Business & Contract Law ✦ Entity Formation
Filing the LLC Takes Twenty Minutes. Setting It Up Right Takes a Plan.
Anyone can file Articles of Organization on the Secretary of State’s website. What the filing does not include is the tax election, the operating agreement, the founder equity, the licenses and registrations California requires, and the compliance calendar that keeps the entity from being suspended. North Star Law Firm forms California LLCs and corporations with all of that done, by an attorney who is also a CPA. Flat fee. Free consultation. Statewide.
The Short Answer
Form the entity with the tax result decided first, and the paperwork will be right.
A California business entity is three decisions and a stack of filings. The decisions are which entity (LLC, corporation, or something else), how it is taxed (disregarded, partnership, S corporation, or C corporation), and how the owners hold and share it (the operating agreement or bylaws and shareholder agreement). Get those right and the filings are mechanical. Get them wrong, or skip them, and you find out at tax time, at the first partner dispute, or when the Secretary of State suspends the entity for a missed Statement of Information. We make the decisions with you, model the tax on your numbers, and handle every filing on the list below.
- Choice of entity and tax classification modeled on your revenue, margin, and owners
- Articles of Organization or Incorporation, Statement of Information, EIN, and registered agent
- S corporation election (Form 2553), or a C corporation with founder stock and § 83(b) elections
- Operating agreement or bylaws and shareholder agreement drafted for your ownership
- Seller’s permit, EDD employer registration, city business license, fictitious business name
- First-year compliance calendar: franchise tax, Statement of Information, annual minutes
The Checklist
What California actually requires to start a business
The Secretary of State filing is one item. This is the rest, with the deadline attached to each.
| Item | Who requires it | When | Consequence of missing it |
|---|---|---|---|
| Articles of Organization (LLC-1) or Articles of Incorporation | Secretary of State | At formation | No entity exists |
| Statement of Information (LLC-12 / SI-550) | Secretary of State | Within 90 days, then every two years (LLC) or annually (corporation) | $250 penalty; suspension by the Secretary of State and the FTB; a suspended entity cannot sue or defend in court |
| EIN | IRS | Before hiring or opening a bank account | No payroll, no bank account |
| S election (Form 2553) | IRS (California follows automatically) | Within 2 months and 15 days of the start of the tax year | Default taxation for the year; late relief usually available |
| $800 annual franchise tax | Franchise Tax Board | First year by the 15th day of the 4th month; annually thereafter | Penalties, interest, and eventual suspension |
| Seller’s permit | CDTFA | Before making taxable sales | Unregistered sales tax liability; eight-year audit period for unfiled periods |
| Employer registration (DE 1) | EDD | Within 15 days of paying more than $100 in wages in a quarter | Penalties on unreported payroll |
| Fictitious business name | County clerk | Within 40 days of starting business under a name other than the entity’s | Cannot sue on contracts made under the name until filed (Bus. & Prof. Code § 17918) |
| City business license | City (Riverside, San Bernardino, Ontario, etc.) | Before operating | Penalties; some cities audit against state records |
| Beneficial ownership report | FinCEN | Domestic companies exempt since March 2025 | Foreign-formed entities registering in California still report |
LLC or corporation: how the choice is made in California
The default for a small California business is an LLC, and the default is often right: liability protection, flexible ownership, a single filing, and the option to elect S corporation taxation later. The LLC’s cost is California’s gross-receipts fee under R&TC § 17942, which starts at $900 when revenue passes $250,000 and reaches $11,790 at $5 million, on top of the $800 annual tax, whether or not the business is profitable. A corporation electing S status pays 1.5 percent of net income instead and offers the reasonable-salary payroll tax savings that make it the better vehicle for a profitable operating business. A C corporation makes sense when outside investors require it or when a future sale might qualify for the federal qualified small business stock exclusion, with the caveat that California does not honor that exclusion. Professionals licensed by the state (doctors, lawyers, accountants, and others) generally cannot use an LLC at all and form a professional corporation instead. The tax modeling is done before the choice, and the choice is documented in the engagement.
What the online formation services leave out
A formation service files the articles and, for an extra fee, sends a generic operating agreement. It does not decide whether the LLC should elect S status before the first payroll, whether the members’ capital accounts should be tracked on a tax or book basis, whether the operating agreement’s distribution provisions match the allocations the IRS will enforce under I.R.C. § 704, or whether a founder’s equity should be issued now and an § 83(b) election filed within 30 days while it is worth nothing. It does not register the entity with the CDTFA or the EDD, file the fictitious business name, or calendar the Statement of Information. Those are the steps that produce the tax result and the liability protection you formed the entity for, and they are the ones most often found missing when a new client brings us an entity someone else formed.
When the entity is already formed and something was skipped
Most of it is fixable. A missed S election can usually be made late under Rev. Proc. 2013-30 with a reasonable-cause statement. A suspended entity can be revived by filing the delinquent Statements of Information and paying the FTB’s balance, with a certificate of revivor that restores its powers, though contracts made during suspension may need ratification. An LLC that never adopted an operating agreement can adopt one now, and equity that was never documented can be papered, ideally before it becomes valuable or contested. The cleanup is a flat-fee engagement, and it is cheaper the sooner it happens.
The Attorney-CPA Difference
The entity is a tax election with a liability shield attached. We build both.
- Entity and tax classification chosen on modeled numbers, not defaults
- Every state and local registration completed, with the deadlines calendared
- Operating agreement or bylaws drafted for your ownership through the business law practice
- Founder equity, § 83(b), and S elections handled on time
- Flat fee for formation, quoted in writing, with state filing fees and the $800 tax paid to the state
Questions & Answers
Entity formation questions California owners ask
How much does it cost to form an LLC in California?
The Secretary of State charges $70 for the Articles of Organization and $20 for the Statement of Information, and the FTB collects the $800 annual tax. Our flat fee covers the entity, the operating agreement, the tax election, the registrations, and the compliance calendar, and is quoted before you engage.
Can I form my LLC in Nevada or Delaware to avoid California taxes?
If the business operates in California, no. A foreign LLC doing business here must register with the Secretary of State, pays the same $800 tax and gross-receipts fee, and files California returns. You end up with two states’ filings and one state’s taxes. Out-of-state formation makes sense only for specific investor or multi-state structures.
Do I need a registered agent?
Yes. Every California LLC and corporation must designate an agent for service of process with a California street address. An owner can serve, but a professional agent keeps your home address off the public record and ensures lawsuits are not missed.
I am a licensed professional. Can I use an LLC?
Generally not. California does not allow LLCs to render professional services requiring a state license; physicians, dentists, attorneys, accountants, architects, and many others form a professional corporation under the Moscone-Knox Act instead. The corporation can still elect S status.
Form it once, form it right.
A free formation consultation with an attorney-CPA, and a flat fee in writing before anything is filed.