For-Profits

Starting an LLC in California

Adapted from this guide to incorporating a business in California.

1. Choose and reserve a name. Details about name availability here.

   1. Note:  Your entity name must contain the words Limited Liability Company or the abbreviation L.L.C.

2. Filing your LLC

   1. Choose a Registered Agent for the Service of Process, to send and receive papers for your LLC

      1. They must be a resident of California or a company authorized to transact business. It can individual in the company, including yourself; an LLC cannot be its own Agent for the Service of Process.

   2. Decide if your LLC will be member managed or manager managed. More details here.

   3. File the Articles of Organization, found here. 

   4. File the Initial Statement of Information (Form LLC-12) to the California Secretary of State within 90 days.

3. Other requirements

   1. Create an Operating Agreement [bylaws for LLC].

   2. Request a Federal Employer Identification Number (FEIN) with the IRS to open a bank account and be able to pay taxes.

   3. Open a bank account for the LLC.

   4. Register your LLC for California State Tax.

   5. Create accounting records

   6. Obtain necessary licences and permits. Licences, forms, and fees required for different business types in all California cities are listed here at the Governor’s Office of Business and Economic Development.

      1. For example, a company in “Computer Programming Permits” in Palo Alto, California will fill out up to fifteen forms, for the city, county, state, and federal levels, ranging from employer registration, to zoning, to taxes, to proof of residency. Filter the search to your specific use case. The website has a list of resources available to help you incorporate as well.

   7. Get Worker’s Compensation Insurance and General Liability Insurance


Starting a Corporation in California

Adapted from this guide to incorporating a business in California.

1. Choosing and reserve a name. Details about name availability here.

2. Incorporating the business.

   • Appointing Directors

   • Completing and Submitting Articles of Incorporation

3. Other requirements

   • Creating a corporate records book

   • Drafting Bylaws

   • Request a Federal Employer Identification Number (FEIN) with the IRS to open a bank account and be able to pay taxes. 

   • Obtain necessary licenses and permits to conduct your business, and submit required forms and fees. Specific licenses, forms, and fees required for different business types listed here at the Governor’s Office of Business and Economic Development.

     • For example, a company in “Computer Programming Permits” in Palo Alto, California will fill out up to fifteen forms, for the city, county, state, and federal levels, ranging from employer registration, to zoning, to taxes, to proof of residency. Filter the search to your specific use case. The website has a list of resources available to help you incorporate as well.

   • Submit a Statement of Information to the Secretary of State

   • (Likely not applicable) Decide whether or not to  become an S Corporation, submit Form 2553 if so. 

     • S Corporations pass corporate income and losses to shareholders, and also avoid being taxed twice. S Corporations have 100 or fewer shareholders, have only one class of stock, and cannot have any shareholders who are partnerships, corporations, or non-resident aliens.


Nonprofits

Starting a 501(c)(3) Nonprofit in California.

Find a detailed guide as to how to start a 501(c)(3) non-profit in California here, from which the below is adapted. (501(c)(3) nonprofits are for religious, charitable, scientific, literary, or educational purposes and are eligible for federal and state tax exemptions.)

1. Form a California nonprofit corporation.

   1. Choose the initial directors for your corporation

   2. Choose a name for your California nonprofit corporation and apply to register the name.

   3. Prepare and file nonprofit Articles of Incorporation

      1. Requires an Initial Agent for Service of Process with an address in California

      2. Requires a mailing address for the non-profit.

      3. You will require

         1. a statement of purpose that meets IRS requirements

         2. statements that your non-profit will not engage in prohibited political or legislative activity, and

         3. a dissolution of assets provision  dedicating your assets to another 501(c)(3) organization upon dissolution.

      4. Prepare bylaws

      5. Hold an organizational meeting of your board of directors

      6. Set up a corporate records system.

2. Apply for Federal and State Tax Exemptions

   1. File your Form 1023 federal tax exemption application. Note: Check for the latest version on the IRS website here.

      1. Note that smaller nonprofits with projected  annual gross receipts of less than $50,000 and  total assets of less than $250,000 are eligible to use Form 1023-EZ, a streamlined application.

   2. File the FTB 3500A for state tax exemption application. Check for the most recent version here.


Starting a 501(c)(4) Nonprofit in California.

A 501(c)(4) organization is a nonprofit social welfare organization, which is allowed to participate in political activities and lobbying. A 501(c)(4) nonprofit is not allowed to receive tax-exempt donations. You can find a concise guide on how to incorporate a 501(c)(4) California nonprofit from this site.

Very Unlikely Forms of incorporation for new Crypto-Related Firms in California:

Limited Liability Partnerships

According to Nolo.com, “As of January 1, 2016, California law recognizes three kinds of LLPs (and the LLP format is generally not applicable to most crypto startups anyways):

• LLPs formed by California-licensed lawyers, public accountants, or architects.

• LLPs formed by people licensed to provide professional services in other states, and

• LLPs that are “related” to other LLPs that practice public accounting or law.”


Sole Proprietorships

• A simple guide to starting a Sole Proprietorship in California can be found here.

  1. Choose a business name.

  2. File a Fictitious Business Name Statement with the county recorder.

  3. Request a Federal Employer Identification Number (FEIN) with the IRS to open a bank account and be able to pay taxes. 

  4. Obtain necessary licenses and permits to conduct your business, and submit required forms and fees. Specific licenses, forms, and fees required for different business types listed here at the Governor’s Office of Business and Economic Development.

  5. Obtain A Business Bank Account

  6. Obtain General Liability Insurance, because sole proprietors are personally liable for all business debts.


Sources:

• How to Form an LLC in California
• How to Incorporate a Business in California
• Governor’s Office of Business and Economic Development - Incorporation Permit Requirements
• How to Form A Non-Profit in California
• Tax Form 1023 For Non-Profits