California Company Incorporation: The Latest News And Tips

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Starting a business for many entrepreneurs and aspiring business owners may be an appealing possibility but also may seem like a daunting challenge to complete. Entrepreneurs looking to establish a formal business structure that incorporates elements of a sole proprietorship and a  corporation could potentially consider the opportunity to get started with a new LLC business structure. Limited liability companies (LLCs) are often considered to be a popular choice for new startups and business owners who are looking to form a professional business. 

Entrepreneurs looking to incorporate their businesses are more often than not looking to transform their sole proprietorships into a formal state-recognized company in accordance with the specific state of incorporation. Businesses that strive to incorporate become a legal business structure set apart from the individuals who initially founded the business. Through the means of incorporation, business owners create a separate legal entity to transact the company. The new business then has the means to transform the way it is seen through the eyes of the law, has increased credibility, and may potentially generate more customers, clients, and employees.

California Business Incorporation  

In the state of California, limited liability company names are required to have the initials “LLC” or the phrase “limited liability company” embedded within the title. The state laws direct that LLC business names may not include any types of words that refer to alternate business types as well as words that refer to specific kinds of business. California requires every business registered as an LLC to designate a registered agent, who is the point of contact between business entities and the state regulations. Without a registered agent, a business in California may potentially lose good standing and has the right to possibly dissolve the LLC. Registered agents are an essential part of any Californian business since failure to correspond with the state could potentially result in a lawsuit for the company.

California Company Incorporation Requirements

California limited liability companies also require articles of organization, which may be described as the document that could register the LLC with the state. In total, the state of California charges an amount of around $70 to form a legally compliant LLC business structure. Should business owners choose not to pay expedited processing fees, it may take approximately ten days for the state to process the Californian LLC formation paperwork electronically. 

LLCs across most states require a federal tax ID number or an EIN. This may potentially serve as the business version of a social security number and may possibly be used for several LLC functions such as hiring employees or opening a bank account. Depending on where any specific business is located within the Californian state, business owners may be required to pay some local taxes. All LLCs are governed by California’s Annual Franchise Tax, regardless of technicalities; this conceivably means that all LLC business structures may be subjected to pay around $800 for the Annual Franchise Tax. 

Similar to taxation requirements, California requires business permits that any specific LLC needs to acquire should they be ready to do business. According to state regulations, California requires a seller’s permit should the LLC be a type of retail business; however, each state may potentially have an industry-specific license and permit requirements for certain companies in niche industries. 

California Incorporation Tips

After creating a California LLC and obtaining the EIN from the IRS, research advises that it is recommended to establish a separate business bank account so that the business finances may be maintained separately from the business owners’ personal finances. This may be beneficial for business owners who are looking to secure their personal assets separate from the business. 

Californian businesses that include employees are legally required to acquire unemployment insurance, workers’ compensation, and disability insurance; these businesses could also consider general liability insurance as well as industry-specific policies to ensure that the company is streamlined and secured. Another valuable tip for business owners aspiring an LLC business is for business owners to file an introductory report within 90 days of establishment. It may also be helpful for business owners to employ an accountant or an accounting service software to ensure financial security since there may be too much room for potential error, which may cost the business money and time. Aside from accounting, it may be useful for business owners to consider learning the task of income reporting since it is important to file this type of form regardless of whether money was lost or made during the course of the year.