How much does it cost to start an LLC in California?
Setting up an LLC (Limited Liability Company) in California requires very careful budgeting for all the myriad initial and ongoing costs mandatory and optional. The main expense that you will have to pay during the incorporation of any LLC is the filing fee for the Articles of Organization with the California Secretary of State. In this regard, it may be called a one-time fee necessary for registering your business officially and is regarded as indispensable in so far as the legal establishment of the LLC is concerned.
Once the Articles of Organization are filed, LLCs need to file a Statement of Information. This form-one that is due within 90 days after the filing of the provides the state with much-needed information about the principal office address of the business, the name of the registered agent, and member or manager information. There is a minor filing fee associated with this document. The LLCs also have to file it from time to time, usually every two years, in order to update any information with the state.
Also, California LLCs must pay an annual franchise tax. The franchise tax amount is owed each year that an LLC is in existence to the California Franchise Tax Board, without regard to whether any business has been conducted or income earned. Although the base for this tax is the same for nearly all LLCs, that amount increases once an LLC reaches a certain level of income. Other times, the amount of franchise tax depends on the level of LLC income; thus, owners should include this in their budgeting.
In addition to these filing fees, an LLC also needs to designate a registered agent who shall receive those official communications that are required. Since most business owners do not want to personally deal with the attendant responsibilities of being an agent, they appoint third-party firms as their registered agents, which charge them a periodical fee.
They will also want to obtain any local business licenses and permits, as these vary greatly in cost due to the type of industry and location. Other nice-to-haves include hiring an attorney to create an operating agreement, which is not technically a legal requirement but is highly beneficial in establishing member rights and responsibilities within the LLC.
Generally speaking, the cost of creating an LLC in California ranges from about $500 for a basic setup to several thousand dollars if the business requires licenses, permits, or additional legal assistance. As noted, it is critical to monitor such costs and appreciate ongoing obligations that include an annual tax and a biennial Statement of Information for maintaining an LLC in California.
