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Start an LLC in California: Filings and Owner Draws

By Jason Seo, SHRM-CP®

Official sources checked: October 27, 2026

How much should you set aside before forming a California LLC(state-law business entity), and which costs will come back next year? A hypothetical owner plans a café in Irvine and forms an LLC on January 6, 2026, before signing the business lease. The owner is one individual who already has permission to work, has no employees yet, and has not elected corporation taxation. The practical question is which approval is needed for the next filing, what the setup costs, and what comes due next year.

This example uses a default-taxed, individually owned LLC. Entity ownership, multiple members or an S/C corporation election changes the tax branch. Use the US LLC guide for common federal preparation, then connect the state filings below to the same café's records.

Confirm you can legally work in the business, pick your structure and know how you'll pay yourself. Start with those federal questions in the main guide.

Search the Secretary of State's bizfile system to check for obvious conflicts. The state decides when it reviews your filing, and a trademark search is a separate step. California calls the registered agent an "agent for service of process." The agent needs a California address where legal papers can be delivered.

A lawsuit sent to an address nobody checks can mean a missed deadline to respond.

Prepare the café's legal name, addresses, required management information and the applicable agent or service-of-process mailing details. A name search is preliminary and does not resolve trademark rights. Read the actual Form LLC-1 fields, settle the inputs, then submit to the California Secretary of State with the $70 fee.

Submission is not approval. Resolve a rejected filing before relying on it, then download the approved record and match later registrations to its identifiers.

California wants a Statement of Information (Form LLC-12) within 90 days of forming the LLC, then every two years. The fee is $20 each time. Save the 90-day deadline and the next biennial filing date when approval arrives. Complete the current LLC-12 with the approved entity details, submit it, and retain acceptance separately from the original formation approval.

Apply free on IRS.gov after formation. Eligible online applications receive the number immediately if approved; save the confirmation letter. Details are in the main guide.

If you sell or lease taxable physical goods in California, CDTFA generally requires a seller's permit before your first sale. It's free, though CDTFA may ask for a security deposit in some cases.

The statewide base sales tax rate is 7.25%. Many cities and counties add district taxes on top, so check the rate for your exact address.

CDTFA says you can't legally make taxable sales until you're issued the permit.

Your city controls zoning, business tax registration in many places, and health permits for food. Los Angeles, for example, has its own city requirements on top of the state's. Ask city hall about your exact address before you sign a lease.

For the hypothetical café, send the city permit office the proposed address, food-service activity and any planned alterations. Ask which approvals must be issued before construction and before opening, which office handles each one, and whether an inspection must be scheduled. Keep the reply with the lease review instead of treating the state LLC approval as permission to serve customers.

Build a small register with columns for the agency, permit, application number, submitted date, missing item, inspection, approval and renewal date. Mark an unknown fee as “quote pending” rather than $0. The register is a practical planning method; the actual permit list comes from the city and the relevant health or licensing agency.

Once you pay more than $100 in wages in a calendar quarter, you have 15 days to register with the Employment Development Department (EDD). New employers in 2026 start at 3.4% unemployment insurance plus 0.1% training tax on the first $7,000 of each employee's pay.

California requires workers' comp from every employer with even one employee, including family members. If you're caught without it, the state issues a stop order and a penalty of twice the premiums you should have paid or $1,500 per employee, whichever is higher.

Labor rules for 2026:

A default-classified LLC such as this café generally pays the $800 annual tax and files Form 568. One owner and default classification are separate conditions. An LLC taxed as a corporation instead follows the applicable Form 100/100S corporate regime; do not carry the 3522, 568 and LLC-fee instructions into that branch unchanged.

For this January 6, 2026 formation, the ordinary first annual-tax payment is April 15, 2026, while the basic 2026 Form 568 deadline is April 15, 2027. Filing and payment are different jobs. Use the FTB due-date table for classification, year, holidays and extensions; a filing extension is not automatically a payment extension.

In the chart, compare the recurring annual tax with the smaller formation fee. The listed first-year baseline is $890, not the complete cost of operating a café.

CA total income is a specific fee calculation, not net profit. For example, a default-taxed LLC with $300,000 under that calculation can fall into the first fee tier even if expenses leave little net profit. Apply Schedule IW instead of excluding the fee based only on bottom-line profit.

Assume this café has $100,000 under the fee's total-income calculation; it is below the additional fee tiers. Add actual local permits, agent service and other taxes separately. A dormant default-taxed LLC may continue to owe the ordinary annual tax until properly canceled. Check the FTB exceptions, including qualifying short-form cancellation, rather than treating the expired 2021–2023 first-year relief as a current general exemption.

The exemption for US-created companies from BOI reporting is separate. Check FinCEN's current rule, effective August 14, 2026, and do not mistake it for an exemption from California taxes or filings.

Write an operating agreement, open a business bank account and keep business money separate. Those steps are the same in every state and are covered in the main guide.

Suppose the hypothetical café earns $45,000 after deductible business costs and the owner transfers $5,000 for personal use. A default-taxed one-owner LLC does not deduct that transfer as payroll, so its bank balance and taxable profit are different numbers. This illustration assumes no other wages and earnings below the Social Security base; it is not the owner's complete tax bill.

Federal and state income tax, individual deductions and other income are excluded. Apply the IRS self-employment guidance and Schedule SE to actual inputs, with estimated payments and year-end reconciliation handled separately. Do not use this owner-draw illustration unchanged after a corporation tax election.

Ask whether the proposed address can serve as the business location, mailing destination and address for service of process. Record the answer for each use and check it against the relevant form's official instructions. A provider describing "a business address" does not establish that the same address fits every field or local licensing requirement.

Before submitting LLC-12, compare its names, addresses and management information with the accepted formation record and actual operation. After submission, save the accepted filing separately from a receipt for the $800 payment or another tax payment. Those records answer different questions when preparing the next return.

How much does it cost to start an LLC in California? For the default-taxed operating example, the listed first-year state baseline is $890: $70 to file, $20 for the first Statement of Information and the $800 annual tax. Permits, an agent service and the additional LLC fee at CA total income of $250,000 or more come on top. Corporation elections and qualifying cancellation exceptions require a separate check.

Can I avoid the $800 by forming in another state? Generally no for the default-taxed operating LLC example, if you do business in California. The Franchise Tax Board applies the $800 tax to LLCs doing business in California, wherever they were formed.

Is there still a first-year exemption from the $800? The first-year exemption covered tax years beginning in 2021, 2022 and 2023. It doesn't apply to LLCs formed now.