Business

Starting a business in California: LLC formation and other tips

Staying focused on your Startup’s mission while forming your business entity

 

Getting your startup off the ground is not always an easy process, many entrepreneurs quit because they find the process of building their own business too hard or they don’t have the knowledge and expertise. Try to stay focused on your idea and your product or services and don’t get too overwhelmed with the process of forming your own business entity, you don’t need to know it all and having a new and fresh perspective just might be what sets you apart from the rest. 

Why an LLC might be exactly what your startup needs 

 

As entrepreneurs try to set up a business that won’t needlessly complicate things, it’s no surprise why the majority of startups in the US prefer setting up an LLC to any other type of business entity that provides liability protection to its members. A startup needs to be covered from lawsuits and business debts but at the same time entrepreneurs do not have the time or experience to form a complex entity such as a corporation which is more suitable for larger and well established entities. An LLC can offer both simplicity, the liability coverage and the tax benefits that a startup needs to help get it quickly off the ground. 

Forming an LLC in California  

 

The following actions need to be taken in order to start your LLC off the right way, taking precautionary measures to avoid any problems down the road. 

 

  • Name your LLC: Choose a name that suits your business, adheres to California’s guidelines and is available on the California Secretary of State website. 

 

Quick Tip: when choosing a name for your LLC make sure to check if there is an available web domain with the same name, you might not want to create a website right now but down the road this might be an option you would want to have. Having the same domain name as your business can only be beneficial in spreading brand awareness. 

 

  • Choose a registered agent in California: a registered agent is required by the state of California, they take care of all of the paperwork needed to create and keep your LLC active. 

 

Quick Tip:  Make sure that your LLC stays active and adheres to the annual reporting requirements so you don’t run into problems down the road and you avoid an unwanted dissolution. 

 

  • File the Articles of Organization: needs to be filed with the California Secretary of State and can be completed online, by mail or in person and has a $70 fee. You also need to decide if your LLC will be managed by all of its members or by an appointed manager that is not part of the LLC. 

 

  • File the Initial Statement of Information: Form LLC-12 is required to be filed by California State Law and can be done online in person or by mail

 

  • Create an Operating Agreement: it is intended for internal use and helps to establish ownership terms, the roles of each member, how the company is managed and how profits will be distributed etc. It does not need to be filed with the California Secretary of State but it is needed to establish your LLC as a separate legal entity, 

 

Quick Tip: Make sure to update your Operating Agreement if there are any changes in the way your business operates or if any members have leaved in order to avoid any future disputes 

 

  • Obtain an EIN: an Employer Identification Number is needed in the state of California and is like a social security number for your business. Necessary to hire employees and open a bank account for your business. They are free of charge and can be obtained online. 

 

LLCs have been adopted by all 50 states targeted mainly to help small business growth, California is no exception having a simple and non complex approach to setting up your LLC. TRUiC is a business founded by entrepreneurs to help other business owners in their first steps. They offer extensive guides on how to quickly and effectively form an LLC in California, with state specific guidelines and tips that are worth taking a closer look at. 

 

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