Wednesday, 22 March 2023 15:10

How to Find the Best Information to Open an LLC in California

By  Martin Eckler

If you’re starting a business in California and are considering forming a limited liability company (LLC), you should be as informed as possible before you jump in. Starting an LLC comes with certain decisions to make, and you want those decisions to be informed so that your new business gets off on the right foot. 

Here, we’ll cover how to find reliable information about opening an LLC in California. 

Understand the Basics of an LLC

First, you need to understand the ins and outs of an LLC to make sure it’s the best choice for you.

Many entrepreneurs choose to form an LLC because it offers personal liability protection. Unlike a sole proprietorship or general partnership, an LLC is a separate entity from its owners, who are called members, and thus can have its own assets and obligations. The members are therefore not personally liable for paying those obligations.

But like a sole proprietorship or general partnership, an LLC is a pass-through entity, meaning that the LLC is not taxed. The profits instead pass through to the members to be reported on their personal tax returns. Tax is paid at their personal tax rates. 

An LLC also is fairly simple to form, and has few management requirements. This differs from a corporation, which is more complex to form and comes with many management requirements. It must have a board of directors, who must meet regularly based on state requirements, and it must appoint officers. An LLC has no such requirements. 

Researching the Relevant California State Websites

The first place to start researching California LLC formation is the California Franchise Tax Board website. It has an informational page with an overview of an LLC, and the franchise taxes that California LLCs must pay. Here is a page with more details about the taxes. 

Then you can head to the Secretary of State website to find LLC forms and fees. To form your LLC in California you can go to the Secretary of State’s online business filing system. California also has the Office of the Small Business Advocate which provides many resources for new business owners, including access to small business advisors.

If you really want to dig deep, you can read the California Revised Limited Liability Company Act.

Consulting Legal Resources

Like it or not, when you start any kind of business, you should have a business attorney. They can advise you on the type of business entity to form, help you with the process, and assist with all your other business legal needs. 

An attorney can also draft your LLC’s operating agreement. In California, your LLC is required to have an operating agreement, although you don’t file it with the state. An operating agreement defines the ownership of your LLC, how profits are distributed, voting rights of members, how disputes are resolved, and more.

You can find operating agreement templates online, but it’s best to have it drafted by an attorney, particularly if your LLC has multiple members.

Online Resources and Guides

The Small Business Administration (SBA) has a plethora of information and resources for new business owners. You can learn how to do market research, write a business plan, fund your business, and much more. Their website is quite comprehensive and helpful.

If you need funding for your business, the SBA has loan programs that they guarantee, making it easier for you to be approved for a loan through SBA lenders. You can learn more here

To learn about business and self-employment taxes, the IRS website can help. 

Here are a few other useful resources.

Local Small Business Development Centers (SBDCs)

Small business development centers offer a host of resources for both new and existing business owners. California has a directory of SBDCs in the state so that you can find one near you. 

SBDCs offer access to mentors and advisors, various training courses, access to capital sources, and much more. Their goal is to help entrepreneurs be successful, and the resources offered are generally free or low-cost. The value that these centers can offer can not be stressed enough, so it’s highly advisable to check out one near you. 

Networking and Seeking Advice from Other LLC Owners

One of the best ways to learn is to talk to those who have done what you’re doing. You can find other LLC owners in a variety of ways. Start with making connections on LinkedIn. You can easily find business owners in your area, engage with them, and even arrange to meet them in person. Most business owners are more than willing to share their experience and advice, so you might even find one that’s willing to be your mentor.

You can also meet business owners by attending local business networking events. Your local Chamber of Commerce likely holds regular events, perhaps even weekly, where you can have a cocktail, converse, and make mutually beneficial relationships. Small business development centers and business incubators also often hold networking events. 

Cautionary Notes and Caveats

When you’re doing your research, remember that just because something on Google says it’s so, doesn’t make it so. Be sure that you’re getting your information from reliable sources. You should check multiple sources as well to make sure that you’re getting the right answers.

Also, remember that rules and regulations are constantly changing, so you should ABL – always be learning. Stay up to date on business news, as well as what’s happening in your industry and market.

Finally, there’s no substitute for professional advice. You should have a business attorney, a tax advisor, a banker, and other professionals on hand that you can consult when in doubt about something or when issues arise. 

Conclusion

Starting a business and forming an LLC are not things that you should jump into blindly. You need to arm yourself with information so that you do everything correctly and give your new business the best chance of success. Remember that knowledge is power. Use it wisely.

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