5 Mistakes to avoid before you set up your LLC in California

Setting up an LLC in California can be really easy, there are however a few mistakes you may need to watch out for before starting.

According to TRUiC, setting up an LLC in California can be done in six simple steps. When filing for your LLC it’s all about making final decisions, having all your forms and permits in order and  getting the small details just right. In this article I will discuss five mistakes you can avoid making when starting your LLC in California and a few solutions to overcoming these mistakes. 

Choosing the wrong name for your LLC

The name of your LLC is the first very important step in forming your LLC. The name of your LLC should be catchy, if not memorable and recognizable by potential clients. Yet it is more important that the name you’ve chosen complies with California naming requirements. For one, in the name you’ve chosen must include the phrase “limited liability company” or one of its abbreviations; two, the name of your LLC cannot include words that could be confused with a government agency or any restricted words (e.g. Bank, University) and may require additional paperwork from your side. It is important to do some research on the name you have in mind, to make sure it is not an existing name or in conflict with one of California’s naming rules and requirements. You can read California’s Code of Regulations for a full list of the naming rules in California. 

Setting up your LLC in the wrong

Doing research on the state in which you want to set up your LLC is as important a decision as choosing a name. It’s said that different states have their own benefits and drawbacks when it comes to setting up an LLC, and California is no different. In certain states, such as New York, Texas and Tennessee, the start up cost of an LLC is very expensive in relation to other US states, and some states such as Arizona and Nebraska you are required to publish a Statement of Information about your newly formed LLC in your local newspaper. It is important to know the small details about setting up an LLC in different states and knowing when you’ve made the right decision. In California, the cost of setting up an LLC is relatively low, $70, yet you are subject to an annual biennial fee of $20 and Franchise Tax of $800 depending on the income returns of your LLC every year. Knowing which forms you should file to register your LLC with the California Secretary of State is the next important mistake to avoid. 

Not filing the setting up correct forms 

Having all the necessary forms in order ready to be filed and your business permits and licences in place is very important if you want to set your LLC up quickly. In California, to set up an LLC, you are required to file an Articles of Organization form with the Secretary of State, and within two months of doing so, also file an Initial Statement of Information form. In California, you also need to file an Operating Agreement, which is a legal document that stipulates the ownership and operating procedures of your LLC.  

Not having the required business permits and licences

Having the correct business permits and licences in place, and knowing which permits and licences are required in different industries also on top of the list and again key to setting up your LLC quickly. You may require health permits, building permits, or liquor licences for that matter; the details and fees of business permits and licences you will need will vary depending on your local government regulations and the industry you aim to enter. It is therefore all the more important that you research the type of LLC you would like and the industry you would like to operate in. You can also hire a professional service to assist you in obtaining the necessary permits and licenses for your LLC.

Not knowing how to keep your LLC compliant 

Before even setting up your LLC is important to know how to keep it in compliance with the State of California and not know this can be a big mistake. You need to comply with federal, state and local government regulations for your LLC to continue operating in California. For more information you can visit California’s CalGold website. Hiring a registered agent can assist you in keeping your LLC compliant, your business permits and licences in check and your taxes and annual state filing fees update to date. 

Don’t be afraid to ask for help. At TRUiC’s site you can find out about all the necessary forms, permits licences and little details you will need to know before setting up your LLC in California. Avoid these mistakes and set up your LLC the right way the first time.