Locations
As one of California’s small business owners, you want to do everything in your power to make your business a success. Turning your small business into an LLC is one of those things. There are several benefits connected with turning your business into an LLC.
How the LLC Aids You and Your Small Business
One of the most compelling reasons to turn your small business into a LLC is that the LLC provides a wall of protection between your business creditors and yourself. If your business hits hard times and you ultimately default on your loans, your creditors can go after your business assets, but they can’t touch your personal ones, such as your home and personal vehicle.
Developing an LLC simplifies the accounting process because both the business’s income and loss is passed through to you, the owners. While this simplifies paying business taxes, it does mean you’ll have to claim the profit/loss on your income taxes.
Turning your business into an LLC is an especially smart move when you’re in the start up phase. Those three letters give your business a great deal of credibility which in turn makes it easier for you to attract vendors, creditors, and even employees.
One of the things that many California business owners love about the LLC system is that the decrease in annual requirements means a much more flexible management system.
California’s Rules About LLC’s
California has a few laws about creating an LLC in the state.
Before you can formally start your LLC, you need to scan California’s business name database and make sure that the business name you want to use is not currently in use.
There are some words California doesn’t allow businesses to use when they’re creating an LLC, including:
- Trust
- Trustee
- Bank
- Corporation
- Insurance company/Insurer
- Incorporated
State law dictates that not only can your business not have the same name as an already existing California LLC, but the name also can’t be too similar to that of another business.
Once you’ve selected a name for your business, fill out a name reservation request form. It generally takes the California Secretary of State about 60 days to approve the name. Make sure you include the $10 name reservation fee.
The next step is filing your business’s Articles of Organization.
The information you provide in this form includes:
- Information on how/who will be managing the business
- The business’s location
- The business’s function
- The name and address of the registered agent
Hand deliver or mail the Articles of Organization to the Secretary of State. This part of the process requires a $70 fee. Expediated filing is an option.
The Statement of Information is an important aspect of operating an LLC in California. This form has to be turned into the Secretary of State within 90 days of your turning in the Articles of Organization. It’s also something that needs to be resubmitted to the Secretary of State every two years that your business is in operation. The first time you submit the Statement of information to the Secretary of State, it needs to be hand delivered or mailed, after that, you’re allowed to file online. The Secretary of State has attached a $20 to this form.