How to Start an LLC in California: Steps, $800 Tax, Form 568

How do I start an LLC in California, step by step?

File Articles of Organization (Form LLC-1) with the Secretary of State, then file the Statement of Information, get an EIN and pay the Franchise Tax Board (FTB) on time. In order:

1. Check the name. Search the name in bizfile Online. It must be distinguishable from LLCs already on record and include an identifier such as "LLC". Reserving it for 60 days is optional (name reservations).
2. Name an agent for service of process, who accepts court papers if the LLC is sued. The agent is an individual living in California with a street address, or a registered corporate agent. The LLC cannot be its own agent, and the agent's name and street address are public (Secretary of State FAQs). See registered agents.
3. File Form LLC-1 on bizfile Online. It asks for the name, the principal office street address, the agent, and whether one manager, several managers or all members manage the LLC. The fee is $70 (Form LLC-1).
4. Sign an operating agreement. It sets out ownership, profit split and who decides. The LLC keeps it; the Secretary of State does not take it (FAQs).
5. Get an EIN from the IRS. It is free online and needs the responsible party's SSN or ITIN (IRS). An LLC with two or more owners or any employees needs one. A one-owner LLC without employees may use the owner's SSN or ITIN instead, but can get an EIN for its bank account, and the FTB payment voucher asks for one. See EINs for single-member LLCs.
6. File the Statement of Information (Form LLC-12) within 90 days of filing LLC-1 (forms and fees).
7. Open a bank account in the LLC's name and run all LLC money through it. See setting up books for a new LLC.
8. Pay the $800 annual tax by the 15th day of the 4th month, counting the filing month as month one, with FTB 3522 or the FTB's online payment (FTB).
9. Register for permits the business needs: a seller's permit, an employer account, a city license (table below).
10. File Form 568 every year, the LLC's California return, even with no income (due dates below).

What makes it not simple: two or more owners, spouses who own it together, filing late in the year, an LLC already formed in another state, an owner outside California, an S corporation election, or California income near $250,000. Each changes a form, a deadline or what you owe.

Gather first: two or three name choices, the principal office street address, the agent's name and address, each owner's name, address and ownership share, who will manage, and the responsible party's SSN or ITIN. The state-neutral version of these steps is in how to form an LLC.

How much does it cost to form an LLC in California, and how long does it take?

The Secretary of State charges $70 for Form LLC-1. Its forms page lists online filings at 5 days or less and PDF forms at 10+ days (forms and fees). Year one also brings the $20 Statement of Information and the $800 annual tax, both due within months of filing; Lena's example below adds them up.

Sources: FTB LLC page; CDTFA; CDTFA seller's permit FAQs. Agent and city license costs vary. To compare states, see LLC cost by state.

When is the Statement of Information due, and what if it is late?

The first Statement of Information is due within 90 days of filing LLC-1, for $20. After that, an LLC files every two years, in a six-month window that ends with the month it was formed (forms and fees; filing tips).

• Window example: an LLC formed in March files between October 1 and March 31.
• Filing online needs web User Access, a bizfile Online login that controls who may file for the LLC. Set it up before the deadline (filing tips).
• Changes: file an updated statement when the LLC's information changes; one is required when the agent resigns (FAQs).
• Look-alike letters: the Secretary of State warns of deceptive solicitations sent to registered businesses. The statement is filed with the Secretary of State itself (FAQs).

A missed statement costs a $250 penalty, which the FTB collects for the Secretary of State. The LLC can also be suspended or forfeited (FTB; filing tips). Once the statement is filed, the LLC can ask the Secretary of State to waive the penalty, giving its reasons (penalty waivers).

When is the first $800 tax due, and is the first year still free?

The first $800 payment is due by the 15th day of the 4th month after the LLC files with the Secretary of State, counting the filing month as month one. The FTB's own example: an LLC registered on June 18 pays by September 15. Later payments are due by the 15th day of the 4th month of each tax year, April 15 for a calendar year (FTB).

• The first year is not free. The temporary first-year exemption covered only tax years that began from 2021 through 2023 (FTB).
• Late-year trap: the first tax year starts on the filing date (FTB 3522). An LLC formed in November or December can owe two payments within about two months.
• The 15-day rule: an LLC whose first tax year is 15 days or less, and that does no business in California during it, files no return and owes no annual tax or fee for that year (Form 568 booklet).

No-income years, missed payments, and cancelling within 12 months of filing (short form cancellation, which can avoid the first-year tax) are covered in California's minimum tax and LLC fee.

What does a California LLC file with the FTB each year?

Every California LLC not taxed as a corporation files Form 568 each year, even with no income and no activity (Form 568 booklet). The due date depends on who owns it.

Sources: Form 568 booklet; FTB due dates.

• The annual tax is paid separately, with FTB 3522 or online, not mailed with Form 568 (Form 568 booklet).
• The LLC fee starts at $900 once total California income reaches $250,000. Income here means total income such as sales, not profit. Estimate it on FTB 3536 by the 15th day of the 6th month of the tax year. An estimate below the year's fee costs 10% of the shortfall, unless it at least equals the prior year's fee (Form 568 booklet; FTB 3536).
• A late Form 568 can cost $18 per member for each month, up to 12 months, unless there is reasonable cause. The FTB's penalty page lists this for LLCs taxed as partnerships; the Form 568 instructions apply it to any LLC that must file (FTB penalties; Form 568 booklet).

How does the IRS tax a California LLC?

An LLC with one owner is disregarded: its income goes on the owner's return, on Schedule C for an individual's business. An LLC with two or more owners is a partnership and files Form 1065, unless it elects to be taxed as a corporation (IRS). California uses the same classification (FTB).

California is a community property state. Spouses who own an LLC as community property, with no other owner, can treat it as disregarded or as a partnership; the IRS treats a later switch as a conversion (IRS). See LLCs owned by spouses and family.

What else does a California LLC register for?

Four registrations sit outside the Secretary of State, and each has its own trigger.

For payroll detail, see California payroll taxes and EDD setup. A beneficial ownership (BOI) report is not one of these: FinCEN no longer requires it from companies created in the United States (FinCEN). See who still files a BOI report.

Can I form in Wyoming or Delaware to skip the $800 tax?

No, not if the LLC does business in California. An LLC is doing business here when any member, manager or agent conducts business in California for it, wherever it was formed (Form 568 booklet).

That LLC must register with the Secretary of State, for $70, before it enters into intrastate business here; doing business here unregistered draws a $2,000 FTB penalty (Form 568 booklet). It owes the same $800 tax and Form 568, plus its home state's own fees. See which state to form in and registering in another state.

Should a new California LLC elect S corporation tax?

Only after comparing the numbers, because California taxes an S corporation separately. An LLC taxed as an S corporation files Form 100S instead of Form 568. It pays 1.5% of its California net income, at least the $800 minimum franchise tax, in place of the LLC tax and fee (Form 568 booklet; FTB S corporations). The election is federal Form 2553, filed within 2 months and 15 days after the tax year it covers begins, with every owner's consent (both spouses for a community property interest). California treats it as made on the same date, with no separate form (IRS Form 2553 instructions; Form 100S booklet). The FTB waives that minimum in the first year of a corporation that incorporated or qualified through the Secretary of State; its instructions do not say whether that covers an LLC electing S status (Form 100S booklet).

For timing and payroll, see S corporation from day one; for state rules, see state S corporation elections.

Example

These examples are illustrative, in US dollars, for calendar-year LLCs.

Lena files in March

Lena, the only owner, expects under $250,000 of California income, so no LLC fee. She files LLC-1 online on March 10 and pays $70.

• By June 8: Statement of Information, $20 (90 days after March 10).
• By June 15: first $800 annual tax. March is month one, so June is month four.
• Year-one state cost before any professional help: $70 + $20 + $800 = $890.
• Next April 15: Form 568 for year one, and the $800 for year two. Her LLC's profit goes on her own Form 1040.

Two partners in a later year, with $300,000 of California income

In a full calendar year after the first, two owners run an LLC with $300,000 of sales to California customers and $40,000 of profit.

• Federal: Form 1065, with a Schedule K-1 for each partner.
• California: the $800 annual tax by April 15, and a $900 LLC fee, because $300,000 falls in the first tier. The fee follows sales, not the $40,000 profit.
• By June 15: estimate the $900 on FTB 3536. Paying only $500 could add a 10% penalty on the $400 shortfall, unless $500 at least equals last year's fee.
• By March 15 of the next year: Form 568.

Omar files on December 1

Omar, the only owner, files on December 1 and starts selling that week, so he registers for a seller's permit first.

• First tax year (December 1–31): the first $800 is due March 15. December is month one.
• Second tax year (from January 1): the next $800 is due April 15, about a month later, along with Form 568 for the one-month first year.
• If he had filed on December 17 and done no business until January, his first tax year would have been 15 days. No return or annual tax would be due for it, and his first $800 would be due April 15.

Different for you?

• Two or more owners, or spouses: the split, the partnership return and each owner's share need settling before you sign. See splitting ownership and LLCs owned by spouses, then get business formation help; once it runs, business return help for Form 1065 and Form 568.
• California income near $250,000: the fee estimate and its penalty depend on how California income is measured. See California's minimum tax and LLC fee and business formation help.
• Considering an S corporation election: see S corporation from day one, then business formation help.
• A partner lives outside California: the LLC generally withholds 7% from California-source distributions to that partner above $1,500 a year, and may owe the amount itself if it does not. Each nonresident member also signs FTB 3832, or the LLC pays tax on that member's share (Form 568 booklet). See California nonresident withholding and business return help.
• Not sure the yearly $800 is worth it, or already working as a sole proprietor: see LLC or sole proprietorship and moving a sole proprietorship into an LLC.
• You hold a California professional license: check whether your profession may practice through an LLC; see professional LLC or professional corporation.
• The LLC will hold a rental property: see rental property in an LLC before you move the deed.
• You live outside the United States: follow a US LLC for non-residents, step by step.
• The LLC is already formed in another state: see registering in another state.
• Missed annual tax payments, a year with no income, or closing: see California's minimum tax and LLC fee; for missed returns, business return help and bookkeeping for the books behind them.
• Owners want the pass-through entity tax: see California's pass-through entity tax.
• You sell goods: see California sales tax.
• The LLC is approved and you need the next filings: see after you form your company, and bookkeeping for the books behind Form 568.