
Form a California LLC in 10 minutes for $70 - mmckelvy
https://blog.bookandledger.com/topics/business-formation/form-a-california-llc
======
will_brown
Maybe I’m biased but, this is one of those times where the advice is just
enough to get you into trouble.

No mention of single member vs multi-member LLC, and lack of certain liability
protections with single member LLCs. Most people will have expectation of
liability protection, and those single member LLCs may be surprised to find
the assets of their single member LLC at risk for their personal liabilities.

No mention of tax treatment, by default single member LLC is pass through (no
need to file separate federal return), but can elect to be taxed as a
Corporation or S-Corporation. No mention multi-member is taxed by default as a
partnership but can elect tax treatment as Corporation or S-Corporation.

No mention of an Operating Agreement, which is the controlling document;
therefore, without one the LLC is governed by California Code. These issues
are of great importance, example: you may have a partner and the death of the
partner may result in dissolution of the LLC or maybe having a new, unwanted
partner(s) (spouse and/or heirs of the deceased partner), but without the
operating agreement California Law will dictate.

~~~
mmckelvy
Yeah this article is meant as a simple how-to for someone that has already
decided they want to form an LLC in California and understand the pros and
cons.

I cover some of the issues you cite in another post:

[https://blog.bookandledger.com/topics/business-
formation/int...](https://blog.bookandledger.com/topics/business-
formation/intro-to-forming-a-business)

~~~
jiveturkey
Yeah the original article is almost worthless.

The 2nd article you just linked is much better, and usefully informative.
However, it still needs:

\- info about the need for an operating agreement

\- more detail about piercing the corporate veil

\- discussion of FTB and IRS reclassifying as hobby business

You are advertising to a very technical audience and should address these
things at a deep level.

~~~
theptip
I strongly disagree with "almost worthless"; assuming you've made the decision
to form a CA LLC, this post is very useful.

You're making some quite strident demands of some random person on the
internet here ;)

Having said that, I too would be interested in the extra topics that you
listed, particularly the operating agreement piece. I looked into this
recently and NoLo offers a $100-300 service [1] which comes with options, vs.
free Operating Agreements like this random one on UpCounsel[2].

I have no idea what the parameters are on this, and in the past I've just
leant on a lawyer friend to do this for me; I'd like to understand the
details.

[1]: [https://store.nolo.com/products/online-california-llc-
ptlca-...](https://store.nolo.com/products/online-california-llc-ptlca-2.html)
[2]: [https://www.upcounsel.com/single-member-llc-operating-
agreem...](https://www.upcounsel.com/single-member-llc-operating-agreement)

~~~
jiveturkey
I paid $1000 to a lawyer for an operating agreement. It was fine.

For my 2nd LLC I just copied a free template (different than my expensive
lawyer'd one) since I now had a really good understanding of what needs to be
there.

At first yes it's scary to think you might be getting it wrong, but you learn
that it's not rocket science. It's basically the agreement between the members
of the corporate structure. I haven't read the NOLO one but I bet it's good
value for money.

You will generally have to present the operating agreement to the bank to open
a business account, to get business financing, maybe for insurance, stuff like
that.

My experience (IANAL) is that for friendly partners, the nolo template is
going to be fine. If you're selling shares to folks that you don't have a
history with, you may want to have the assurance of expert, personal legal
advice from someone you can also go back to with future concerns. And for that
kind of bigger LLC anyway, the $1000 or so is a reasonable expense.

~~~
mikeryan
I’m not sure a template is the way to go with multi member. If you are going
multi member you should really both get a lawyer to explain the details and
review the docs. I’ve had to unwind a multi member LLC into a single member
one and gaps in our operating agreement were suddenly all too relevant.

------
omarforgotpwd
Remember that California minumum tax for an LLC is $800. EVERY YEAR. that is
what you have to pay even if you lose money or do nothing. don’t form an llc
in 10 minutes and then screw yourself over with thousands of dollars of debt
just because it makes you feel cool.

A hardware engineer just came into my office earlier with a prototype for a
cheap server with a good GPU for AI tasks. He incoporated in California in
2013 and still hasn't actually gotten a product out or made sales. Meanwhile
he paid 6 years of taxes * $800 = $4800. He could have bought an iMac Pro, or
invested in the business in some way if he had not incorporated. You don't
need to officially be an LLC or corporation for your project to be real.

If you really do need to legally form a company to separate out finances and
liability, depending on what you’re doing, you might want to look at starting
a Delaware C corporation (they have a minimum franchise tax of $350 plus I
think a $50 filing fee). If you’re thinking of taking investment the rules and
laws of Delaware are very well understood and there is a substantial amount of
case law that makes it a lot more predictable to use their courts as almost
everything that can happen has happened. So for certain types of companies
it’s cheaper and better. For smaller things a C corporation may be overkill
and an LLC or S Corporarion may work better if you do not need to raise money.

~~~
BinaryIdiot
You do realize if you do business in CA you have to pay CA taxes, right?
You're mentioning Delaware but that would be for corporations and dispute
management. You're not going to get away from taxes...

~~~
mark212
Right but using the example there aren’t any profits to tax, so his friend
would’ve saved several thousand dollars by having the entity registered in
another state with a lower minimum. Florida, for example, is less than half of
Delaware and SD is even lower. Much better choice for a one person early stage
experiment.

~~~
zhobbs
If you live in CA you're required to file as a foreign corporate entity, and
still pay the $800 in taxes. You can't open a bank account in a CA bank
without proving that you've made that filing regardless of where the corp was
registered.

~~~
wolco
I could be wrong but one could open a bank account in a different state. In
this case he formed a business but did not make a profit or sale or employ
anyone for 6 years. It doesn't make sense to form an llc unless you require
it. Start smaller.

~~~
BinaryIdiot
If you live in CA and are operating your business in CA, you're probably going
to have a hard time arguing you don't have to pay CA tax.

~~~
chaosite
Right, but the point is that he isn't operating a business at all, seeing as
there's no product nor sales. So what does he have?

Maybe he doesn't need an LLC at all right now.

------
dollar
[https://www.nvsilverflume.gov/home](https://www.nvsilverflume.gov/home)

Nevada has SilverFlume for many years. Also, no income taxes. Also, no
Employment Development Department. Also, real estate at $1/sqft. Also...

~~~
abalone
...a largely tourism and mining based economy that has failed to attract high-
tech talent.[1][2]

[1] [https://www.cnbc.com/2016/08/09/zappos-ceo-tony-hsieh-
what-i...](https://www.cnbc.com/2016/08/09/zappos-ceo-tony-hsieh-what-i-
regret-about-pouring-350-million-into-las-vegas.html)

[2] [https://qz.com/875086/five-years-in-tony-hsiehs-downtown-
pro...](https://qz.com/875086/five-years-in-tony-hsiehs-downtown-project-is-
hardly-any-closer-to-being-a-real-city/)

~~~
dollar
I wouldn’t say Vegas failed to attract high tech talent. After 20 years in San
Francisco and San Jose, we moved our tech businesses (and ourselves) to Las
Vegas. Best decision ever.

The Downtown Project was highly ambitious - area is just now starting to take
off.

------
giancarlostoro
You can also do it in Florida entirely online but for $130. Wonder why the
huge difference in cost.

More info:

[http://dos.myflorida.com/sunbiz/start-
business/](http://dos.myflorida.com/sunbiz/start-business/)

To actually create one:

[https://efile.sunbiz.org/llc_file.html](https://efile.sunbiz.org/llc_file.html)

~~~
bubbleRefuge
Also Florida requires and annual filing and associated fee of $200 I believe.

~~~
thaumasiotes
$130 up front and $200 a year beats the heck out of $70 up front and $800 a
year.

~~~
gamblor956
If you do business in California with a FL-registered LLC, all that you have
accomplished is that you now pay $130 to Florida once to register plus
$200/year, then another $20+ to CA to register as a foreign LLC plus
$800/year.

~~~
twoodfin
What does “do business in California” mean? If my LLC opens up a shop on Etsy
and I ship to California customers am I supposed to register as a foreign LLC
and pay $800/year?

If so, that’s nuts and we need some beefier Commerce Clause jurisprudence.

~~~
skinnymuch
No of course not. They mostly mean you literally are doing business in CA.
Usually for small businesses it’s because you are living there.

~~~
mark212
This right here. Office in California, business assets in California, etc will
trigger the tax on profits generated from those assets. Shipping goods to
California doesn’t.

~~~
jjeaff
You can actually skirt them a bit as well even with employees or offices in
CA, as long as they fall under certain defined thresholds.

------
philfrasty
Expanding on this: can someone recommend resources (books/videos/articles/etc)
on holding structures (interested in US and Europe)? This is such a scammy
industry and Googling only brings you so far. To clarify: I DO NOT want to
evade taxes, just separate operational risk.

~~~
JumpCrisscross
> _can someone recommend resources (books /videos/articles/etc) on holding
> structures (interested in US and Europe)?_

Get a bottle of Scotch, clear a week-end and grab an annotated copy of
Delaware’s General Corporation Law [1]. Read it. Book two hours with a top-
tier lawyer. Ask them questions. DE law will give you an overview with which
to ask the right questions for across the U.S.

Pedantic overkill? Yes. Satisfying if you’re the right personality type?
Absolutely. (Caveat: the law is complex and unforgiving. Use this to ask a
lawyer good questions versus pretending to be a lawyer yourself.)

[1] [https://store.lexisnexis.com/products/delaware-
corporation-l...](https://store.lexisnexis.com/products/delaware-corporation-
laws-annotated-skuusSku6622)

 _Disclaimer: I am not a lawyer. This is not legal advice. Do not form a legal
entity without speaking to a lawyer._

~~~
briandear
A side note, has anyone actually ever sued anyone for not having a disclaimer?
It seems a lot like don’t use a hair dryer in the shower.

“I am suing because some dude on Hacker News suggested..”

~~~
JumpCrisscross
It’s more so someone doesn’t think I’m a lawyer, follow my Internet commentary
and then come to harm themselves. The disclaimer is my way of saying “I am
speaking beyond my circle of competence, but still think what I have to say is
interesting.”

------
drewmassey
Good grief if you are this worried about these fees your company doesn’t have
enough revenue to justify its existence. Yes I had a Delaware c-Corp with a
foreign qualification for Massachusetts, no I would not have cared about these
annual fees if my company was meeting growth targets.

Please just spend a little time educating yourself about corporate structure
and spend a lot of time building a company with real value. The former can
typically be changed without a lot of fuss if the latter requires it.

~~~
sleepyhead
Sure, but that doesn't really justify the fees. I keep hearing from Americans
that we in Scandinavia are so heavily taxed. Very strange from me to hear
about a $800 minimum tax fee. Also, not every company is a high flying
startup. It might be a small hairdresser salon. $800 isn't pocket change for a
small biz. In my case I have a company that has pretty much been inactive for
many years as it just exists to have stocks in my previous and current
startup. Wouldn't be happy about spending $800/year to keep it alive.

~~~
kevstev
This is for a specific type of corporate organization in a particular state.
You can start a business without forming an LLC. If you really want to pretend
you are for real, you would form a delaware corporation. Delaware is a tiny
state that many years ago decided to create a very well defined and
(permissive) legal framework for corporate law. Virtually any reasonably sized
corporation is a Delaware corporation.

Delaware does benefit from this... they get all the filing and other
miscellaneous fees out of the deal as well.

------
dawnerd
Oregon has something similar. Was surprised how easy and fast it went through.

People saying why not form in another state: it was my understanding that
while you can do this you'd still have to register with the state you're
actually in so you're not saving on taxes and just spending more money by
registering twice? Maybe I'm just misinformed...

~~~
ChuckMcM
In California the trigger is 'doing business in, or having facilities in
California.' There were lots of interesting cases here around Amazon and
others try to dodge California taxes (my mother-in-law was a CPA and had some
really interesting stories about this).

One of the more interesting was an attempt to tax one of the casino owners (I
believe it was Harrahs but I don't have access to the records) because they
lived in California (South Lake Tahoe). That was denied because the casino did
not do any business with anyone in California and the guy they were chasing
didn't do any work for the casino from home.

~~~
void-star
I think this points out a significant reason "why to incorporate in CA" (as is
being discussed elsewhere in the comments, as in "... instead of Delaware")

Could somebody clarify? Say I want to create a corporation, and will probably
do work for it from home living in California. Does incorporating in Delaware
now mean I will be paying the $800 tax (or some other) for CA, in addition to
whatever Delaware charges?

~~~
mark212
If you’re not profitable, then the minimum fees matter. If you are turning a
profit and you’re living in California and working from home (and assuming you
have no employees) then there’s no real reason to incorporate in Delaware.

The franchise fee is 1.5% with a minimum of $800 for all profits from business
generated in California. So yes you’d pay the franchise fee for CA and the
$250 to Delaware

------
unstatusthequo
Might want to explore if California is really where you want it. Look at the
yearly annual report costs for one.

Also, with Trump's tax plan, C corps might be taxed less than you as flow
through via your LLC. If your tax rate is above the new ~22% c corp rate, you
might want to look at that and do a Delaware C or S Corp. Attorney; just
sayin'

~~~
aidenn0
IANAL, but pretty sure CA LLCs allow you to elect to be taxed as an S- or C-
corporation.

------
fowkswe
Note that each state handles different aspects of LLC's differently. There is
a reason many companies form LLC's in Nevada or Wyoming - those states have
tons of legal precedence for different things pertaining to LLC's. So for
example, avoiding certain types of litigation, or remaining anonymous are
features of LLC's in those states.

Note, I'm not a legal person, but these are things I was told to consider when
picking a state to form your LLC.

~~~
ojbyrne
This is the first I’ve heard of anyone incorporating in those 2 states. It’s
always either Delaware or the state you’re located in.

~~~
camhart
For LLC its wyoming or nevada. Corp C/S i hear delaware.

~~~
77pt77
What are the advantages of incorporating an LLc in wyoming or nevada vs other
locations?

Especially if you don't live there.

------
mynewcompany
FYI we publish guides like this for all 50 states and have comprehensive
guides including checklists for the top 7 states:
[https://www.mycompanyworks.com/states.htm](https://www.mycompanyworks.com/states.htm)

------
chris_va
PSA: $800/y minimum tax for a CA LLC.

------
aphextron
Can anyone explain the pros/cons of LLC vs. a Delaware C corp?

~~~
jalonso510
For a traditional startup, that will (i) raise money from investors or (ii)
give equity to employees, you should just be a Delaware c-corporation. Those
are streamlined, known, and easy processes with a Delaware corporation. Every
lawyer in this space has forms for that and can read those documents with a
baseline of familiarity. If you try to innovate here and set up a startup as
an LLC or a California corporation, you are complicating every corporate
transaction you'll do and adding cost to every interaction with your lawyer
and the counterparty's lawyer. And you will prohibit investment from certain
VCs who aren't able to invest in pass-thru entities because some of their LPs
manage retirement money and are subject to ERISA.

There are other businesses where an LLC makes sense, including possibly for a
bootstrapped startup that will have one stockholder for its whole existence.
But that's not my area.

Not even going to include a disclaimer about this not being legal advice,
because I am a lawyer and this is good advice :)

~~~
mmckelvy
I would just add that tax classification and the liability protection entity
are two different things. You can form an LLC and elect to be taxed as a C
Corp. The upside is most states have fewer admin requirements for LLCs (e.g.
you don't have to keep minutes, name officers, etc.)

As for Delaware vs. your home state (CA in this case), I think it depends on
the business. If you are a multi-national corp, sure go with Delaware. But if
you live in CA, the other owners live in CA, and you're mostly doing business
in CA, I'm not sure you'd need a Delaware corp. Delaware has franchise taxes
of its own, so you'll end up paying taxes and fees in two states because
you'll have to register as a foreign corp in your home state (CA).

~~~
jalonso510
No dispute from me that you can save a little bit on taxes by forming a
California corporation if you're in California. Specifically the ~$400 of
Delaware franchise taxes. But my point is that any company doing typical
startup activities will spend more than $400 extra the first time they
interact with their lawyer, an investor's lawyer or the state of California.

For example - this week I'm helping someone with a simple filing in
California, and the processing time is 10-12 days, unless we pay California an
extra $350 expedite fee, whereas Delaware will turn the same filing around in
2-3 days with no expedite fee.

Or, for another one - in California you can't submit an electronically signed
document for a filing, so you and your lawyer get to spend the extra billable
time dealing with scanning PDFs instead of DocuSign.

And you get to deal with the lottery of attorney reviewers who will sometimes
reject Articles of Incorporation over things that have been OK in every other
document you've ever filed.

And this is all separate from the fact that the lawyers on both sides of your
transaction are secretly scratching their heads while they dust off their copy
of the California Corporations Code and billing your for the time they spend
figuring out what's different from Delaware.

It's just not worth it for the $400.

~~~
pdshrader
And on top of that, when you eventually do realize you want to change the
domicile to Delaware, you find out that California corporations don't allow
direct conversions into Delaware corporations, so you have to pay lawyers an
extra couple thousand dollars to prepare merger documents to move the entity
to Delaware.

Lawyer, but not your lawyer.

------
simonebrunozzi
This thread is really interesting, let me tell you why.

1) Forming an LLC, or a trust, or similar things, has always been considered
complex, expensive, and requiring human supervision. I guess and assume that a
large percentage of the population still believes it is the case.

2) This thread, however, confirms that people are ready to see #1 challenged
and eventually removed. And there are numerous examples of websites,
resources, etc, pointing at simple and elegant solutions that would apply to
MOST cases. (deciding whether your case belongs to "most" or not might not be
too simple though).

3) There is so much unexpressed potential in the ability for people to put
these matters into their own hands. Don't get me wrong, experts are and will
still be required in many cases, but the point still stands.

An example? Everybody owning property should use some form of legal entity to
own/manage that property. Why? Because in its simplest form (a trust) it is
literally cost-free, and brings several benefits out of the gate (no probate
on death; legal separation between trustee and beneficiary; etc). For slightly
more specific needs, an LLCs or other similar vehicles also provide great
benefits (although require tax reporting, and some state and local tax to be
paid each year). And these tools shouldn't be expensive. Not for most people.

In my recent experience, I have been dealing with the structure of a land
trust to facilitate real estate transactions (using the Blockchain to record
these transactions - before you say anything, we're not crypto fanatics, the
crypto part is actually quite straightforward and not too crazy like many
projects out there).

We are a startup, and we invested a significant chunk of our initial funding
in fees (legal and otherwise). We intend to open source most of our outcomes
eventually, and hope that MOST people will be able to actually benefit from
this, instead of spending several orders of magnitude more to have it done the
old way.

In that regard, the "setting up an LLC in 10 minutes for $70" is exactly how
these things should be. (again, provided that you belong to the "most cases"
category).

All in all, I'm really happy that this is happening.

As a side note, if you have experience with trusts and LLCs used for real
estate investment, I would be very happy to chat with you - I come from the IT
world (Amazon, etc) and still have a lot to learn from experienced people.

------
tardo99
The $800 annual tax is worth people knowing about.

~~~
asdsa5325
This. Forming a company in CA is stupid, no other state has this insane tax.

~~~
gamblor956
Most states have minimum franchise taxes. CA charges on the higher side
because CA offers the biggest market. In effect, CA is taking advantage of the
libertarian free market principle of supply and demand. They have the largest
supply of potential customers, and there is a large demand of businesses
wanting access to those customers, and the minimum franchise fee reflects
that.

You're free to set up shop in South Dakota (no minimum) and see just how many
customers you find there...

~~~
asdsa5325
You can incorporate in any state, it doesn't matter where your customers are.
Most CA companies (and most companies, across all states) form in Delaware for
legal reasons. CA is not a popular place to incorporate in.

~~~
s73v3r_
But if they're located in CA, which many of them are, they still have to pay
the $800.

------
vonnik
We first incorporated under a CA LLC. It was worthless. If you ever plan on
raising money in the US, form a Delaware C-Corp through Clerky. It’s cheap,
fast and easy, and it will allow you to raise from VCs or any other outside
investor. One reason: Delaware’s jurisprudence on almost any business issue is
an established matter of record, which derisks investments.

------
petesalty
I've never really understood the desire to "save" on lawyer costs up front.
Lawyer money is the cheapest money you'll ever spend, if you use it right.
Having a lawyer set up your company correctly from the start is not expensive.
Where it does get expensive is when you try to get investment, or bought or
some other event and they have to spend months unraveling the gigantic mess
you've made by doing all the legal yourself based on some blog posts you read.

To save on costs, don’t go to a big firm, they are expensive. Ask around and
find a solid boutique firm that specialises in your area. They will often do
some kind of deferment if you are really small, although there’s usually a
retainer.

Get it done right, the first time, and you won’t have to spend money on it
again. This applies to anything legal; incorporation, contracts, employment
agreements, licences, etc.

------
w0mbat
Dealing with the California Franchise Tax Board for a single member LLC ever
afterwards is a pain. You need to file a 568 with them every year, on paper
even if you e-file your CA state taxes, which includes the same data. You need
to pay them $800 every year through their terrible website and its Web Pay
system. Just getting an account on their website involves them sending you a
magic access code in a letter which takes a week and if it doesn't work you
have to start again and wait another week. If you ever forget to file
something on time they fine you and charge you interest, and threaten to
suspend your LLC. I wish I'd just filed a "doing business as".

------
Cshelton
Yeah, I don't know about this advice.

If you are by yourself, starting a company, just go register a d.b.a (doing
business as) at your local courthouse.

And yes, a CPA will cost you money, but it is something you must have right
and is worth the cost. By having a CPA, you will avoid falling into a
situation where you end up paying a fine, or have unexpected fees/taxes, or,
more often than not, the CPA will actually show you how to structure/operate
in a way that will SAVE you taxes and fees. If you are going into a
partnership or S/C Corp with different owners, than the money spent on a
lawyer as well as the CPA is very much worth it.

Save yourself down the road and spend the money now to do it right.

------
rdlecler1
I would love to see a startup package in the US (for genuine startups). No
franchise taxes for three years, no employee tax—-or a simple contractor
system—a simple and inexpensive corporate healthcare plan, a simple tax form
for companies with little or no revenue. Running a startup is hard enough
already then you have to put up with all of this admin nonsense when you’re
just trying to keep your head above water. Why waste all this money on lawyers
and accountants when it could be put into your business.

------
everdev
FYI, it costs $20 to file a statement of information (every other year) to
establish and maintain an LLC. But it costs $800 a year in state taxes.

------
chasingthewind
It's important to remember that in some jurisdictions if you decide to fold
your business you have to file a dissolution. Many also require that you file
a yearly report. There's a few businesses that help with incorporations and it
may be worth the extra fees to tap into their knowledge.

------
joshuaheard
This blog lists the steps to take to get a corporate file number issued from
the state. It is only a subset of the steps required to fully form a
corporation. If you want to form a corporation yourself, there are many books
on Amazon that can walk you through the entire process.

------
gregpilling
You could also use something like ZenBusiness which is free
[https://www.zenbusiness.com/pricing](https://www.zenbusiness.com/pricing) .
They are a startup out of Austin TX.

------
legohorizons
Hey Mark - who do this in CA and not in DE?

Also, a lot of students I know would be interested in learning more about
bookandledger - do you have 40 minutes to give a talk about the new co. and
your past experiences?

------
tomc1985
If one forms an LLC as a holding entity for child C-Corporations, would that
allow the C-Corps' access to financing or would investors see the parent LLC
and be turned off?

~~~
pdshrader
What do you mean by "allow access to financing"? A fair number of founders
maintain their stock ownership through an entity like an LLC. This could be
for all sorts of reasons (tax planning, separating assets/liability). I would
expect a potential investor (or their lawyers) to ask for the reasoning behind
the structure, but assuming it's a relatively simple answer, that would be
unlikely to have any major effect on the investment decision.

~~~
tomc1985
Sorry, I meant 'affect' not 'allow'. But you figured it out :)

------
thrrrowwy
and minimum $800 fee each year to CA for no reason whatsoever

------
wemdyjreichert
What's the best way to do this in Texas for cheap?

------
wheresmyusern
can anyone give me advice? im starting a small online service that will charge
customers -- i guess you could call it a "saas." i am the only person
whatsoever involved with this project. am i required to incorporate if i start
charging people for my online service? do i have to file taxes as a business?
isnt there a clear and straightforward guide for this kind of thing?

~~~
s73v3r_
You would want to talk to a lawyer (which, if you are starting a business, you
will want to have one), but you are not required to incorporate your business
if you don't want to. However, incorporation does offer several benefits,
which is why some people choose to do it.

~~~
wheresmyusern
this is what frustrates me. i cant afford a lawyer. from the looks of it, i
cant afford to incorporate either. how is anyone supposed to bootstrap
themselves these days?

~~~
s73v3r_
Same way you'd bootstrap if you needed developers, and couldn't afford to hire
developers. You can either study and try to do it yourself, you can offer
equity (although lawyers are generally smarter than developers in this area,
and few will take just equity, but you might be able to find someone), or you
do it the old fashioned way and get a small business loan from a bank.

Although, as has been said, you don't need an LLC if your business is not
"there" yet.

------
bitrazor123
If the company is worth something, 70 or or 200 isn't much apart. But if it
isn't than even a 70 USD is a baggage.

I liked the 10 minute part though.

------
xtracerx
800 dollars a year even if you have no income? yeesh

~~~
analognoise
Isn't that low for a business? I mean unless you're running a lemonade stand.

------
dsfyu404ed
I fail to see the benefit of a California LLC over an LLC in one of the other
49.

It seems to me like choosing CA over some state with less onerous taxes and is
like loading a gun and pointing it at your foot. If you wind up doing business
that wouldn't be subject to CA taxes then the CA taxes on that would be money
down the drain.

------
peter_retief
Before I read the whole article, do I have to be a US citizen to create the
LLC?

------
pascalxus
Don't forget, you will need to pay 800$ every year in CA sos LLC taxes

------
ttul
The USA sucks for incorporation. Here in Canada, I can create a fully fledged
federal corporation that is as bulletproof as any for personal liability, for
$200.

Annually, I have to pay $20 to file an annual return. Taxes you can do
yourself if they are simple - as in a single consultant.

We don’t have LLCs.

~~~
seanmccann
You do have to file 2 tax returns and suffer double taxation for your Canadian
corporation. The benefit of a LLC is that it's pass through and reported on
your personal tax return. It can minimize tax prep and taxes (YMMV).

~~~
ttul
Well, it’s not really double taxation because you can just flow through the
income to yourself, leading to a loss for the company and a profit to you
personally.

But you are correct about the two tax return thing. That is a slight bummer.

------
dmh2000
might want to look at the advantages of other states, Nevada for instance. You
can start you LLC in any state. doesn't have to be where your business is
located

------
justboxing
... and then get ready to be taxed into Bankruptcy.

CA has 1 of the highest business taxes. LLCs have to pay the State $800 every
year, even if your business is losing money or has no revenue and even if you
are a single-member LLC, in which case IRS regards it as a pass-through
entity.

On top of that, if you form your business in San Francisco, you are mandatory
charged a 4% "Healthy San Francisco" city tax that is supposed to helps pay
for employee's healthcare.

> 2008 Health Care Security Ordinance, which provides health care to San
> Francisco residents without insurance (the Healthy San Francisco program)
> and requires businesses to help fund health care for their employees in San
> Francisco.

Source: [https://www.tripsavvy.com/restaurants-healthy-san-
francisco-...](https://www.tripsavvy.com/restaurants-healthy-san-francisco-
surcharges-2939548)

Restaurants were busted running a scam where they passed on this tax to the
customer and pocketed the $$ themselves, but that's a whole different story
(see Source link above).

~~~
zaksoup
> ...taxed into Bankruptcy.

Given that you're taxed on profits (reductive, I know) isn't this literally
impossible?

God forbid Californians value healthcare and that a city 45 minutes from the
HQ of the richest company in the world, in the midst of a homelessness crisis,
attempt to improve the lives of its at-risk citizens

[http://sfist.com/2017/06/26/2017_san_francisco_homeless_cens...](http://sfist.com/2017/06/26/2017_san_francisco_homeless_census.php)

~~~
manigandham
Interesting how given the tax does exist, the city with the HQ of the richest
company in the world is in a homelessness crisis in the first place. Perhaps
these taxes are not actually useful?

~~~
alchemism
Or mayhaps the tax rate is too low and should be much higher for them?

~~~
manigandham
For who? Also I'm asking about effectiveness, not necessarily the amount.

If they are not useful _unless_ they are at a certain amount, then what would
that be and why aren't they at that level already? And wouldn't that just mean
that anything below that level actually is useless if it doesn't meet the
minimum needed to do anything?

------
EGreg
And then owe $700 a year for minimum franchise taxes

~~~
w0mbat
$800

------
joelrunyon
Step 1. Don't.

Step 2. Go anywhere but California.

------
JAdamMoore
This is stupid. California is the worst tax choice for everything.

~~~
dx034
And yet it remains one of the top destination for start-ups. Which indicates
that getting rid of taxes and regulation (which states/countries do to get
more business) can bring business in the short-term (companies forming
subsidiaries and channelling business) but doesn't help the economy in the
long term. If you have the right environment for companies to form, higher
taxes don't destroy that. Sweden also appears to be a good example, high taxes
and stricter regulation (partly through the EU) and still a very active start-
up scene.

~~~
carlmr
Sweden offers more benefits for it's taxes though. I think California is only
attractive because of the SV hype.

~~~
dx034
Most of those benefits are the safety net you get if your startup fails. I
think the main benefit for a startup is having similar companies close by.

~~~
carlmr
Safety net not only if your startup is failing, but also while you're starting
out, money to start your startup, amazing public transport, a functioning
public education system which gives you employees that don't need the highest
pay to service their loans, ... the list could go on for a long time.

------
aviv
The downside is that you are going to be left with a California LLC.

------
matte_black
Under a certain amount of revenue, the double taxation treatment of a C Corp
actually saves you money compared to the pass through taxation most people
elect as an LLC. And by the time you’re making larger revenues, you’ll want to
be a C Corp anyway.

~~~
jjeaff
How would that be?

You still have to pay yourself a reasonable salary which would be taxed at
regular earned income rates.

And then for any dividends you pay yourself, you are going to pay corporate
tax of 21% (after Trump tax changes hit) plus 15% or more capital gains.

------
Karishma1234
Unless you have a very good reason do not register your company in California.
Most certainly not because it costs $70.

California is very backward in all sort of regulations and you will get into
trouble as your company goes bigger and bigger. Always register your company
in Delaware.

There is a good reason why most companies are register in Delaware or Florida
and not in Communist Republic of California !

------
Havoc
haha no. Unless I specifically need US for some reason I'd rather go
_anywhere_ else. And if I have to do US it'll be a Delaware partnership.

------
floatingatoll
This is an incredibly misleading title. They charge you $70 in filing fees,
yes - and then over $800/year in annual LLC fees.

~~~
awalton
The Franchise fee is a separate issue and is charged on _any_ company doing
business in CA\\... Only way to avoid it is not to be in California at all.

\edit: according to my tax attorney. Get your own legal advice, etc.

~~~
andrewbinstock
>charged on any company doing business in CA

That's not correct. It's not charged to sole proprietorships.

~~~
klodolph
A sole proprietorship is not a distinct legal entity from its owner.

