Form an LLC in California

The Golden State offers golden opportunities, but it comes with a steep price tag. Learn about the $800 Franchise Tax and how to keep your address private.

🌉 The Silicon Valley Dream vs. Reality

California is the 5th largest economy in the world. Silicon Valley. Hollywood. The Pacific Coast. Every entrepreneur dreams of building their empire here.

But here’s what they don’t tell you:

The Golden Rule:

• ✅ Do you have employees, an office, or warehouse in California? → Open in California (you’re legally required).
• 🚫 Are you 100% remote with no California presence? → Run to Wyoming (save $800/year).

🎯 At a Glance: California LLC

💡 Who Should Choose California?

California makes sense if:

• ✅ You have a physical office in LA, SF, or San Diego
• ✅ You have employees working in California
• ✅ You have a warehouse, retail store, or inventory in CA
• ✅ Your target customers require a California address (some contracts)
• ✅ You’re raising VC funding in Silicon Valley (then register as Foreign LLC)

Wyoming is better if:

• 🚫 You’re a 100% remote business (no physical CA presence)
• 🚫 You want to save $800/year in mandatory taxes
• 🚫 You sell digital products or services online
• 🚫 You value privacy (CA exposes your address publicly)

🏷️ Step 1: Choose Your California LLC Name

California has standard naming requirements with a few quirks:

• Must include “LLC”, “L.L.C.”, or “Limited Liability Company”
• Cannot use restricted words like “Bank”, “Trust”, “Insurance”, “University” without approval
• Cannot use “City”, “County”, or imply government affiliation
• Must be distinguishable from existing California entities

Check Availability: Search the California Business Search to see if your name is available.

💡 Pro Tip: California’s database is the most comprehensive in the US—it includes dissolved entities and DBA names. If your name is taken, try adding your city or industry (e.g., “SunsetMedia LA LLC”).

🕵️ Step 2: Get a Registered Agent (Critical for Privacy)

California requires a registered agent with a California street address (no PO boxes).

🏆 Recommended: Northwest Registered Agent

Northwest has physical offices in Los Angeles and Sacramento and can shield your personal address:

• ✅ $125/year – Standard registered agent service
• ✅ Their California address appears on public records, not yours
• ✅ Handles California compliance filings ($800 tax, Statement of Info)
• ✅ Same-day document scanning & email forwarding
• ✅ Reminder system for the 90-day Statement of Information deadline

💡 Privacy Strategy: Use Northwest’s address as both your registered agent AND principal office address on the Statement of Information. This keeps your real address off public databases.

Get Your California Registered Agent →

📝 Step 3: File Articles of Organization (Form LLC-1)

California calls the formation document “Articles of Organization” (Form LLC-1). You file it through the bizfile online portal.

💻 Filing Process

What You’ll Need

1. LLC Name (verified as available on California Business Search)
2. Registered Agent (with a California street address)
3. Management Structure (member-managed or manager-managed)
4. Purpose Statement (usually “any lawful business activity”)
5. Organizer Information (the person filing—can be anyone)

Processing Time: 2-5 business days via standard filing. Expedited options available ($350 for same-day, $175 for 24-hour).

🐘 The $800 Franchise Tax (The Elephant in the Room)

This is the most important section if you’re considering California. Let’s be brutally honest about the costs.

📊 The Additional “LLC Fee” (Gross Receipts Tax)

If your California LLC makes more than $250,000 in gross revenue, you pay an ADDITIONAL annual fee:

💭 Reality Check: This is a gross revenue tax, not profit tax. If you sell $1M in products but only profit $50K, you still owe $6,800 to California.

🗓️ California vs. Wyoming: 5-Year Cost Analysis

💡 The Verdict: Unless you’re legally required to be in California (physical presence), you’re burning $3,875 over 5 years for zero benefit.

📄 Step 4: File Statement of Information (Form LLC-12)

This is California’s most notorious privacy violation—and it’s mandatory.

🔍 The Privacy Problem

Unlike Wyoming (which protects member privacy), California makes your Statement of Information fully searchable online.

What gets exposed:

• 🚨 Your full legal name
• 🚨 Your residential address (if you use it)
• 🚨 Your phone number and email (if provided)
• 🚨 Updated every 2 years with fresh information

💡 Privacy Workaround: Use your registered agent’s address as BOTH your principal office and mailing address. This keeps your personal address off the public database.

📅 Ongoing Requirement

After the initial filing, you must update your Statement of Information every 2 years during the 6-month period after your original formation date.

Example: Formed March 15, 2025 → Next Statement due between Jan 1 – June 30, 2027.

🛡️ Step 5: Get Your EIN & Operating Agreement

After California approves your LLC (2-5 days), you need two federal documents:

1. EIN (Employer Identification Number)

Same process as other states. Non-residents can:

• Apply by fax – Fill out Form SS-4 and fax to the IRS (4-6 weeks)
• Use a service – Northwest or IncFile can get your EIN in 1-2 days

👉 Read our complete EIN guide for non-residents

2. Operating Agreement

California does NOT require an Operating Agreement to be filed with the state, but it’s critical for legal protection.

What to include:

• Member names and ownership percentages
• Capital contributions and profit distribution
• Management structure (member-managed or manager-managed)
• Voting rights and decision-making process
• Buyout and dissolution procedures

💸 California Tax Structure

Personal Income Tax: Up to 13.3% (Highest in US)

California has the highest state income tax in America, with a progressive structure:

• 1% on first $10,000
• Scales up to 13.3% on income over $1 million

For LLC owners: If your LLC is a pass-through entity (default), your profits flow to your personal tax return. California residents pay this tax on worldwide income.

💡 Non-Resident Note: If you live OUTSIDE California and your LLC only does business IN California, you only pay California tax on California-sourced income.

Sales Tax: 7.25% Base (Up to 10.75% Total)

If you sell physical products to California customers, you must collect and remit California sales tax:

• Base state rate: 7.25%
• Local districts add 0.10% – 3.50%
• Total range: 7.25% – 10.75% (varies by city)
• Los Angeles: 9.50% | San Francisco: 8.625% | San Diego: 7.75%

Registration: Apply for a seller’s permit through the California Department of Tax and Fee Administration (CDTFA).

Payroll Taxes (If You Have Employees)

California has additional employer obligations:

• State Unemployment Insurance (SUI): 1.5% – 6.2% on first $7,000 of wages
• Employment Training Tax (ETT): 0.1% on first $7,000 of wages
• State Disability Insurance (SDI): 1.1% withheld from employee wages (2025 rate)

🏦 Opening a US Bank Account

California LLCs are widely accepted by banks due to the state’s economic prominence:

1. Mercury (Best for Tech Startups)

• ✅ 100% online application
• ✅ No minimum balance or monthly fees
• ✅ Fast approval (24-48 hours)
• ✅ Popular with Silicon Valley startups

2. Wise Business (For International Operations)

• ✅ Multi-currency accounts (USD, EUR, GBP, etc.)
• ✅ Low international transfer fees
• ✅ Easy approval for California LLCs

3. Chase Business Banking (Traditional Option)

• ✅ Physical branches throughout California
• ✅ Strong reputation for business accounts
• ✅ May require in-person visit or video call

Documents banks will ask for:

1. Articles of Organization (from California Secretary of State)
2. Statement of Information (Form LLC-12)
3. EIN Confirmation Letter (from IRS)
4. Operating Agreement
5. Your passport + proof of address

⚖️ California vs. Wyoming vs. Delaware

Choose California if:

• ✅ You have a physical office, warehouse, or employees in CA
• ✅ You’re legally required to register due to nexus
• ✅ Your target customers require a California business address
• ✅ You’re raising funding and investors require CA incorporation

Choose Wyoming if:

• ✅ You’re a 100% remote business with no CA presence
• ✅ You want to save $800/year in franchise tax
• ✅ You want maximum privacy (Wyoming doesn’t publish member names)
• ✅ You sell digital products/services online

Choose Delaware if:

• ✅ You’re raising venture capital and investors require Delaware
• ✅ You plan to go public (IPO) eventually
• ✅ You need the specialized Court of Chancery

👉 Still deciding? Compare all 50 states side-by-side

❓ Frequently Asked Questions

🐻 Should You Form a California LLC?

Let’s be honest: California is expensive and invasive. But sometimes it’s unavoidable.

Form Your California LLC →

🐻 Silicon Valley Economy + Hollywood Brand + Strict Compliance

✅ Fast 2-5 day approval | ⚠️ $800 annual franchise tax | 🕵️ Statement of Information required