This post is for information only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, tax or business advice. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, tax and business advisors, as needed. Businesses outside of California will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy and any other applicable policies.
California can be a great place to start a Limited Liability Company (LLC). The Golden State has much to offer to potential business owners like you, with millions of residents and a range of industries around innovative products and services. There are thousands of businesses in California already using Shopify, including brands in the apparel, health and beauty, and home and garden categories.
Starting an LLC in California can help you join a passionate community of business owners. We’ve compiled some resources to help you get started on the path to setting up your LLC, and being part of the action.
How to start an LLC in California
- Choose an idea for your LLC
- Name your California LLC
- Create a business plan
- Get an Employer Identification Number (EIN)
- File California certificate of formation
- Choose a registered agent in California
- Obtain business licenses and permits
- Understand California state tax requirements
- Prepare an operating agreement
- Examine business insurance options in California
- Understand financial considerations
- Market your LLC
What is a limited liability company (LLC)?
An LLC is a business structure that occupies the space between the simplest structure, sole proprietorship, and the most complicated structure, a corporation. It offers some of the simplicity and ease of setup that sole proprietorship provides, with some of the legal and debt protections that are delivered to corporations. An LLC can be a great way to start a small-to-medium sized business without risking your personal assets or accruing debt or liabilities under your own name. An LLC is generally easier to manage than a corporation, but may be subject to both state and federal taxation, which could result in additional administrative work.
Is an LLC right for you?
LLCs may be right for owners who intend to start a business and plan to keep it small or medium sized along with having:
- Significant physical assets (like retail inventory, office space, furniture, vehicles, etc.)
- The potential to acquire debt, liabilities, or be subject to legal proceedings
LLCs can also be ideal for early-stage startups that want to stay nimble and get moving quickly without the hassle, time, and expense of setting up a corporation. If you’re not sure that an LLC business structure is right for you, you can learn about other business structures that might be more appropriate for your ideas.
1. Choose an idea for your LLC
If you’re still working through your business ideas, or if you have a solid idea, it’s a good idea to assess your idea to make sure it’s right for your market, your audience, and you as an entrepreneur. Developing your idea can help you to understand:
- Who you are as a founder
- What people or businesses you're aiming to sell to
- What the potential profitability of your business idea is
- What repeatable ways you have to reach customers
This process can help you complete subsequent steps in starting your business, but it can also help ensure that your idea is viable as a business.
2. Name your California LLC
The first thing you’ll need to determine is the name of your LLC. Most forms and documents require a unique business name that identifies your operation specifically. If you need help coming up with a name, try the Shopify Business Name Generator for inspiration.
While assembling a list of potential names, search online to see if any other businesses are using them already. You can also search the United States Patent and Trademark Office database to see if anyone is already using it.
You can also check if a corresponding domain name is available via the Shopify domain name generator. Your website is likely to be one of the cornerstones of your LLC and your brand will be much more comprehensive with a coordinated business name and domain name.
When you’re satisfied with your business name and it’s time to make it official, you will need to perform some additional actions, including:
- Consult the California Secretary of State Name Regulations to ensure that your name is compliant
- Reserve your business name with the California government
3. Create a business plan
Creating a business plan is a great way to organize and execute your ideas, and keep the startup process on track. A business plan is usually a requirement for business loan applications, which you may need to start your enterprise.
A business plan is a straightforward document that outlines:
- Company description
- Market analysis
- Management and organization
- Products and services
- Customer segmentation
- Marketing plan
- Logistics and operations plan
- Financial plan
Launch your business on Shopify and try us free for 3 days
4. Get a federal employer identification number (EIN)
The Internal Revenue Service (IRS) requires new LLC owners to apply for an federal employer identification number (EIN), which serves a similar purpose as your personal Social Security Number (SSN), except for your business. Supplying this tax information is one of your federal tax requirements. The streamlined, interview-style application process is easy to complete quickly and there is no fee. You will need your SSN or Individual Taxpayer Identification Number (ITIN) to complete the application.
5. File a California certificate of formation
In order to register your LLC, you’ll need to file a California certificate of formation, also known as a statement of information or an annual report. This document outlines details about your LLC, such as the business address, official name, and more. The California Secretary of State offers an online application service via California bizfile. You can also apply in person at some offices of the California Secretary of State.
6. Choose a registered agent in California
A registered agent, also known as an agent for service of process, is a person or corporation who receives court documents on your behalf if your LLC is subject to legal action, debt collection, or other liabilities. This is one of the facets of an LLC that protects your personal assets, placing responsibility for liabilities on the business, not you personally. In California, you cannot be your own registered agent. You can get more information about finding a registered agent through the FAQ on the California Secretary of State website.
7. Obtain business licenses and permits
Depending on where your LLC will be operating and what products and services you'll provide, you may need to apply for a business license and permits. Common licenses and permits include:
- Alcohol sales
- Weights and measures
- Waste discharge
You can search the California Governor’s Office of Business and Economic Development online database to help determine which ones you need, then apply at the California Department of Tax and Fee Administration.
8. Understand California state tax requirements
The California Franchise Tax Board levies an annual tax to all LLCs operating in the state. Note that this tax is due whether or not you are conducting business until you cancel your LLC.
Your LLC will also most likely have to collect and remit sales tax in California, depending on what types of sales you make. The California Department of Tax and Fee Administration offers more information on which sales qualify and how much tax to collect.
9. Prepare an operating agreement
You may not be required to submit an operating agreement to the California Secretary of State as part of the LLC registration process. However, an operating agreement allows you to define parts of your business, such as:
- How your business operates
- How your business is managed
- How profits are shared between stakeholders
If you do not write an operating agreement, the state’s default rules will apply to your LLC, which may not provide the ideal level of protection for your assets.
10. Examine business insurance options in California
Even though an LLC is intended to provide you with some legal protections, it’s still usually a good idea to have insurance, such as:
- General liability insurance
- Professional liability insurance
- Worker’s compensation insurance
Guidance is available from the California Department of Insurance as to which types of insurance could be beneficial to your business.
11. Understand financial considerations
An LLC is meant to separate business and personal assets, which means you may want to open a business bank account, apply for a business credit card, and possibly even contract a business accountant. These actions can help keep your personal finances out of your business and protected from some liabilities.
As part of the startup process, you may find that you are in need of additional capital. If you are applying for a business loan from a bank, be sure that your business plan is ready to go. You could also consider Shopify Capital as a way to help fund your business.
12. Market your LLC
While this section looks like the last step on this LLC checklist, you can actually start most of your marketing work while you’re waiting for the various registration steps to be completed. With a comprehensive marketing plan, your business can be better positioned to start growing once it’s time to start selling.
Brand your LLC
Your brand is what consumers connect with in the public marketplace, drawing them in, establishing an emotional connection, and hopefully, convincing them to buy your product or service. Your brand is a reflection of your unique business idea and personality, so take the time to think carefully about how you want to be represented. Brand elements include:
- Your company logo. Try Hatchful for easy logo inspiration and creation.
- Official brand colors and imagery. Tools like Paletton are a great way to coordinate colors.
- A catchy slogan or tagline. Check out the Shopify Slogan Maker for inspiration.
- Official fonts or typefaces.
- Company tone and voice.
- Brand positioning and brand persona.
Don’t hesitate to get creative, and if you need some help, there are plenty of resources out there on how to start your own brand.
Build a business website
If you want your LLC to be competitive, you'll want it to be as visible, interactive, and available as possible. A great place to start? Your website. Fortunately, you can launch a website for your business with services like Shopify to provide you with the ideal ecommerce platform, and detailed guidance available around online store best practices.
This is your first opportunity to really apply your brand to something tangible. To get started, you’ll need:
- Digital logo files in different sizes that suit your front page, footer, and anywhere else you want to brand your new website
- Brand colors, so you can personalize your website theme and match it to your products, services, print materials, and more
- Attractive product photos and imagery that engage users visually
- Coordinated fonts to create a consistent look and feel across all of your promotional materials
- A site map that outlines the page structure and makes it easier for you to organize all of the information you want to communicate to your customers
- Your public contact information
Promote your LLC
Promoting your LLC is one of the last steps on your journey toward operating a business. A marketing plan can be a smart way to keep your promotional efforts focused on the goal of reaching ideal customers, providing a structure to your communications, social media, advertising, and more. If you’re not sure where to start, marketing plan examples can be a big help. Marketing plans often include:
- An executive summary that summarizes your overall plan
- A mission statement that outlines your overarching goals and business philosophy
- Objectives that detail the specific things you want to achieve through your LLC
- A Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis that can help you identify what you’re doing right and what needs to be refined
- Market research that helps you understand your industry, potential customers, and competitors
- A market strategy that details your plan of attack
- A budget that keeps your finances under control