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Cheapest Way to Form an LLC in California: Advice and Tips

Max Smith

Reading Time: 8 minutes

Are you looking for a way to save money while forming an LLC in California? This can easily be done if you look for the cheapest way to form an LLC in California.

Costing is an important factor when planning to form an LLC. You must avoid all the extra expenses and save all the money for LLC formation. That is why you must look for a way to complete the LLC formation process at the least cost. 

You can also find a great way or process to form your LLC to save money and time. An expert service provider can certainly help you in this manner. 

So, let’s discuss the cheapest and best way to form your new LLC in California.

No, LLCs are not free of charge in California. Although the filing fee was waived temporarily from July 1, 2022, to June 30, 2023, for a program, it is no longer valid. 

Now, the formation process has filing fees. There are two types of filing fees for Articles of Organization (Form LLC-1) with the California Secretary of State. One is online filing, which requires $70, and the other one is by mail, which takes $85. 

It is worth spending the money despite the costs involved in starting an LLC in California. This investment is a wise and practical decision. You will benefit from liability protection, along with other advantages that come with LLC formation. 

Lastly, learning about the expected cost of a proper budget is better. Do you want to get an idea about LLC costs? Then read our next section!

Cost to Start an LLC in California

Particular 

Costing

State of California LLC Fees

$70

Statement of Information Fee

$20

California's Annual Tax

$800

Foreign LLC Registration

$70 ($85 if you choose the online method)

Official Status Certificate

$5 per Document

Certified Business Copies

$5 per Document

DBA

$10–$100

Registered Agent Fee

Between $100 and $150 per Year

1. State of California LLC Fees: $70

You must pay $70 to create an LLC in California. It’s associated with the LLC’s in-person filings and records. If you go for in-person filings, then you may pay $15

2. A Representative for Process Fee Service

Hire a registered agent for your LLC. It’s also a cost for your LLC. You can choose from many options to get a suitable registered agent. A person or an employee can also become your registered agent. Your agent will communicate with the officials on your LLC’s behalf. So it’s essential, and it’s also a sector where you will spend money.

3. Statement of Information Fee for California: $20

The Statement of Information is also called the biennial report. It may cost you only $20

After forming your LLC, you may need to file the statement of information within 90 days. Every two years after that, during a six-month reporting term beginning with the initial registration day,

There are many ways to submit Statements of Information. You can do it online or in person. However, if you still need to submit Form LLC-12, you must be ready to pay a $250 penalty. 

4. California's Annual Tax: $800

It does not matter whether you are running your LLC or gaining profit. If you have registered an LLC, you must pay an annual tax of $800. It’s a must, and you cannot avoid it unless you shut off your LLC officially. 

Moreover, the LLC Tax Voucher (FTB 3522) must be submitted with the annual tax payment.

5. Fee for California LLC: Subject to Change

Does your LLC make more than $250,000? Then, pay an LLC fee. It can be changed, so get updated information from your state officials. 

Mark the 15th day of the 6th month of your present tax year to pay the LLC fee. Plus, you can legally use Form FTB 3536 to pay the LLC fee.

6. Registering a Foreign LLC in California

Is California not your home state? Then, it became a foreign state. It will cost you more than $70. You can apply to register a foreign limited liability company. There is a form called Form LLC-5. You will use it to pay the foreign LLC registration fee. 

If you file it online, then it will cost you $85. However, you can also submit the file in person.

7. Business Permits and Licenses

Federal, local, or state permission is a must to run your business successfully. However, the specific license you need depends on your business type, location, and state rules. So contact your state officials and tell them what licenses you need. 

8. Additional California Business Filing Fees

Not every fee is countable for every LLC type. There are some extra or optional fees to count. Check them out below.

9. "Doing Business As" (DBA) Name

You can use another name for your business. It can be a fictitious name. The state allows for a DBA name. You may need to contact the state officials to understand the cost of the DBA name and its duration.

10. Certified Copies of Documents

You may need to collect the California business documents from the Secretary of State, who will provide official papers. It will cost you $5 per document.

11. Official Status Certificate

Now, it’s time for the certification of your LLC. You can get that online or in person. It will cost you only $5

All right, so now you are aware of the expected costs. But how will you minimize the cost and find a cheaper way to form your LLC? Read the next section to know it better.

What is the Cheapest Way to Form an LLC in California?

Typically, completing the process yourself instead of hiring a service or an attorney is the most affordable way. Here are a few ways for you to have a cheap LLC formation in California:

  • Avoid Name Reservations

While you select a name for your California LLC that is unique and complies with state laws, avoid reserving that name. Making an LLC name reservation costs $10. It is an optional job you are not required to do during your LLC formation.

  • File Articles of Organization Online

Filing Articles of Organization to form an LLC is mandatory. However, the cheaper option is online filing instead of mail filing.

  • Be Your Agent

A registered agent is required to receive legal documents. Generally, people hire a professional individual for this. But you can opt to be your registered agent. Just be mindful of the legal details.

  • Create an Operating Agreement

Although California law does not require an operating agreement, it is highly recommended. Professional service does this for the LLC owners. But you can create it yourself. You can also use a template online.

  • Free EIN-Obtaining

For tax purposes, you must obtain an EIN from the IRS. But you do not have to worry about paying, as this process is free of charge. You can apply on the IRS website.

  • File Statement of Information Online

You will find two options (online or mail) when you file the Statement of Information. Choose to file for it online, as it is cheaper than the mail option.

You can confidently form your California LLC for as little as $70 if you follow the above steps for a budget-friendly process. 

Whenever there is an option to handle the process yourself, go for it to save money on formation costs. Seeking additional assistance will be a costlier process.

However, there is also a way to form your LLC in California to follow. Do you wonder what the process can be? Read below to find out more!

What is the Best Way to Start an LLC in California?

Here’s a strategy for the best way to form a California LLC. 

  • Research and Plan

To begin, research and learn about the conditions and results of forming an LLC in California. Take into account factors like business structure, taxation, and legal responsibility. Then, plan for your target market, business model, and long-term objectives.

  • Choose a Name

Please choose a name which is unique. Ensure it aligns with state naming requirements and isn’t already being used by another business in California.

  • Select a Registered Agent

A registered agent is the person who will accept official papers on your LLC’s behalf. You, an LLC member, or a registered agent service may be this.

  • File Articles of Organization

Complete and submit your LLC Articles of Organization to the Secretary of State of California. The compulsory filing fee, either for mail filing or for online filing, must be paid.

  • Make an Operating Agreement

According to California law, creating an operating agreement is strongly advised. This document explains your LLC’s ownership arrangement and internal operational processes.

  • Get an EIN

Send an application to the IRS for an Employer Identification Number (EIN). You must provide this number if:

  1. There is more than one member.
  2. You intend to hire staff.
  3. There is a need for tax purposes.

Moreover, getting an EIN is free of cost. 

  • File a Statement of Information

This should be done within 90 days after filing your articles of organization. There is both online and offline options to do it respectively.

  • Tax and Regulation Compliance

Register for municipal & state taxes and obtain the necessary licenses & permits. Also, follow all relevant regulations diligently and ongoing compliance requirements.

Besides, you can also file an LLC in California online. Do you know how? Let’s find out more about this in our next section.

How to Open an LLC in California Online?

Opening an LLC in California online involves the same steps as opening it generally, except for the online method. Here are those steps, with details in the following:

  • Name your LLC

Give your LLC a distinctive name that conforms with California’s naming specifications. Use the California Secretary of State’s website to ensure your selected name is available.

  • Select a Registered Agent

Select a registered agent to accept legal documents on your LLC’s behalf. You can use it online if you hire any professional individual or company through their website for this. 

  • File Articles of Organization

When you file for the Articles of Organization, do it online on the California Secretary of State’s website. The online fee for this filing is $70.

  • Create an Operating Agreement

As California law highly recommends it, you can create an operating agreement. For this step, you can use the templates available online for free.

  • Obtain an EIN

You might obtain an EIN from the IRS for taxes and other purposes. Using the IRS website, you can apply online for free.

  • Apply Statement of Information

Make ready the Statement of Information and submit it to the California Secretary of State. It can be done online through their website, where the filing fee is $20.

  • Register for State Taxes

You may need to register for state taxes, considering your business activities. It can be completed online via the California Department of Tax and Fee Administration’s (CDTFA) website.

  • Necessary Permits and Licenses

Suppose you get the necessary permits and licenses to conduct business lawfully in California and research the requirements. Then, please submit an online application to the respected authority.

Conclusion​

What is the cheapest way to form an LLC in California? The answer depends on your state’s rules, fees, and willingness to discover all the possibilities. 

You may find many experts, service providers, and registered agents. You must choose the one that will cost less.

Plus, choosing a smooth process for filing an LLCM may also reduce your expenses. The rest of the saved money will be used in your LLC later. 

Ultimately, ignore the extracurriculars and spend money on essential things to do while forming an LLC in California. Plus, make sure to avoid penalties. 

Besides, do you know other best states to form your LLC?

Key Points

  • Forming an LLC in California is not free. 
  • There are various kinds of costs associated with forming an LLC. 
  • You may pay LLC fees, foreign LLC registration fees, annual tax, and certificate fees. 
  • There are ways to reduce costs and save money while forming an LLC. For example, avoid name registration, make a member your LLCC agent, get an EIN for free, and more. 
  • It’s essential to find the best way to form your LLC. There are simple steps for it that you can follow. For example, name your LLC, get a registered agent, file an article for the organization, create an operating agreement, obtain an EIN, do the rest of the paperwork for maintenance, and collect necessary licenses & permits. 

Frequently Asked Questions

How Long Does It Take to Form an LLC in California?

Forming an LLC in California takes around 2–3 weeks. However, making mistakes when submitting papers can make it longer. It may take longer to confirm the appearance and then submit for confirmation.

Do you have to pay the $800 California LLC fee for the first year?

 No! You don’t need to pay the $800 California LLC fee for the first year. So you don’t need to file Form 3522. However, you may pay the $800 through Form 3522 for the second year of your business

Max Smith - LLC Formation

He is a seasoned entrepreneur and legal expert at LLC Formation Hub. With a stellar track record in both business and law, Max simplifies the complexities of LLCs. His practical insights, featured on LLC Formation Hub, empower entrepreneurs across the USA. Max merges business finesse with legal acuity to guide businesses toward success.


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