How to Form an LLC in San Diego
You’ve looked into the different business entity options and discussed your business goals with an experienced attorney. You’ve finally decided that you want to form an LLC, but now what? Here we’ll explain the steps for starting an LLC in San Diego, California. This is similar to most states, but California has a few specific requirements you’ll want to be sure not to miss.
Write Business Plan
The first thing you should do is write a business plan. While this step is technically not required, it will help you create an effective growth strategy by outlining your objectives and laying out a plan for how to meet them. It also helps your team better understand your business and is key to obtaining funding.
Choose a Business Name
The next step for forming an LLC in San Diego is choosing a business name. Not only must your name include “LLC,” “Limited Liability Company,” or some other iteration of that title, but it must also be unique to your business. By searching the Secretary of State website, you can find out if your business name ideas are already taken. You can also file a name reservation request form to reserve your chosen business name for 60 days while you complete the rest of the steps.
Choose a Registered Agent
The state of California requires your LLC to have a registered agent that will be visible in the public record and can receive legal documents on behalf of your LLC. You can hire a company or individual unrelated to your LLC to be your registered agent, or a member of the LLC can act as a registered agent. The LLC itself, however, cannot act as its own registered agent.
File Articles of Organization
In order to become an officially recognized LLC, you must file Articles of Organization (Form LLC-1) with the California Secretary of State. This will include all of the relevant information about your business, including the name and address of the business, its purpose, management structure, and the name and address of the registered agent you chose. The address cannot be a P.O. Box and this step does cost $70.
Get a Federal Tax ID Number
If your registration is approved from the previous step, you will receive a certificate that confirms your LLC formally exists in the state of California. You can use the information on this document to obtain an Employer Identification Number (EIN) through the IRS. While not required for single-member LLCs, this allows you to get a business bank account, hire employees, and helps you with filing and managing your taxes.
Create an Operating Agreement
The state of California requires that LLCs have an operating agreement. This document does not need to be filed anywhere and technically doesn’t even need to be written down. However, this is what courts will use to settle disputes and determine if your business has operated according to this agreement. So having it readily accessible if needed is a good idea.
File Statement of Information
Within 90 days of forming your LLC, you must file a statement of information (Form LLC-12). This document contains similar information to the Articles of Organization but also contains your California Secretary of State filing number and the name and residence of each member of your LLC. This costs $20 and needs re-filed every two years.
Get Business Licenses as Needed
Depending on your business, you may need to obtain certain licenses before you can operate. For example, if you plan to sell alcohol, you will need to get a liquor license. If your business includes some type of clinic such as a dental office or pharmacy, you’ll have to get a clinic permit. There are a variety of different licenses you may need, but every San Diego business needs a San Diego business license in order to conduct business within the city limits.
Register with the Appropriate California Taxing Authority
There are a variety of taxes you’ll have to pay. Every LLC in California must pay an annual $800 franchise tax fee. You may also need to register with the California State Board of Equalization if you plan on collecting sales tax, and you’ll need to register employer taxes with the California Employment Development Department. There are some other taxes that you may have to pay depending on your business, and with new legislation, you could be exempt from the annual franchise tax fee for the first year.
While technically you do not need a business lawyer to help you set up your LLC, the process can be complex and an experienced attorney can help you navigate it. In fact, when speaking with a business attorney, you may discover that you want to register your business in a different state.
It’s important to have all your ducks in a row when creating your business so that you don’t run into legal troubles down the road. Here at Bagla Law Firm, we’re proud to help our clients figure out what path will work best for their business and guide them in setting up their business entity the right way. Contact us today to schedule a consultation.