Many people regard California as a state of startups. The business industry has always been a cornerstone of its culture. It shows in the status of California as one of the wealthiest states. While the spotlight is usually shining on technology in San Francisco and the Bay area or in the media conglomerates that form Hollywood, big businesses aren’t the only ones that can get a start in this state. There are plenty of people with a dream and a little bit of seed money who want to start a company. One of the best ways to do that is to form a single member LLC in California.
But what is this? Why would you want to do it? How do you go about it? Let’s tackle each of these questions.
What Is A Single-Member LLC?
LLC stands for Limited Liability Company. As the name suggests, an individual owns and operates a single-member LLC. In other words, it is a small, start-up business.
A corporation is usually for larger companies, complete with directors, officers, shareholders, and intricate tax and financial regulations. On the small end is Doing Business As (DBA). It’s also known as a Fictitious Name or a Sole Proprietorship. It is the smallest business unit and is for people who are working for themselves but want some business recognition, such as a freelance programmer or television screenwriter.
In function, a single-member LLC isn’t that much different from a sole proprietorship. Legally, however, there are some major differences.
Why Choose A Single Member LLC Over A DBA?
The DBA structure is the easiest business license to apply for and receive. However, it has one risk. There is no personal liability protection. As a sole proprietor, your personal finances are business assets. So, if you have formed a DBA, and you run into some unmanageable debt or get in trouble with the IRS for taxes, your personal account is one of the ways and means to address the liability.
An LLC limits the liability to the amount you invested in the business, in case a financial circumstance requires it. As with a corporation, your bank account is your own. Because of this and the easy application, LLCs have surpassed corporations in popularity. It also helps that LLCs are ideal for smaller business ventures. If you’re looking for a bit of extra-legal protection for your single-person business, a single-member LLC in California is a safe bet.
How Do You Create A Single Member LLC in California?
While LLCs are much easier to form than corporations, they still have a few administrative, financial, and legal hoops that you need to jump through to satisfy the application requirements and get approval.
Whether you are running a business yourself or running it with a legally recognized spouse/partner, you can apply for a Single Member LLC. In this case, both you and your partner are considered a single owner for legal, administrative, and financial purposes.
Applying for a Single Member LLC in California is the same as applying for a normal LLC. You will need to secure, fill out, and submit Form LLC-1 for review and approval. It is known as the Articles of Organization, and you should submit it with required documentation and filing fee.
What Else Will You Need?
A Single Member LLC has all the same requirements for information as a typical LLC application. Thus, you will need to submit the following along with your form:
1. An available name that includes an indicator like LLC, L.L.C. or Limited Liability Company. Also be sure not to include restricted words like “Bank” or “Trust” in the name.
2. Designated Registered Agent
3. Business Address
4. Mailing Address
5. Type of LLC – “Member-Managed’ or “Manager-Managed.”
6. Name and signature the organizer that is creating the LLC.
7. Filing fee of $70 if you want a certified copy of the document there is an additional $5 filing fee.
Once the company is registered it is important to create and obtain the following supporting documents for the LLC.
1. Operating Agreement
2. Federal Employer Identification Number
3. Licenses and Permits
All of these pieces of information are legally required for California to recognize and allow you to operate your business. You may come across requirements that you should secure before submitting your Single Member LLC form. Research about these and familiarize yourself with the process.
Fortunately, a Single Member LLC application in California is not like a student exam or driver’s test, which depends on performance. As long as you meet the administrative, financial, and legal requirements outlined in the form, you will be approved for Single Member LLC status and can quickly move on to operating your business.
All you have to do to get over this initial administrative step is to make sure you know the requirements, are ready to supply them and pay whatever fees are required to process and file your application. Once that’s done, you’re ready to start a business as a Single Member LLC in California.
Business Filing Section