How Much Does an LLC Cost in California?

There are plenty of advantages to setting up your California business as an LLC, including liability protection, flexibility in how the business is run, and tax options. But there are costs too.

You’ll pay a filing fee to set your LLC up as a business entity. You may pay for registered agent services and annual LLC fees. And you’ll be responsible for paying California’s $800 minimum franchise tax every year.

Here's what you need to know about California LLC costs.

How much is the California LLC formation filing fee?

To start an LLC in California, you must file articles of organization with the California Secretary of State. The California LLC filing fee is $70. The articles may be filed online, by mail, or in person at the Secretary of State's office in Sacramento. In-person filings require an additional $15 handling fee.

You’ll pay additional filing fees if you choose any of these optional LLC formation services:

• Expedited processing. LLC filings are processed in the order received, with online filings receiving the highest priority. Online and in-person filings can receive faster service for an additional fee: 24-hour processing for $350 and same-day processing for $750. There’s also a four-hour processing option for in-person filings for $500.
• LLC name reservation. If you have chosen an available LLC name but aren’t ready to file articles of organization, you can reserve the LLC name for up to 60 days for $10.
• Certified copies. An official certified copy of your LLC registration costs $5. Certified copies have an original stamp from the agency that issues them. You may need a certified copy for certain transactions such as opening a business bank account.

How much do LLC Articles of Organization cost in California?

There’s no cost to conduct a business name search and fill out California articles of organization forms on the Secretary of State website. You can file the forms yourself and it will cost you nothing other than your filing fee of $70.

You can also create and file articles of organization for free by using an online legal services provider. LegalZoom will create and file your articles of organization and check that your business name is available at no charge (other than the $70 state filing fee). This can be less time-consuming than the DIY approach, and it ensures your documents are filled out and filed properly.

How much is the California Statement of Information fee?

California law requires LLCs to file a Statement of Information with the Secretary of State within 90 days of their initial registration. A new Statement of Information must be filed every two years after that. The Statement of Information is similar to the annual report that many other states require.

The fee to file a Statement of Information is $20. There's a $250 penalty for failing to file.

How much does a registered agent cost in California?

Every California LLC must have a registered agent for what's known as service of process. An LLC’s registered agent is a person or company that will receive notice of lawsuits and other legal proceedings involving your LLC.  You must list your registered agent on the articles of organization.

You’ll save money by acting as your own LLC registered agent or appointing a business partner, employee, or family member as an agent. But many business owners prefer to hire a registered agent service to perform this important role.

Reasons to hire a registered agent service include reliability, consistency, and privacy. Registered agent services charge a California registered agent fee that ranges from approximately $50 to $250 per year.

LegalZoom's registered agent service does far more than receive legal notices. LegalZoom will scan and upload important documents so you can view them from anywhere. You'll receive alerts when documents are received and email reminders about Statement of Information deadlines. And LegalZoom provides unlimited cloud storage for business documents.

How much does a California seller’s permit cost?

If your limited liability company is engaged in business in California and intends to sell goods subject to sales tax, you’ll need to apply for a seller’s permit from the California Department of Tax and Fee Administration. There’s no cost to obtain a seller’s permit, but you may be required to pay a security deposit. You’ll also be required to collect sales taxes and remit them to the state. 

How much do local business licenses cost for an LLC in California?

The California Secretary of State does not issue a general statewide business license. Instead, you’ll register for a business license or business tax certificate in the city where your business is located or in your county if you live in an unincorporated area.

Typically, all businesses must get a local license, including a single member LLC and a home-based business. You can find your local business licensing agency through the search tool on the CalGold website.

Some localities charge a flat annual fee for a business license or tax certificate. In others, the fee may be based on the size of your business. Small businesses generally pay modest fees. In San Diego, the tax certificate fee is $34 for a business with up to 12 employees. In San Francisco, it's $57 plus the $4 state fee for most businesses with $100,000 or less in gross receipts.

Your LLC may also have to pay taxes to the locality that issued your business tax certificate. The tax amount may be tied to your revenue, number of employees, industry, or other factors.

How much is the annual LLC fee in California?

If your LLC will make more than $250,000 in income in a year, it must pay an annual LLC fee to the California Franchise Tax Board. Your LLC’s California business income determines the amount of the fee. For example, LLCs that make between $250,000 and $499,999 will pay an LLC fee of $900, while the fee is $11,790 for businesses making $5 million or more.

LLCs must estimate the amount of the California LLC fee and make payment by the 15th day of the 6th month of the current tax year. Your business may be subject to penalties and interest if you miss the due date.

How much does business insurance cost for a California LLC?

If your LLC has one or more employees, it must carry workers' compensation insurance. You can get this insurance through a private insurance company or the State Compensation Insurance Fund.

The cost of workers' compensation insurance will depend on the number of employees you have, your industry, your location, your claims history, your payroll, and your coverage limits. On average, companies pay $62 a month for this insurance, according to the insurance company Insureon.

You may also need or want additional business insurance. Although an LLC business structure protects LLC owners’ personal assets from liability for business obligations, it does not protect against all risks. Business insurance can provide legal protection against general liability, fire and flood, weather-related events, business interruption, and other issues.

What is the California franchise tax?

Every LLC organized or doing business in California must pay an $800 annual franchise tax. The first year’s franchise tax is due on the 15th day of the 4th month after you establish your LLC. After that, the annual franchise tax is due on the 15th day of the 4th month of each tax year.

An LLC that has elected to be taxed as an S corporation or C corporation must pay an additional annual tax on the LLC’s California source income. The state income tax rate for an LLC taxed as an S corp is 1.5% and as a C corp is 8.84%. Newly formed or qualified corporations don’t have to pay the $800 franchise tax their first year. 

Other California business costs and fees you might encounter

Here are some of the other fees and costs an LLC in California could expect to pay. Depending on your business, you may or may not incur these costs:

DBA filing costs

If your California LLC does business under a name other than the LLC’s legal name, it must file a fictitious business name statement with the clerk-recorder’s office in the county where its principal place of business is located. Procedures and fees may vary.

In Los Angeles County, for example, you'll pay a $26 filing fee, plus an additional $5 for each additional business name or registrant. In Santa Clara County, the fee is $40 for one or two owners. Regardless of where you file, you’ll have to pay fees to publish your fictitious business name filing in a newspaper of general circulation once a week for four weeks.

Business permit and licensing fees

In addition to the general business license you’ll get from your locality, you may need additional business licenses from the federal, state, or local government. These include professional licenses, local permits related to health and safety, and licenses and permits that allow you to operate in government-regulated industries such as alcohol sales, firearms, aviation, or commercial fishing.

Fees and requirements for these licenses vary. CalGold has a statewide business license search tool that can help you identify the licenses you need for your type of business in your locality.

Certificates of good standing

Your California LLC may occasionally need a certificate of good standing, a document that certifies you have paid filing fees and taxes and are in good standing with the State of California. You can obtain the certificate from the Secretary of State for $5.

Accounting fees

To maintain your California LLC’s liability protection, you must keep your business and personal expenses separate. You’ll need to track California income and expenses and make sure you’re taking full advantage of business tax deductions and strategies to minimize your tax burden.

Investing in business accounting software and a consultation with a small business accountant can save you time and money. LZ Books can handle bookkeeping, invoices, proposals, and the reports you'll need at tax time—all for $9.99 a month after a free trial.

Payroll fees

If you have employees, you may want to hire a professional payroll service to handle payments and tax withholding for you. Payroll costs depend on the company you use, the size of your LLC and how many employees you have. On average, you can expect to pay anywhere from $20 to $99 a month, plus between $3 and $14 per employee.

Bank fees

An LLC needs its own business bank account so you can keep business finances separate from your personal ones. The account may have monthly fees, fees to order checks, and credit card annual fees.  

How much is an operating agreement for an LLC in California?

In addition to the articles of organization, every California limited liability company should have an LLC operating agreement. The operating agreement isn’t filed with the California Secretary of State, but it serves as an important guide for how you’ll run your company.

An operating agreement includes such things as the rights and duties of the owners, the way the LLC will be managed, how profits and losses will be divided, and how you’ll make decisions. Having an LLC operating agreement in place at the beginning of your LLC’s life can help you avoid expensive mistakes and disputes in the years to come.

LegalZoom offers operating agreements starting at $99. Although you can prepare your own operating agreement for free, you risk having an agreement that is incomplete, doesn’t comply with California law, or doesn’t reflect the actual way you run your business.

If you hire an attorney on your own to prepare these documents, you can expect to pay either an hourly rate or a flat fee. Attorney rates can vary greatly depending on the expertise of the lawyer, the size of the law firm, and the locality. The average hourly rate for a California business lawyer is $410 per hour.

What is the total cost to start an LLC in California?

Setting up an LLC in California involves the following costs, at a minimum:

• California Secretary of State LLC articles of organization filing fees: $70
• Initial Statement of information: $20
• Initial franchise tax payment (due 4 months after formation): $800
• Local business license or tax certificate: approximately $70 or less

Minimum total California LLC cost: approximately $960

You may also have these initial LLC costs:

• Preparation of operating agreement: $250
• Registered agent service: $100 (but could cost more or less)
• Certified copy of formation certificate: $5

Total additional California LLC cost: approximately $355

You can, therefore, expect to spend between about $1,000 and $1,600 to set up your LLC for the first year in business. This doesn't include recurring LLC costs and other fees, such as LLC fees, industry or location-specific licenses, insurance premiums, and accounting services.

FAQs

Is it cheaper to register a foreign LLC in California?

With its $800 minimum franchise tax, California can seem like an expensive place to establish an LLC. But forming an LLC in another state and registering it as a foreign LLC in California will not save you money.

A foreign LLC pays the same $70 California LLC filing fee as a domestic LLC Foreign limited liability companies must still file a statement of information. And a foreign LLC doing business in California is subject to California franchise tax and LLC fees. A foreign LLC must also meet all the requirements to remain in good standing in its home state, including maintaining a registered agent there and filing annual reports.

What’s the cheapest way to start an LLC in California?

The least expensive way to start an LLC in California is to have an online legal service provider such as LegalZoom prepare and file the paperwork for you at no charge. You can act as your own registered agent and avoid paying fees for that service.

However, you will still pay California LLC fees, including a $70 LLC fee for filing articles of organization and a $20 statement of information fee. You will also be responsible for paying the $800 annual minimum franchise tax.

Do California LLCs need an employer identification number, and what does it cost?

The federal employer identification number (EIN) identifies your business for tax purposes. If your LLC in California has employees or is a multi member LLC, you must have an EIN. The IRS allows a single member LLC with no employees to use the member’s Social Security number instead, but your financial institution may require an EIN. You can apply for an EIN on the IRS website at no charge.

Do I have to pay the annual franchise tax if my California LLC didn’t make any money?

Yes, all California LLCs must pay the $800 minimum tax to the Franchise Tax Board. This includes inactive LLCs and LLCs that didn’t make a profit. You’ll continue to owe the tax each year until you cancel your LLC registration. However, if you cancel your business within one year of formation, you will not owe any franchise tax.