When starting a company in California there are many considerations to take. Many startup owners choose to form a limited liability company (LLC) because of its tax flexibility and protection for owners and their personal assets. However, in order to receive the benefits of an LLC, potential startup owners must take the necessary steps to legally form the business entity under California law. While forming an LLC can be substantially simpler than forming a corporation, there are still formation costs for which you should plan ahead. These costs will help you determine your startup’s need for investments and your budget for initial operating costs of the business.
Filing with the Secretary Of State
There are steps you must take with the California Secretary of State (SOS) to officially receive the legal protections of an LLC, including registering a unique business name, designating a registered agent, and filing an important document called the Articles of Organization. The filing fee for your Articles of Organization is currently $70 and you may also pay a small fee if you need to reserve a specific name for a period of time before your official filing.
Additional Costs
While filing an Articles of Organization will legally form your LLC, there are additional steps you should take to ensure smooth operations and to protect your business in the event of a legal conflict. Other steps may be necessary to make certain your LLC is in compliance with all of the relevant laws and regulations in California. The requirements that apply to your company will vary depending on the types of goods or services you offer, whether you have employees, and other important factors. Some steps you may need to take include:
- Operating agreement – The SOS does not mandate that LLCs have operating agreements in place, however, this document is critical to oversee effective and efficient operations and conflict resolution in your LLC. It is imperative to have an experienced startup lawyer draft and review an operating agreement to ensure the proper protections and make it legally enforceable.
- Permits and licenses – Many different types of businesses require permits and licenses to even begin operations, including any businesses that provide professional services, involve goods, etc. If you do not pay the costs of obtaining the necessary licenses and permits, you can face significant financial penalties and your operation may even be shut down.
- Tax and employment compliance – It is necessary to take the steps needed to comply with all of the tax laws that relate to your LLC. In addition, if you have employees, you may need to draft employment agreements, NDAs, policies, among other important documents.
Discuss Your LLC Plans with a California Startup Attorney
The California startup attorneys at Startup Company Counsel have many options for entrepreneurs planning to start an LLC. Our packages will vary depending on the needs of your specific startup and we will help you lower your costs whenever possible. Starting a business, specifically an LLC, can be overwhelming and costly if not done correctly. Please call our office at 408-441-7555 or email us for more information today.
