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Forming An LLC In California: What’s Next For Your Business?

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Congratulations on taking the first step towards business ownership in California by forming an LLC! Did you know California is the world’s 5th largest economy? If you can make a business successful here, you can do so anywhere!

If you’re starting a business in California, an LLC is a great choice. As far as business entities go, LLCs are a win-win situation for small business owners and entrepreneurs in California because of their benefits—the personal liability protection of a corporation and the flexibility and simplicity of a sole proprietorship or partnership.

This article considers LLCs for new businesses, precisely forming a California LLC, and the steps you need to take to create them.

What Is An LLC?

A limited liability company (LLC) is a business structure that offers personal liability protection and flexibility regarding taxes and management. LLCs are popular because they are easy to set up and provide more protection than a sole proprietorship or partnership.

An LLC is formed by filing articles of organization with the secretary of state in the state where the LLC will operate, in this case, California. Once the LLC is formed, the owners, who are called members, can manage the LLC themselves or hire a manager to do so. LLC members are not personally liable for the debts and liabilities incurred by the business.

A limited liability company can be taxed as a sole proprietorship, partnership, or corporation. The LLC’s members can choose how the LLC will be taxed. If the LLC is taxed as a sole proprietorship, the LLC’s income is taxed on the member’s tax return. The same idea applies to LLCs taxed as a partnership or a corporation, i.e., the LLC will be taxed based on the partnership’s or corporation’s tax returns.

The management structure of an LLC is flexible. The members of an LLC can manage the LLC themselves or hire a manager on their behalf. If the members of an LLC are the ones heading it, the LLC will be called a member-managed LLC. Meanwhile, an LLC with a manager at the helm is called a manager-managed LLC.

What’s Next For Your Business?

Forming an LLC is a great way to protect your assets and give your business a professional image. To enjoy these benefits and more, you need to do a few key things to form your LLC to get it up and running. Here are the next steps you need to take:

Choose A Business Name For Your LLC

The first step to forming an LLC in California is choosing a business name. Your LLC name must be unique and distinguishable from other businesses in the state. It must include “limited liability company” or “LLC” and can’t have words that could confuse your LLC with a government agency or a non-profit organization. It’s a good idea to check with the Secretary of State’s office to ensure your chosen name is available.

File Your Articles Of Organization With The California Secretary Of State

If you’re ready to form an LLC in California, the next step is to file the articles of organization with the Secretary of State. A 90-day window allowed for this step. The articles of organization is a document that includes your LLC’s name, address, contact information, and purpose. You’ll also need to designate a registered agent for your LLC, who will receive legal documents on your behalf.

Create An Operating Agreement For Your LLC

You will need to create an operating agreement, which sets forth the rules and regulations for running your LLC. Your operating agreement is a document that outlines the ownership and operating procedures of your LLC. This is a critical document, as it will help avoid disputes among LLC members.

Get An Employer Identification Number (EIN) From The IRS

The first thing you need to do after forming your LLC is to obtain an Employer Identification Number (EIN) from the IRS. You can apply for an EIN online, by fax, or by mail. If you’re applying online, you’ll need your LLC’s articles of organization handy and your Social Security number. The online application takes about 15 minutes to complete. If you’re applying by fax or mail, you’ll need to fill out Form SS-4 and submit it to the IRS. It can take up to four weeks to receive your EIN by mail.

Open A Business Bank Account

Once you have your EIN, you can open a business bank account in your LLC’s name. This will help you keep your personal and business finances separate. Getting a business credit card to help you track your business expenses is also a good idea. Separating personal and business finances is vital for legal and tax purposes.

When looking for a bank, compare the fees and services offered to find the best fit for your LLC. Once you’ve found a bank you’re happy with, you’ll need to open a business checking account. The bank will require your articles of organization, EIN, and an initial deposit into the account.

Apply For Any Necessary Licenses And Permits

Depending on the type of business you’re starting, you may need to apply for licenses and permits from the state or local government. For example, creating a restaurant, you’ll need to obtain a food license. You will also need insurance to protect you and your business in case of possible accidents or damages. You can find out what licenses and permits you need at the California Business Portal or by contacting your local Chamber of Commerce or Small Business Administration office.

Create A Business Plan

Now that you have your business licenses, permits, and insurance, you can start operating your business. The next step is to create a business plan and marketing strategy. This will help you determine your business goals and how you will achieve them. You’ll also need a suitable location for your business to set up your office or store.

Creating a business plan can help you stay on track and ensure your business is heading in the right direction. If you’re unsure where to start, plenty of resources are available to help you create a business plan, including templates, software, and services.

Stay Compliant With State and Federal Regulations

As a business owner, staying up-to-date on state and federal regulations that may affect your business is essential. Failure to comply with these regulations can result in hefty fines, so staying informed and compliant is in your best interest. State regulations include:

California’s Tax Requirements

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All California businesses are required to pay state and federal taxes. You’ll need to register your LLC with the California Franchise Tax Board (FTB) and the IRS. You may also need to pay sales tax depending on your selling products or services.

California’s Employment Laws

If you’re going to have employees, you’ll need to comply with California’s employment laws. This includes proper wages, workers’ compensation, and unemployment insurance.

California’s Environmental Laws

Depending on your business type, you may need to comply with California’s environmental laws. This could include getting permits if your business deals with solid or hazardous waste and pesticides.

Start Marketing Your Business

Now that your business is up and running, it’s time to start marketing your products or services. There are several ways to market your business, including online, offline, and through word-of-mouth. Once you begin, you should create a marketing plan that outlines your marketing goals, strategies, and budget. Then, start implementing your marketing plan and track your results to see what’s working and what’s not.

Summary

Forming an LLC in California is the first step towards owning your own business. It is relatively simple as long as you’ve prepared the necessary paperwork and information for the relevant institutions and government agencies. By utilizing the information in this article, you can ensure that your LLC will be appropriately registered with the state and that you’ve taken all the necessary steps to run your business smoothly. Soon you’ll be on your way to a successful LLC business experience in California.

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