements
