A California LLC operating agreement establishes the relationship among members and LLC, rights and duties of a manager, the activities of the company, and conditions for amending the document. You don’t need to file your agreement. Just keep it safe so you can access it when needed.
Is an LLC Operating Agreement Required in California?
YES, even single-member LLCs need an LLC operating agreement in California. This means that even if you’re starting the business independently and decide to operate an LLC, you’ll need to draft and sign an operating agreement.
The rules governing an LLC are in Title 2.6 California Revised Uniform Limited Liability Company Act, with the following operating agreement statutes:
- Section 17701.07: Enforceability of operating agreements.
- Section 17701.10: Scope of governance.
- Section 17701.11: Agreement to terms.
- Section 17701.12: Amendments.
Costs and Fees
If you’re starting a business, you need to know how much an LLC in California is:
- Filing fee – $70 ($75 if requesting a certified copy of your articles of organization).
- Name reservation fee – $10.
- Statement of Information – $20 every two years.
- Annual franchise tax – min. $800.
How to Form an LLC in California
We have set out a step-by-step guide to help you when applying for an LLC in California.
Step 1 – Choose Your Name
You have to ensure that the name you pick is unique. Selecting the same name as another business can be misleading. The first thing you need to do is check the California Secretary of State’s business name database. If another business doesn’t use the name you picked, you can reserve the name for up to 60 days by filing a “Name Reservation Request form“.
You can file this form online or drop it off at the Secretary of State’s office in Sacramento. Another essential aspect is that you cannot use the words bank, trust, trustee, incorporated, inc., corporation, corp., insurer, insurance company, or any other words suggesting that it is in the insurance business.
Step 2 – File Articles of Organization
Unlike the Name Reservation Request form, the articles of organization can be filed online. You can also file it by mail or in person if you choose. Remember that you need to pay a filing fee of $70.
Step 3 – Choose a Registered Agent
It would be best to choose a registered agent or an “agent for service of process”. This individual or company will accept legal papers on the LLC’s behalf. Agents must reside in California, and their street address must be listed in the articles of organization.
The LLC itself cannot be the agent, but you can pick a member, a manager, or a lawyer. Remember that the agent does not need to be affiliated with the LCC. You can also pick a separate service that can act as an agent for a fee.
Step 4 – Decide on Management Structure
It would be best to decide how you will run your business. If you’re a small business with a few members, all members can manage the business. You can also have a separate manager to handle the business’s operations.
Managers act as a board of directors and make decisions for the company.
Step 5 – Prepare Your California LLC Operating Agreement
You can set out all the details of the management structure in your California LLC Operating Agreement. Keeping one on file makes sense even if you are a one-person LLC.
Step 6 – File Statement of Information
You need to file a Statement of Information within 90 days of filing your organization articles. Remember that you also need to file this form every two years.
A Statement of Information sets out some details about the LLC, including name, file number, address of agent for service of process, address of office, mailing address, and valid email address.
Step 7 – Comply With Your Tax and Regulatory Requirements
Make sure to pay all your taxes. You must file annual tax returns and pay a franchise tax of $800 minimum per year. LLCs with a net income of over $250,000 must pay additional fees.
You also need to comply with all your regulatory requirements, such as business licenses, sales, and employer taxes.
Download your California LLC operating agreement template below in PDF and Word.