Cost to Start an LLC in California

Key Takeaways

• When starting an LLC in California, be prepared to pay both the start-up and recurring costs. This is everything from state filing fees to annual franchise tax to registered agent fees!
• Although this is a required filing, it has a set state fee for filing the Articles of Organization. It is the same for the Statement of Information, so budget your cash flow accordingly!
• All California LLCs, including those that aren’t profitable, owe an annual $800 franchise tax. Failure to pay on time can incur late fees and administrative dissolution!
• We always suggest going with a professional registered agent service for ease of compliance and added privacy. Some providers will give you that free first year so you save even more money!
• Other costs like business licenses and permits, and even legal or accounting consultation, should factor into your total budget.
• Take advantage of free resources, like EIN applications and operating agreement templates. Be sure to remain compliant in order to prevent penalties and surprise fees!

California LLC Costs: Quick View

There are several different costs you will incur to set up your California LLC. These are costs that go well beyond just the cost to file. Don’t get distracted – view the entire landscape! Look beyond the one-time filing fees and annual minimum tax, and pay attention to the little costs that can quickly add up.

Having a handle on these figures will allow you to budget accordingly and avoid any last minute surprises. Keep reading to get a rundown of the biggest costs involved and how to tackle each one when starting your business.

Core State Filing Fees

State Filing Fees Forming your LLC is a very important process that begins with paying state fees. These are the must-pay costs to get your LLC recognized by the state:

• Articles of Organization: $70 (one-time fee)
• Statement of Information: $20 (penalty of $0 due within 90 days of registration)
• In-person handling fee: $15 (only if you file at the counter)

These periodic filings serve as evidence that your business is operational and maintain your business’s good standing. Your Articles of Organization is your primary formation document.

Your Statement of Information helps the state keep track of your LLC’s important activity.

The Annual Franchise Tax

The Annual Franchise Tax Every California LLC—regardless of profitability—pays a minimum annual franchise tax of $800. This payment needs to be made by the 15th day of the fourth month after you sign up.

If you fail to do this, your LLC could forfeit its status of good standing. Continued non-payment can actually close your business for you. What’s more, you might be subject to state income tax from 1% to 13% on net income.

Registered Agent Essentials

A registered agent is a person or company that accepts legal documents on behalf of your LLC. Thousands of international founders depend on services provided by companies like Northwest Registered Agent, where operating costs run around $75–$150 per year.

In fact, some provide the first year at no charge, which means you save money while launching your California business.

Other Startup Expenses

You may incur additional expenses, like business licenses, a local tax certificate, or a permit. In other cities, you pay a flat annual fee.

Additionally, there may arise expenses for accounting, compliance, or business insurance.

• Business license fees
• Local permits
• Compliance costs

Your California LLC Cost Breakdown

Whether you’re starting an LLC in California or moving there, it’s important to be aware of all the costs involved from the beginning. Clear numbers help you plan better and avoid last-minute surprises. As you progress through this process, you’ll notice both mandatory and voluntary expenditures. Each of them has a different, specific purpose and timeline.

Skipping one can put you behind or cost you more down the line! Let’s break down these costs, fee by fee. You’ll get a clear picture of where your money is currently going and tips on how to get ahead of them!

1. Articles of Organization Fee: $70

The first real step in establishing your brand-new California LLC is the Articles of Organization. The state requires a one-time fee of $70. This form is what officially creates your California LLC as a distinct legal entity. You provide information for your registered agent and other basic information about your business like the name and address.

Submitting this form shouldn’t be a mere formality. If you don’t file, your LLC isn’t recognized by the state. Failing to complete this step, or postponing it, means you can’t move forward and open a bank account. Plus, you won’t be able to sign contracts or hire employees. Until you file this and pay this fee, the state will not process any other documents.

2. Statement of Information Fee: $20

Ninety days after you create your LLC, you must submit a Statement of Information. The fee for this is $20. California requires you to provide some basic information about your business, such as your principal officers, business address, and principal business activity.

This periodic statement is how you maintain accurate and current records for your LLC with the state. Unfortunately, you are required to file this every two years. If any of that information should change, you have to report it immediately. Failure to complete this step could result in a penalty or even the suspension of your LLC. Filing this document on time isn’t just good practice, it’s the law.

3. Registered Agent Service Cost: $0–$125+

According to California law, every LLC must have a registered agent. This person or service receives important official correspondence and legal notices on behalf of your business. Alternatively, you could serve as your own agent at no cost. Most owners do pick one out of a desire for greater privacy and reliability.

In California, a commercial registered agent usually ranges from $50 to $300 per year. The precise cost depends on the company and what additional services they offer. For instance, if you form your new LLC with Northwest Registered Agent, they give you your first year of registered agent service for free. If you use a third-party service for this, you’ll receive alerts about your mail.

That way, you don’t have to worry about missing important legal notices, which is especially important if you stay outside of the U.S.

4. Operating Agreement: Usually Free

An operating agreement serves as your LLC’s rulebook, detailing how your LLC operates. While California doesn’t charge any California LLC filing fee for this document, it remains essential for all types of LLCs, including a single-member LLC. Regardless of its lack of a filing fee, having an operating agreement is crucial for preventing conflicts among members or partners from becoming public.

The good news is that many templates for an LLC operating agreement are available online for free. If you prefer to have a lawyer draft a custom agreement, you can expect to pay as much as $200. This agreement should outline the necessary steps should a member depart from the LLC, ensuring clarity and structure.

For founders from outside the U.S., a strong operating agreement further defines roles and responsibilities across different time zones and cultures, enhancing the operation of a California limited liability company.

5. Getting Your EIN: No Cost

Each LLC must obtain an Employer Identification Number (EIN), which is used by the IRS for tax purposes and to open a business bank account. The IRS provides you with an EIN for free. While it’s simple to obtain one online, you should only apply directly through the IRS’s official website.

You’ll need this number to file federal tax returns, hire employees, and open bank accounts for your business. A few companies attempt to charge you a service fee for this step. Luckily, there’s always a way to avoid that cost by doing it yourself—even if you don’t live in California.

6. Optional: Name Reservation Fee

If you intend to have a business name but wish to reserve it before you file, California allows you to reserve a name for $10. This step is completely optional. It’s useful to have if you aren’t quite ready to file your Articles of Organization yet.

Name reservations are valid for 60 days. Paying this nonrefundable small fee guarantees that no one else can take your desired LLC name. You’ll enjoy peace of mind as you complete your other paperwork. Once you see your ideal name up for grabs, don’t hesitate! This fee holds it for you while you get all of your documents in order.

7. Optional: DBA Name Filing

DBA stands for Doing Business As and is a process that lets your LLC create an alias name. This name can be different from your legal LLC name. Filing for a DBA in California varies between $40 and $100, depending on the county.

You will likely need a DBA if you intend to operate multiple brands or product lines under a single LLC. For example, maybe your LLC is “West Coast Holdings LLC,” but your store operates under the name “Sunny Goods.” Not just the county clerk – you have to renew your DBA every five years in most counties.

A DBA can aid in more effective business marketing or protect your primary LLC name from becoming public record.

Key Ongoing and Extra Costs

There’s the rub… California LLCs have an $800 annual franchise tax, no matter how much you make. This tax is on top of your formation costs. This excise tax begins on the 15th day of the fourth month after you create your LLC.

You might need city or industry-specific permits. These vary from $50-$500 based on your type of business and where you operate. Legal and renewal fees can be quite costly, often exceeding $1,000 annually. Wise preparation and ensuring you’re aware of the regulations for your municipality or sector prevents you from being blindsided.

What Is The CA Franchise Tax?

Upon forming, California forces all LLCs—regardless of income or activity—to pay an annual franchise tax. This fee is imposed on every LLC formed, registered, or transacting business in the state. This burdensome tax kicks in regardless of how much money you bring in or whether or not your business is even operating.

The baseline tax is $800 annually. If your LLC earns over $250,000 in a given year, you’ll pay significantly more. This additional tax is between $900 and $11,790 depending on how much you make.

It’s important to understand these fixed and variable costs so that you can effectively plan your cash flow. If you expect steady or growing revenue, budgeting for both the base tax and possible extra fees keeps your finances in check. Each LLC must pay the $800 annual fee by the 15th day of the fourth month after its creation. After that, annual payment is due by April 15th each year.

Understanding This $800 Annual Fee

The $800 franchise tax is the same for all California-based LLCs. Regardless of whether you’re turning a profit or not, you owe this charge. It’s due 3.5 months after your LLC is created.

This new rule has the potential to change the way you spend your business money in a big way. Alternatively, missing a payment means you’ll pay a 10% late fee on the total amount due. Why does California charge this fee? Their intention with this fee is to supplement public resources and mitigate state expenses associated with maintaining businesses.

Payment Deadlines and Methods

You can pay franchise tax in a variety of ways including online, by credit card, and through Payment Plan options. The initial payment is due 3.5 months after approval, then payments every April 15th thereafter.

There are online, mail, and wire transfer options to pay. On-time payment ensures your LLC remains in compliance and prevents additional fines and fees.

First-Year LLC Tax Nuances

If you created your LLC between January 2021 and January 2024, you may not have to pay this charge. Receive a complimentary first year! This one-time as-of-right break is a great help to new businesses.

In subsequent years, anticipate paying the base tax plus any potential additional penalty taxes.

Form 568: Reporting Your Income

Form 568 is required to be filed each year for every LLC in California. Not filing in time will incur additional penalties, including potential loss of your good standing with the state and increased annual LLC fees.

Why Your LLC Needs A Registered Agent

For California LLCs, having a registered agent isn’t just a business best practice—it’s the law. California requires every LLC to name a registered agent to receive legal documents, known as “Service of Process,” and other official notices. This is true regardless of your jurisdiction!

Thus, if you are an international founder or simply not located in California, you will still need to have an agent with a physical street address in the state. Your registered agent is your consistent, dependable point of contact for accepted service of process, subpoenas, and other important legal notifications from the state.

This official business address also serves to prevent your personal information from entering the public record, creating an obvious privacy advantage. For most business owners, hiring a professional service will offer the most peace of mind. You’ll never have to stress about overlooking a time-sensitive annual report request or other important legal notice!

The Agent’s Official Role

A registered agent will receive every legal notice, demand, or service of process on behalf of your LLC and send it your way. This means service for all legal proceedings, such as lawsuits, as well as any compliance notices from the Secretary of State.

You could use the agent’s California address as your business’s address of record. This is particularly convenient if you don’t maintain an office in the state. That means using a third-party agent will preserve your privacy and allow you to keep your home address from appearing on public, state filings.

The agent does more than just receive papers; they assist you in maintaining compliance with state regulations to prevent late fees or, even more dire, administrative dissolution.

DIY Agent vs. Professional Service

If you live in California, you can be your own registered agent using your home address. Just be sure you’re prepared to be on call all of the time during business hours! This can jeopardize your privacy and create unnecessary panic if you accidentally miss a delivery.

A professional agent gives you all of that plus peace of mind. They make sure that no important legal mail gets lost in the shuffle and help your LLC stay compliant.

Our Tip: Northwest (Free Year)

Our Tip: Northwest (Free Year) Northwest Registered Agent is the best option for founders outside of the U.S. They provide a free first year and have top-notch customer support.

With their easy-to-use platform, it’s a breeze to get up and running and keep all of your documents in order. By selecting a reliable registered agent such as Northwest, you can rest assured that your business will be taken care of.

Future Agent Service Costs

Registered agent services typically run $100–$150 per year. These fees vary from provider to provider, so be sure to budget for this annual expense.

Not only does budgeting for a professional agent allow you to avoid surprise bills, it ensures your LLC remains in good standing.

Ongoing California LLC Expenses

Operating a California LLC involves some continuing expenses that you should be aware of. These costs compound annually, piling up and potentially eating into your bottom line if you don’t keep a watchful eye on them. A responsible budget includes money to pay these fees. This is what helps maintain your business’ good standing and avoid any legal trouble!

Here’s what you should know about ongoing California LLC expenses and why they’re important to the fiscal well-being of your LLC.

That $800 Franchise Tax Again

That $800 Franchise Tax Again While not a new cost, one may feel the impact immediately. This is a required fee, regardless of whether your LLC turns a profit.

Failure to make this payment on time can result in severe penalties or even the loss of your business rights. Even so, make this tax a part of your annual budget and prepare for it as a regular expense.

Biennial Statement of Information

California is one of the states that requires you to file a Statement of Information every other year, with a $20 fee. To do so, you need to update important information such as your address, management, and registered agent.

File by the due date to prevent incurring late penalty fees and to ensure your public record is current.

Business License & Permit Renewals

With few exceptions, California cities require you to renew business licenses annually. Fees differ—an average small business in the city of San Francisco would pay $57 per year plus a $4 fee to the state.

A few localities have an annual fee that is flat regardless of business size. These business license & permit renewals keep you legal but can add up quickly.

Registered Agent Renewal Fees

If you use a third-party registered agent, that can cost anywhere from $75 up to $150 annually. We have included a range, as rates vary by provider, so shop around.

This isn’t optional—your LLC must have a registered agent at all times.

Budgeting for Professional Help

All legal and accounting assistance is an expense, but it can aid you in avoiding costly compliance errors. Fees are based on your specific needs.

With professional assistance, you’ll make sure to file Form 568 before the due date, manage multiple income tax rates ranging from 1% to 13% and always be audit-proof.

Extra Costs: Plan for These

When you form an LLC in California, the initial filing fee isn’t the whole story when it comes to the actual cost. You can be hit by a number of additional costs, and each one counts when you’re working to budget yourself.

Planning for these costs upfront allows you to maintain healthy cash flow for your business and not get caught off guard later.

Faster State Filing Options

California provides expedited state filing if you need your LLC formed as fast as possible. While standard processing may be free but take several weeks, expedited options—some for a fee—reduce this time to as little as several days.

The cost for this additional speed ranges anywhere from $350 to $800, on top of your base filing fee. If your effective date is time-sensitive, this faster option is often worth it. It’s one of the very few ways you can execute contracts quickly!

Need a Certificate of Status?

Need a Certificate of Status? Extra cost It provides verification that you are current on tax liabilities. This may be necessary if you are opening a business bank account under your entity name or entering into business with partners outside of California.

Depending on the state, the certificate will cost somewhere between $5 and $20. Not always required, but a good idea to plan for it.

Legal or Accounting Advice Fees

Obtaining legal or accounting advice protects you from making mistakes. These professional fees can cost anywhere between $200 to $1,000 or more, depending on what you require.

This is an expense that can save you from expensive blunders, so budget for it wisely.

Business Insurance Considerations

Most LLCs will require some form of insurance such as general liability or errors and omissions. Premiums are different.

For reference, a small business would likely receive quotes in the range of $400 to $1,500 per year. Getting the right policy is crucial to shielding your business against loss or risk.

Local City and County Fees

Many cities and counties have their own business license or permit fees. These can vary from $50 all the way to $500 depending on where you’re at and what business you are in.

Some jurisdictions require annual renewals or additional local income taxes, so research local ordinances before you launch.

Formation: DIY, Service, or Attorney?

Starting an LLC in California gives you a few clear choices: do it yourself, use an online service, or get help from a California business lawyer. Each method has legitimate trade-offs, including the California LLC filing fee, speed, and the level of expertise required. Understanding what each approach brings to the table allows you to choose the one that best meets your needs.

The Do-It-Yourself Route

Yes, you can create an LLC by yourself! It’s as simple as that—just file the Articles of Organization with the California Secretary of State. You submit the forms, pay the required state fee (about $70), and then do the follow-up tasks such as obtaining your EIN.

The main advantage here is saving money! With us you pay just the state fees, which start as low as $40 in some states and increase to $500. That said, expect a big learning curve. You’ll have to study state regulations, monitor deadlines, and file the paperwork on your own.

If you don’t nail down all of the details, you might face significant delays or additional expenses to correct errors.

Using Online LLC Services

Online services, such as LegalZoom and Incfile, provide a good balance. For $100-300 a year, you receive assistance with completing forms, monitoring compliance, and frequently the provision of a registered agent.

These services make things a whole lot easier and save you from spending hours learning the ins and outs. It’s more expensive than DIY, but you’ll have help and direction along the way, lowering the likelihood of making mistakes.

Hiring a Business Lawyer

Attorneys are more expensive— hourly rates ranging from $150 to $400, or flat fees of $500 to $1,500. How much you pay will vary based on your business’s needs. With unusual or complicated arrangements, a lawyer will be able to identify problems you’ll overlook.

First, you get the peace of mind that comes from knowing that your LLC has been properly set up. Make no mistake, you pay for that skill and care.

Weighing Time, Cost, Peace of Mind

Think about what matters most: your time, your budget, or avoiding stress. If you’re the sort of company that’s pretty straightforward, and you want to save some money, DIY makes sense.

If you’re looking for the fastest assistance, go with a DIY online service. If you have more complicated needs, an attorney may be the way to go.

Smart Tips for Saving Money

Creating an LLC in California involves finding effective smart tips for saving money that won’t compromise your product or service. Smart planning allows you to retain more cash to invest in expansion and protects the long-term viability of your firm.

Take advantage of what’s available at no cost and track your spending. Look beyond startup costs to prepare your new business for a successful launch!

Get Your EIN for Free

You don’t have to pay to receive an Employer Identification Number (EIN) from the IRS. This can cause many new owners to overpay when filing services charge them more to file than it costs to do it themselves.

Get your EIN for free by applying online through the IRS website—it’s simple and takes about 10 minutes. You’ll need an EIN to get a regular business bank account, hire employees and file your business taxes.

Create Your Own Operating Agreement

Creating your own operating agreement is a smart money-saving move. There are plenty of free templates available online, and you can adapt one to your specifications.

Not planning on having anyone else in your business? Having a written agreement can save you from a lot of future headaches. Finally, it shows banks or investors that you’re ready.

Pick a Value Registered Agent

Registered agents can save you from falling out of good standing with your state. Third-party registered agents typically run anywhere from $75 to $150 per year.

Choose an agent you can trust with good reviews over the cheapest option. Many of these agents provide reminders for important filings.

Skip Rush Fees If Possible

Standard filing is the default option for everyone. Rush fees can quickly become a budget buster, but with proper planning, you can avoid this expense and still meet your filing deadlines.

You can skip rush fees and stay within budget.

Stay Compliant, Avoid Fines

Failure to file or pay associated fees on time can lead to harsh penalties. Plan ahead for your Statement of Information fee (USD 20 every 2 years) and annual franchise taxes.

Licenses and permits fees range from USD 200 to 1,000. These, in addition to agent fees, are deductible on taxes.

Accurate recordkeeping and on-time filings protect you from penalties and ensure you’re able to take all the deductions you deserve.

Hidden Costs & Common Pitfalls

There’s more to starting an LLC in California than just the initial California LLC filing fee. Unfortunately, many LLC owners overlook these hidden costs, which can quickly add up due to local ordinances, tax policies, or other common oversights. By being aware of what to watch out for, you can steer clear of costly California LLC fees and stay within your budget.

Underestimating Local Permit Costs

Depending on the locality, local permits can range from $50 to $500+. Far too many overlook this step, assuming that state filing is sufficient. Some cities may have one set of local rules, while nearby counties may have completely different requirements.

For instance, a café in Los Angeles would require at least a health permit and a sign permit. At the same time, a tech company in San Diego might need just a simple business license. Identify all local requirements before you launch. These costs should be baked into your plan from the start.

Forgetting Sales Tax Registration

If you’re selling tangible goods, you need to register for sales tax. Failure to do so can result in penalties or retroactive tax liability. Your home state will check to see that you are collecting and remitting the proper amount.

Confirm whether or not your business is required to collect sales tax. Understand what’s required of you to save yourself headaches down the road.

Penalties for Late Filings

Missing deadlines for annual reports or other required filings can incur late fees or penalties, including the California LLC fees. In California, failure to report on time results in state penalties, so avoid penalties by getting ahead with reminders and tracking progress every step of the way.

Not Budgeting for Tax Prep

Tax preparation is not complimentary. Tax prep fees for the inexperienced can pile high, but with adequate planning they are entirely avoidable. LLCs are subject to convoluted regulations, including an $800 annual minimum franchise tax.

Budget for these expenses to sidestep pitfalls.

Banking and Payroll Setup Fees

Opening a business bank account or starting a payroll incurs additional costs. Consider this, some banks require set-up fees. Payroll services charge monthly fees as well.

Evaluate and compare different options to find the best fit and price.

Conclusion

Forming your very own LLC in California provides you with the distinct advantage and knowing path to conduct your business how you see fit. You know what you would owe right away, such as the cost of the state filing fee and the annual franchise tax. Additional expenses such as a registered agent, business licenses, and other add-ons can suddenly come into play, so be mindful of these costs. Most people form their LLC on their own or with the help of one of those low-cost, online LLC formation services. You’ll avoid some of the most costly and painful missteps and surprise charges if you do your homework and plan ahead. So, no matter what your industry, the investments you make at the beginning determine how much you can grow later. Review your budget, consider your alternatives, and the outstretched hand of assistance if necessary. Get your LLC right, and get your efforts building safer infrastructure that much further.

Frequently Asked Questions

How much does it cost to start an LLC in California?

The principal cost is the formation filing fee, which is 70 USD. You have to pay a Statement of Information fee of 20 USD. Complete this within 90 days of creating your LLC!

What is the California Franchise Tax for LLCs?

Every California LLC is required to pay an annual franchise tax of at least 800 USD, which is part of the annual LLC fees. This minimum charge must be paid annually, regardless of whether or not your enterprise is profitable.

Do I need a registered agent for my California LLC?

Short answer: Yes, California law requires all LLCs to have a registered agent. This individual or entity is responsible for accepting legal documents on behalf of your business, ensuring compliance with California LLC fees.

Are there ongoing costs for a California LLC?

Are there continuing fees for a California LLC? This means you have to pay the annual LLC fee of 800 USD.

Can I form a California LLC myself to save money?

Can I form a California LLC myself to save money on the California LLC filing fee? This saves the cost of LLC formation service or attorney fees, helping you avoid costly mistakes with LLC taxes.

What are common extra costs when forming an LLC in California?

Other potential costs include expedited filing, certified copies, business licenses, and registered agent services. Again, these aren’t required but depending on the nature of your business, some might be necessary.

Are there any hidden costs I should watch for?

Are there any hidden costs, such as the California LLC fees, I should watch for? As always, refer to the official California state government page for the most current information.