Setting up an LLC in California is fairly straightforward when you follow the necessary steps correctly. Are you wondering how to form an LLC corporation in San Diego? Are you a new business owner looking to register your business as a California LLC? Use this guide to help you through the process.
Step 1: Confirm That an LLC is Right for Your Business
If you are wondering how to form an LLC in San Diego, chances are you have already decided that this type of entity is right for your future business. If you are still uncertain, your best course of action is to find out more about this type of entity before you move forward with forming an LLC. Take some time to research the different types of business entities to establish whether an LLC truly is the best entity for your business. Partnerships, S corporations, C corporations, and LLCs all offer their own benefits, and most business owners will want to consider several (if not all) of these options.
The advantages to having an LLC are:
- Protection of your personal assets (meaning you cannot be held personally responsible for business debts)
- Formal credibility compared to a sole proprietorship
- Little to no business taxes
- Minimal organizational requirements
- Easy startup
Step 2: Choose a Business Name
Once you’ve decided that an LLC is indeed the type of entity you should register your business under, the next step is to choose a name for your business. You can use the California Secretary of State business database to check whether the name you’re considering is taken, and you can reserve a name for up to 60 days by filling out a Name Reservation Request form. When aspiring entrepreneurs ask how to form an LLC corporation in San Diego, they seldom think to ask whether there are rules for naming one. However, there are. Here are a few requirements by California law to keep in mind when naming your business:
- An LLCs name must end with “LLC,” “L.L.C.,” or “Limited Liability Corporation”
- The name cannot include the words “bank,” “trust,” “trustee,” “incorporated,” “inc.,” “corporation,” “corp.,” “insurer,” “insurance company,” etc.
- The name must be clearly distinguishable from any similar businesses in the state of California
Step 3: Appoint a Registered Agent
Every LLC is required to have a registered agent, a person or business that officially agrees to send and receive documents on the LLC’s behalf. This includes state filings and any court documents if the LLC is sued. The registered agent may be affiliated with the LLC, and must be a California resident with a street address (not a P.O. box). Wondering how to form an LLC in San Diego if you don’t know anybody whom you could designate a registered agent? If you are having trouble appointing someone you know, the California Secretary of State provides a list of private service companies that are qualified to serve as your registered agent.
Step 4: File Articles of Organization
To formally register your LLC, you’ll need to fill out Form LLC-1, Articles of Organization. This will provide your LLCs name, line of work, address, and other basic information about the business. The filing fee is $70.
Step 5: Create an Operating Agreement
To answer the question how to form an LLC corporation in San Diego, know that the same rules apply throughout the state. California law requires an LLC to have a verbal or written operating agreement. While this might be considered an extra burden compared to other states that do not require an operating agreement, it’s best practice to clearly outline the inner workings of your business in writing before you get started. The operating agreement establishes the ownership and operating procedures of your LLC.
Step 6: File a Statement of Information
At this point, you’re almost home free with all of your filing requirements. Within 90 days of filing your Articles of Organization, be sure to file a Statement of Information (Form LLC-12) with the Secretary of State. Note that you’ll have to re-file every two years. The filing fee is $20, and once the initial form is filed by hand or mail, you can file online moving forward.
Your Statement of Information will include details such as:
- Business name and file number
- Registered agent name and contact info
- Business address
- Mailing address
- Name and address of manager(s)
- Email address
- Type of business
Step 7: Fulfill Tax Requirements
Before you ask how to form an LLC in San Diego, ask yourself if your tax requirements have been met. Perhaps the most complex phase of setting up an LLC in California is getting all of your tax information and tax requirements aligned. This includes:
If your LLC has more than one member, you will need to obtain an Employer Identification Number (EIN). For tax, banking, and future hiring purposes, you might also elect to get an EIN even if you are the only member of your LLC. There is no filing fee for obtaining an EIN.
If you have employees or are selling a product subject to California State tax, you will need to register for State taxes.
Business Permits and Licenses
To find a complete answer to the question how to form an LLC corporation in San Diego, you need to provide the details concerning your prospective business. Different types of businesses require different licenses. For example, California requires restaurant owners to complete mandatory training and obtain a California Food Handler Card. A restaurant that intends to serve alcohol also requires liquor licensing from the California Department of Alcoholic Beverage Control. Additionally, there are permits and checks relating to crowd control, exits, and handling of emergencies.
The CalGold website from the California Governor’s Office of Business and Economic Development is an extremely useful tool that provides a comprehensive database of required licensing for any business entity in any industry.
Being a budding entrepreneur, you probably have many other things you could be working on instead of registering your business. Allow us to step in because we know how to form an LLC in San Diego in a time-efficient manner. David York’s Tax Service can file your LLC and prepare all the necessary tax paperwork for you in just a few easy steps. Click here to learn more.