How to Register your LLC with the California Secretary of State

How to Register your LLC with the California Secretary of State.

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How to register your limited liability company with the California Secretary of State without paying a third party.

You’ve given some thought to forming a limited liability company (“LLC”), you’re not exactly sure what you need or where to start. This article will tell you exactly how to be prepared for and how to register your entity with the California Secretary of State.

Every qualified entity has the privilege of becoming recognized as a separate entity (and thus being afforded limited liability protection) by registering for authority to conduct business. In California, the Secretary of State is the division that authorizes your entity as such and authorizes you to conduct business as that separate entity.

The California Secretary of State’s website can be accessed here: Business Entities :: California Secretary of State . Here, you can find information on registration of business entities including additional requirements after filing for registration, such as the requirement to file an annual statement. The fastest way to file your business entity is online at another website called biz file online: bizfileOnline.sos.ca.gov .

In order to successfully register your LLC you will need to complete and submit your LLC’s Articles of Organization and you will need the following information:

• Articles of Organization

  • LLC Name

  • Initial Street Address of Designated Office in California

  • If applicable, Mailing Address of LLC

  • The individual or corporation appointed to accept service of process on behalf of your LLC

  • A designation of how the LLC will be managed

  • A statement of purpose on the business and activities to be performed by the LLC

  • The Organizer’s name and signature.

LLC Name. Ideas on how to name your LLC.

Your name is one of the most important pieces of information for your business. And there are multiple strategies on selecting a business name. Some prefer to set their own name and title as the name of the LLC. Some prefer to remain anonymous and select a name at random that has nothing to do with the business to be conducted. Some prefer to name the LLC after the street name of the real property that the LLC owns. Some prefer to name the LLC a name that targets consumers to understand the business. Some prefer to create and build a brand. Each strategy has its benefits and disadvantages. Ultimately, although important to your business, the LLC name doesn’t actually mean much to the California Secretary of State. It can be, generally, anything you want it to be.

Business Address.

Your LLC will need a business address that’s located within the State of California. If your LLC does business in another state, then your LLC is most likely domesticated in another state, in which case you would likely need to file for foreign qualification. Nevertheless, your business address must be stated on the Articles of Organization. The directions promulgated by the Secretary of State provide that your business address cannot be a PO Box and that’s because you need a physical address where the business will be headquartered. This will also be referred to as your principal place of business. If you have a PO Box, that can be entered in the mailing address box. The mailing address box does not need to be filled out unless your mailing address is different from your principal place of business. Not every business location needs to be listed on the Articles of Organization – just your principal place where business/executives will be conducted/located.

Registered Agent for Service of Process.

Your LLC will need an agent (someone authorized by the LLC) to accept service of legal process on behalf of the LLC. The registered agent is the person (or corporation) authorized to accept service of process of legal documents on behalf of the LLC. For example, if a lawsuit is commenced and your LLC is named as a Defendant the complaint in that lawsuit would be served on your LLC’s registered agent. Another example: if the California Franchise Tax board needs to send you a tax notice, it will (most likely) send the notice to your registered agent. The registered agent for your company should be an individual you trust to be available at their location during business hours to accept these important legal documents. More importantly, the agent should be someone you trust to quickly deliver legal documents or important notices to you if, in fact, any are served. If you’re wondering “Can I be my LLC’s agent if I’m the one starting the LLC?” The Answer is yes. You can serve as the registered agent for an LLC you are a Member or Manager of. Some LLC’s appoint their CPA, a managing member of the LLC, or other professional. However, it’s generally great practice to have an attorney serve as your registered agent, especially because an attorney will understand the notices served on your LLC quickly. You will need to list their name and their physical address where service can be performed.

Management Designation.

You must inform the California Secretary of State (and the public) how your LLC will be managed. The options are as follows: (a) One Manager; (b) More than One Manager; (c) All LLC Member(s). To keep this part short and sweet, the LLC has freedom to elect whether members will manage the LLC or whether the members will appoint “manager(s)” to manage the LLC. It’s possible that the Members appoint a manager that is also a member. It’s typical for a larger organization to be managed by managers and typical for smaller organizations to be member managed. However, the LLC has the freedom to elect how the LLC will be managed and must put the public on notice of the management of the LLC.

Statement of Purpose.

You usually want this statement to be as broad as possible. A fine example is as follows: “The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the California Revised Uniform Limited Liability Company Act”. Generally, you don’t want to limit what type of business your LLC can and cannot engage in. However, in some cases, you may want to. With a broad statement, as long as you are generating revenue, you’re fulfilling the purpose statement of the LLC. You could provide a service one day and a product the next and your purpose statement would not be violated if broad.

Signature.

The Organizer can be anyone authorized to submit the filing on behalf of the LLC. It does not have to be a member, owner, employee. In fact, it could be a member, manager, registered agent, lawyer, assistant, family member, etc. Though, in my experience, the organizer is usually a member, manager, cpa or business lawyer. There are no important qualifications to be an organizer of an LLC other than to make sure the filing fees are paid and the registration (Articles) are as complete as possible with accurate information. Nevertheless, the Articles of Organization must state the name of the organizer and must be signed by the organizer.

What Happens After Submission?

Once the filing fees are paid, the Secretary of State will process the Articles of Organization and assign a filing number. I highly recommend that you order at least one certified copy at the time of filing (a small additional cost). Most other registrations, such as with taxing entities (IRS/ CA FTB / etc.), may require a certified copy of the LLC’s articles of organization.

Am I done after that?

No. Every LLC needs an operating agreement which governs the operation of the LLC. The Operating Agreement does not get filed with the Secretary of State, in fact the Operating Agreement is only kept internally and is not intended or designed to be released to the general public. The Operating Agreement specifies the ownership interests of each member including the percentage owned, sets out the names and identities of the members (owners) of the LLC’s, the powers of each member, the purpose of the LLC, and other important terms and conditions, including, but not limited to: what happens when a member wants to sell or transfer their ownership interest, what happens if the other members want to buy out another member, what happens if a member becomes incapacitated, the frequency of meetings (if any), whether the LLC will be taxed as a partnership, S corporation or other method, etc.

Unfortunately, many organizers only draft and complete articles of organization and never get around to adopting an operating agreement. This can be particularly troublesome if the LLC has more than one member because, quite often, expectations, contributions and output changes from each member over time. There is no worse moment than when you have no recourse to change a situation because you didn’t take the time to spell out and complete an operating agreement for the LLC. Not only does the feeling suck, but it can completely ruin the business.

You can probably find a sample operating agreement online but make sure to customize it to your individual circumstances. This can be the hardest part and I obviously recommend partnering with an attorney to draft the operating agreement. Keep in mind that your attorney can only represent either you, or the LLC (and sometimes both).

By: Shaunt Oozoonian, Esq.

(714) 873-9411

How to Register an LLC in California - Oozoonian Law Corporation