Doing Business in California as an LLC
Learn what it means to do business in California as an LLC — from filing Articles of Organization and paying the $800 franchise tax to Statement of Information deadlines and staying in good standing.
Bizee Editorial Staff
Editorial Team
California LLC at a glance
Filing fee: $70 (Articles of Organization, Form LLC-1, filed online)
Processing time: Varies; expedited options available through the California Secretary of State
State agency: California Secretary of State (bizfileonline.sos.ca.gov)
Annual report due: Statement of Information (Form LLC-12) due within 90 days of formation, then every 2 years; $20 filing fee
State tax rate: $800 annual minimum franchise tax due to the California Franchise Tax Board; additional LLC fee applies if gross receipts exceed $250,000
What counts as doing business in California
The California Franchise Tax Board (FTB) decides whether a business is considered to be doing business in California. If your LLC meets any of the FTB's criteria — things like having employees in the state, making sales to California customers, or holding property here — it's subject to California's tax and compliance requirements, regardless of where it was formed.
This matters most for 2 types of business owners. First, those thinking about forming an LLC in another state to sidestep California's $800 franchise tax — that strategy rarely works if the business is actually operating here. Second, those who already know they're doing business in California and want a clear picture of what's required to stay in good standing.
California LLC formation requirements
To form an LLC in California, you file Articles of Organization (Form LLC-1) with the California Secretary of State. The form covers your LLC's name, management structure, and registered agent. California has a few naming and filing requirements that catch people off guard, so it's worth knowing them before you start.
Naming your LLC
Your LLC name must include "Limited Liability Company," "LLC," or "L.L.C." It can't be identical or deceptively similar to a name already registered with the California Secretary of State, and it can't include words that imply banking, insurance, or licensed professional services without the proper credentials.
You can reserve a name for 60 days through the Secretary of State if you're not ready to file yet.
Articles of Organization (Form LLC-1)
Form LLC-1 asks for your LLC's name, a California street address for service of process, the name and address of your registered agent, whether the LLC is member-managed or manager-managed, and whether it's formed for a specific purpose or any lawful purpose. File online through the California Secretary of State's BizFile portal.
Registered agent
Every California LLC needs a registered agent — a person or business with a physical California street address who can receive legal documents on behalf of the LLC during business hours. You can serve as your own registered agent, but many business owners use a registered agent service to keep their personal address off public records.
Employer Identification Number (EIN)
All California LLCs need a federal Employer Identification Number (EIN) from the IRS — even if the LLC has no employees. You apply online at irs.gov/ein at no cost. Your EIN is what you'll use to open a business bank account, file taxes, and hire employees if the time comes.
Ongoing compliance checklist for California LLCs
Forming your LLC is the first step. Staying in good standing with California requires meeting a handful of ongoing requirements — some annual, some biennial. Missing them can mean penalties, loss of good standing, or administrative dissolution by the Secretary of State.
$800 annual franchise tax
California charges every LLC doing business in the state a minimum $800 franchise tax each year, regardless of income or whether the business turned a profit. For newly formed LLCs, the first payment is due by the 15th day of the 4th month after formation. After that, it's due annually. Pay through the California Franchise Tax Board.
Statement of Information (Form LLC-12)
Within 90 days of forming your LLC, you need to file a Statement of Information (Form LLC-12) with the California Secretary of State. After that initial filing, it's due every 2 years. The filing fee is $20 when filed online. The form updates the state on your LLC's principal address, managers or members, and registered agent.
Not filing on time carries real consequences. Late filings trigger a $250 penalty for the first 60 days, plus $20 per additional day. After 12 months without a filing, the Secretary of State can suspend your LLC's good standing.
Annual tax return (Form 568)
California LLCs file Form 568 — the Limited Liability Company Return of Income — with the Franchise Tax Board each year. This is separate from your federal tax return. If your LLC's gross receipts exceed $250,000, an additional LLC fee applies on top of the $800 minimum franchise tax. A tax professional can help you figure out what your LLC owes.
Business bank account
California doesn't legally require an LLC to have a separate business bank account. But running business and personal finances through the same account is one of the most common mistakes that can cost you the liability protection your LLC is supposed to provide. If a court decides your business and personal finances aren't truly separate, your personal assets are fair game.
Operating agreement
California law doesn't require LLCs to have a written operating agreement, but having one is strongly recommended. It sets out how the LLC is managed, how profits and losses are divided, and how decisions get made. Without one, California's default LLC rules under the Corporations Code govern your business — and those defaults may not match what you actually want.
FAQ
It depends on your situation. The California Franchise Tax Board sets the criteria. Generally, if your LLC has employees in California, makes sales to California customers, holds property in the state, or is managed from California, it's considered to be doing business here — and subject to California's $800 franchise tax and compliance requirements, regardless of where the LLC was formed.
Yes. California requires newly formed LLCs to pay the $800 minimum franchise tax for their first tax year. The payment is due by the 15th day of the 4th month after the LLC is formed. There's no grace period for new businesses — the $800 is owed regardless of whether the LLC has earned any income yet.
If your LLC was formed in another state but is doing business in California, you need to register as a foreign LLC with the California Secretary of State. That means filing a registration application, appointing a California registered agent, and paying the $800 annual franchise tax. A foreign LLC that skips this registration can't enforce contracts in California courts.
It depends on the filing method and current processing times at the California Secretary of State. Standard online filings through BizFile are generally processed faster than paper filings. Expedited processing options are available for an additional fee. Check the Secretary of State's current processing times before filing if your timeline is tight.
Generally, no — not in the traditional sense. California does not recognize nonprofit LLCs the way it recognizes nonprofit corporations. You can form an LLC and operate it without distributing profits, but it won't qualify for federal tax-exempt status under IRS rules the way a nonprofit corporation can. If nonprofit status matters for your goals, talk to a legal professional about forming a nonprofit corporation instead.
The Augusta Rule refers to an IRS provision that lets you rent your personal residence to your LLC for up to 14 days per year without reporting that rental income on your personal tax return. If your LLC pays you rent for those days, the LLC may be able to deduct the expense. The rules around this are specific — a tax professional can help you figure out whether it applies to your situation.
It's done for privacy and liability protection. California keeps LLC ownership information relatively private compared to many other states, which makes it appealing for people who want to hold real estate without their name appearing in public property records. That said, transferring a home into an LLC can trigger mortgage due-on-sale clauses and affect property tax treatment. Talk to a legal professional before making that move.
No. California does not allow LLCs to claim lottery winnings. Lottery prizes in California must be claimed by an individual. This is a common question because some states do allow LLCs to claim winnings as a way to protect the winner's identity — California is not one of them.
