Are you the type of person who takes the DIY approach to things in life? Then you might be thinking about forming an LLC all on your own. And the great news is that you can save quite a bit of money by doing it yourself, rather than hiring a lawyer.
What steps do you need to take to form your single member LLC and officially register your freelance business?
While it’s fairly easy to set up your LLC yourself, you do need to be prepared to put time, effort, and money into the process.
The information below is an overview of the process of forming an LLC yourself in California.
Just keep in mind that, while we’ve made every effort to ensure this information is up-to-date and accurate, it does not constitute legal advice, and it should not be used as a substitute for legal advice. When in doubt, consulting with an attorney is always best.
How to Form a Single Member LLC in California
Here’s a basic outline of the main steps that you’ll need to take when you begin forming your LLC by yourself.
Remember, because you’re taking this DIY approach, you’ll be in control the whole way. But it also means that you’ll need to keep an eye out for errors and be super diligent about checking off all the boxes on your to-do list.
So, without further ado, here we go.
Step 1: Choose a Name for Your LLC
Before you begin, you need to know the legal name you’d like to use for your LLC. Before you get ahead of yourself, there’s something to keep in mind:
Your LLC’s name can’t be the same as the name of another LLC on file with the California Secretary of State’s office.
This means that you’ll need to check the Secretary of State’s online records to see if the name you want to use is available. If not, it’s back to the drawing board, so it’s a good idea to have a list of potential names to start with.
In addition to ensuring no one else has the same name, there are also some restrictions on the format of your LLC’s name.
We’ve covered all of these details in our article Freelancer’s Guide to Naming an LLC in California.
If you’re going to use your LLC’s name to market your products or services, you’ll also need to do a trademark search to be absolutely sure the name won’t conflict with another company’s trademark.
We’ve covered how to DIY your trademark research in How to Save Time and Money DIYing Your Trademark Research.
Sound too tedious? When you sign up with Hyke, we help you make your way through the naming process with greater ease. You’ll still be able to say you took a DIY approach, but it’ll be much smoother, trust us.
Step 2: Choose a Registered Agent
Next up: designating a registered agent for your LLC.
What’s a registered agent?
This is an individual or a corporation that serves as your LLC’s legal agent.
They’ll be entrusted with accepting court papers and other important documents on your behalf, and will play an important role once your business is up and running.
You or any other adult who lives in California can serve as your LLC’s registered agent.
Or, you can pay a subscription fee (anywhere from $75 to $150 per year) to use a professional registered agent company.
Read through Everything You Need to Know about Registered Agents to get all the details about registered agents.
Step 3: Complete and File Articles of Organization
To actually form your LLC, you have to complete and file Articles of Organization with the California Secretary of State. Thankfully, the Secretary has made this pretty easy to do all on your own.
There’s a standard fill-in-the-blanks form called Form LLC-1 on the Secretary’s website. To complete it you’ll be asked to provide:
- Your LLC’s name and address
- The purpose of your LLC
- Information on how your LLC will be managed
- The name and address of your registered agent
Once it’s all filled out, file the articles online or by postal mail, and pay the $70 filing fee.
Step 4: File Statement of Information
Within 90 days after filing your Articles of Organization, you’re required to file a Statement of Information or SOI.
This is Form LLC-12, and it needs to be filed with the California Secretary of State. Expect to pay a $20 fee.
The SOI, which includes your LLC’s address, registered agent’s name and address, and the names and addresses of you LLC members, can be filed online.
Step 5: Write an LLC Operating Agreement
Although not required, we recommend that you draft and sign a single-member LLC operating agreement.
This legal document establishes how your LLC will be run. Having it in place helps preserve your limited liability because it helps show that your LLC is a separate business entity.
You don’t need to file your operating agreement with the Secretary of State.
All you have to do is complete and sign it and stored it with the rest of your LLC records.
Read through Freelancer’s Guide to LLC Operating Agreements to discover even more of the benefits of an operating agreement.
Step 6 (Optional): File a Fictitious Business Name Statement
Did you know that you don’t have to operate your LLC under the legal name listed in your Articles of Organization?
You’re also allowed to use a different name, referred to as an assumed name, fictitious name, or “DBA,” which stands for “doing business as.”
In order to do this, you must file a fictitious business name application in the California county where your LLC’s main office is located.
And, just like your business’s legal name, you need to make sure that the name you want to use isn’t already taken.
Once you know that the fictitious name you plan on using is up for grabs, you just file the form and pay a fee. To learn more, check your county’s website for details.
Step 7: Obtain Business Licenses
Depending on where your LLC is located and the kind of work that you do, you might have to obtain a local business license from your city or county. This is also easy to do, so don’t feel frazzled if you have to get a license to operate your business.
To get a business license, fill out the appropriate form and pay the required fee.
Your city or county government website should have all of the details you need, so take the time to do your research to cover all your bases.
Want to learn more about business licenses for LLCs? Check out our article Freelancer’s Guide to Business Licenses in California.
Step 8: Get an EIN
Next up: obtain your EIN (employer identification number).
This 9-digit number is issued by the IRS and used to identify your LLC for tax purposes.
Most single-member LLCs are taxed like sole proprietorships, and the IRS doesn’t require those LLCs to have an EIN. Instead, you can use your personal Social Security number when you file your taxes.
Your LLC will need an EIN if:
- You hire employees
- You elect to be taxed like a corporation
A company that hires you needs one to process payments
- You want to open a business bank account for your EIN and the bank requires one
Step 9: Obtain a Sales Tax Permit
You’re almost there! Just a couple more steps and you’ll be well on your way towards operating your freelance business as an LLC.
Will your LLC sell goods to customers in California?
If so, you need to collect and pay sales tax. To do that, you have to register with the California Department of Tax and Fee Administration (CDTFA) on their website, or in person at one of their field offices.
After you register, you’ll receive a seller’s permit and will be required to collect and pay sales tax.
10. Open LLC Bank Account
Yay, you’ve reached the last step!
Finally, you should open a bank account in your LLC’s name.
Doing so helps preserve your limited liability status, and makes your business bookkeeping much easier than if you use your personal bank account for your business.
Plus, when you open a business bank account, you can also get a credit card in your LLC’s name. Hooray for buying power!
Need Help? Hyke Is Here for You!
When it comes to filing an LLC in California, there are quite a few things that you need to do.
To be sure you do everything right, and to ensure you don’t miss any important deadlines, you can enlist the help of the experts at Hyke.
We’ll help you with every step of the LLC filing process, from choosing your name to to filing your forms with the right government agencies and opening your bank account.
So, what are you waiting for? Contact us today to learn more and get started!
Stephen has dedicated his career as an attorney and author to writing useful, authoritative and recognized guides on taxes and business law for small businesses, entrepreneurs, independent contractors, and freelancers. He is the author of over 20 books and hundreds of articles and has been quoted in The New York Times, Wall Street Journal, Chicago Tribune, and many other publications. Among his books are Deduct It! Lower Your Small Business Taxes, Working with Independent Contractors, and Working for Yourself: Law and Taxes for Independent Contractors, Freelancers & Consultants.