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How to Start a Business in California

What You'll Need

  • Your chosen business name (check availability at sos.ca.gov before filing)
  • A registered agent address in California (can be your own address)
  • EIN from IRS.gov (free, takes 5 minutes online)
  • $70 for the Articles of Organization filing fee (LLC)
  • $800 for the first-year California franchise tax
  • $20 for the Statement of Information (due within 90 days of formation)

Normal Procedure

  1. Choose your entity type. For most solo operators, a single-member LLC is the right starting point. See the entity type comparison below.
  2. Check your business name at sos.ca.gov to confirm it is available.
  3. File Articles of Organization (Form LLC-1) online at sos.ca.gov. Fee is $70.
  4. Get an EIN at IRS.gov. Free and immediate. You need this before you can open a bank account or hire anyone.
  5. File a Statement of Information within 90 days of formation. Fee is $20. Due every two years after that.
  6. Register with the FTB via MyFTB at ftb.ca.gov and pay the $800 franchise tax.
  7. Open a dedicated business bank account using your Articles of Organization, EIN, and operating agreement.
  8. Check whether your city or county requires a local business license or permits.

Entity Type Comparison

  • Sole Proprietorship: No registration required. No liability protection. All income taxed on Schedule C. Best for testing a business idea before committing to a formal structure.
  • Single-Member LLC: One owner. $800 annual franchise tax. Personal liability protection. Taxed as a sole proprietor by default, with option to elect S-Corp status.
  • Multi-Member LLC: Two or more owners. Partnership taxation by default. $800 franchise tax plus an LLC fee based on gross revenue. Requires an operating agreement.
  • S-Corp: A tax election (not a separate entity type). Reduces self-employment tax by splitting income between salary and distributions. Most beneficial when net profit exceeds $60,000 to $80,000 consistently.
  • C-Corp: Separate tax entity with double taxation. Used primarily by venture-backed businesses planning to raise outside capital.

Abnormal Procedures

  • Forming an S-Corp from scratch: File Articles of Incorporation with the Secretary of State, then file Form 2553 with the IRS. Deadline is March 15 for the current tax year.
  • Converting an existing LLC to S-Corp taxation: File Form 2553 by March 15 (or within 75 days of the entity's formation). The underlying LLC does not need to change.
  • Multi-member LLC: All members must sign an operating agreement before filing. Ownership percentages, voting rights, and profit distribution must be agreed upon in writing.
  • Out-of-state business registering in California: File a Statement of Foreign Qualification with the Secretary of State. Still subject to the $800 franchise tax.

FAQs

How long does it take to form an LLC in California?

Standard processing is 4 to 6 weeks. Same-day and 24-hour expedited options are available for additional fees at sos.ca.gov.

Do I need an attorney to form an LLC?

Not required, but recommended if you have multiple members, complex ownership arrangements, or unusual provisions in your operating agreement.

Can I change my entity type later?

Yes, but there are tax and legal implications depending on the change. Talk to NCO before making any structure changes.

What if I already started operating without registering?

You are a sole proprietor by default. You can register an LLC at any time, but make sure NCO knows the start date so the first-year franchise tax is handled correctly.