• June 23, 2014

6 Things to Know About Forming an LLC in California

Trapp Technology

6 Things to Know About Forming an LLC in California

6 Things to Know About Forming an LLC in California 1080 454 Trapp Technology

by Michael Schachter

1. Name
When forming an LLC, an individual must ensure that the name is available with the California Secretary of State (“SOS”) or else the filing of the Articles of Organization to form the LLC could be rejected. you could check the name availability online by entering your proposed name, and any variations thereof, on the SOS website and clicking the “Limited Liability Company/Limited Partnership Name” tab at the following website: kepler.sos.ca.gov/. An individual may also call or write to the SOS to ascertain whether a certain name is available. If the individual ascertains that the proposed name is available, an individual could reserve the name by paying a fee to the SOS or move forward with forming an LLC.

Forming An LLC

The SOS is a filing service and does not provide legal advice regarding the sufficiency of the name in the marketplace. Thus, it is prudent to check search engines for the proposed name and reserve the domain names to ensure that you are practically able to use the name without an issue even if the individual is forming an LLC with the SOS.

2. Professional Services
Forming an LLC in California may not provide “professional services”. “Professional services” are defined as any type of professional services that may be lawfully rendered pursuant to a license, certification, or registration authorized by laws. It is recommended that you contact the appropriate licensing authority in order to determine whether your services are considered professional.

3. Articles of Organization (Form LLC-1) (“Articles”)
The Articles registers the LLC with the SOS and the form can be found here. Once the Articles is correctly completed and signed, the individual would submit the Articles with the SOS via mail or hand delivery. The SOS generally takes 7-10 business days to file the Articles but could take longer depending on the time of the year. An individual could expedite the filing, if necessary, for a fee. It is also possible to check the status of the Articles by referring to the “Processing Times” page on the SOS website: www.sos.ca.gov/business/be/processing-times.htm. Filing the Articles will obligate the LLC to pay an annual minimum tax of $800 to the California Franchise Tax Board.

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4. Employer Identification Number (EIN)
Every LLC is required to have an EIN. An EIN is the identification number for the LLC for tax purposes with the IRS. An individual could obtain an EIN online here.

5. Operating Agreement
An Operating Agreement for an LLC sets forth how the LLC will be managed and run. It will also state the ownership interests and officers, if any. Although an Operating Agreement is not required in California, it is highly recommended. Operating Agreements are to be maintained by the LLC and are not to be filed with the SOS.

6. Statement of Information
A Statement of Information for the LLC must be filed with the SOS within 90 days after filing the Articles and biennially thereafter during the applicable filing period. The applicable filing period is the calendar month in which the Articles was filed and the immediately preceding five calendar months. The form of Statement of Information is found here.

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Michael Schachter is a founder and an owner of Pearson & Schachter, where he is a business, corporate and real estate transactional attorney. Michael has authored articles in corporate, business and real estate law. For more information, visit: www.PearsonSchachterLaw.com.

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