California Business Formation · LLC · Corporation · DE Foreign-Qual
I form California LLCs and corporations the right way, with the documents you actually need.
LegalZoom files paperwork. I form your entity, draft the operating agreement or bylaws, issue founder stock with 83(b) elections where applicable, and explain the franchise tax and Statement of Information schedule you have to keep current. Flat-fee formation, no surprise add-ons.
2011CA Bar admitted
#279869CA State Bar
$500LLC flat fee
7-10 daysTypical formation
The choice is mostly about taxes, investors, and formalities.
California recognizes three workable structures for most small businesses: the LLC, the C-corporation, and the C-corporation with an S-corp tax election. Each has trade-offs.
LLC (Limited Liability Company). Pass-through taxation by default (profits and losses flow to the members' personal returns). No double taxation. Flexible governance through the operating agreement. Fewer formalities (no required annual meetings, no required minutes). Single-member or multi-member. Best for service businesses, real estate holding, consulting, e-commerce, and most California small businesses that are not raising priced equity.
C-corporation. Separate taxable entity. Profits are taxed at the corporate level (currently 21% federal under TCJA), and distributions to shareholders are taxed again as dividends (double taxation). However, the C-corp is the required structure for venture capital, allows stock options and qualified small business stock (QSBS) treatment under IRC 1202 (up to $10 million of gain potentially excluded after a 5-year hold), and is preferred by professional investors.
S-corporation (a tax election). Not a separate entity type. An LLC or C-corp can elect S-corp tax status by filing IRS Form 2553 within 75 days of formation (or by March 15 for an existing entity). The election preserves pass-through taxation while allowing the owner-operator to take part of the compensation as W-2 wages and the rest as a distribution, saving self-employment tax. Best for established profit-heavy service businesses with one or a small number of US-resident individual owners. Restrictions: no more than 100 shareholders, all individuals or qualified trusts, no non-resident aliens, one class of stock.
When the LLC wins
You are a service business, e-commerce, consulting, real estate, or solo professional.
You have one to four founders, all US-resident individuals.
You will not raise priced equity from professional investors in the next 24 months.
You want flexible profit allocations (the operating agreement can allocate differently from ownership percentages).
You want fewer corporate formalities.
When the C-corp wins
You expect to raise priced equity from venture capital.
You want to issue stock options to employees (LLCs use profits interests, which are workable but more complex).
You want to qualify for QSBS under IRC 1202 (LLCs do not qualify for QSBS, though they can convert to C-corps before a sale).
You want a clean exit pathway via acquisition.
The Delaware question, honestly answered.
About half the formation conversations I have start with "should I form in Delaware?" Most of the people asking would do better with a California entity. A smaller group genuinely needs Delaware. The split is roughly:
Form in Delaware if
You expect to raise priced equity from professional investors (Series Seed, Series A, etc.) within the next 24 months. Venture documents (NVCA forms) assume Delaware C-corp.
You are building a venture-scale software company aimed at a $5M+ raise.
Your cap table will include institutional investors, non-US investors, or entity shareholders.
You want the predictability of Delaware corporate law and the Delaware Chancery Court for governance disputes.
Form in California if
You are bootstrapping or raising only friends-and-family money.
You are a service business, e-commerce, consulting, or real estate.
Your cap table will be small (one to four California-resident founders).
You want to avoid the additional Delaware registered-agent fee (around $50 to $300 per year).
You want to avoid the Delaware franchise tax (which has a tiered calculation that can produce surprises for high-share-count entities).
The California foreign-qualification trap
Forming in Delaware (or Wyoming, or Nevada) does not exempt you from California obligations if you operate in California. Cal. Corp. Code 17708.02 (for LLCs) and Cal. Corp. Code 2105 (for corporations) require a foreign entity that transacts intrastate business in California to register with the California Secretary of State. "Transacting intrastate business" is broadly defined: a California office, California employees, repeated California sales, or California-based operations all qualify.
Once registered as a foreign entity, you owe the $800 California minimum franchise tax (Cal. Rev. & Tax. Code 23153, 17941). You also file Statements of Information. You essentially pay California compliance costs on top of Delaware filing costs. The total: Delaware filing fee ($90 corporate, $90 LLC) + Delaware registered agent (~$100/year) + Delaware franchise tax (varies, $175 minimum for corps with low authorized shares) + CA SoS foreign qualification fee ($100 corporate, $70 LLC) + CA $800 franchise tax + CA Statements of Information. The Delaware-plus-foreign-qual path makes sense for ventureable startups and is wasteful for everyone else.
For the venture-bound path, I offer a combined package: $750 Delaware C-corp formation + $750 California foreign qualification = $1,500 total, plus state filing fees paid by the client directly.
$500 LLC formation
Articles of Organization (Form LLC-1) prepared and filed with CA SoS
EIN application (IRS Form SS-4)
Operating agreement (single-member or multi-member)
Member resolution and consent
Statement of Information (Form LLC-12) initial filing
83(b) election guidance and filing for vesting stock
Shareholders' agreement template (mutual rights of first refusal, drag-along, tag-along)
Statement of Information initial filing
Welcome memo with annual compliance schedule
State filing fees and franchise tax (paid by client directly)
California LLC: $70 filing fee, $20 Statement of Information fee (biennial), $800 minimum annual franchise tax to FTB.
California Corporation: $100 filing fee, $25 Statement of Information fee (annual), $800 minimum annual franchise tax to FTB (year 2+).
Delaware Corporation: $90 filing fee, registered agent fee (about $100/year), Delaware franchise tax ($175 minimum for corps using authorized-shares method).
Foreign qualification in California: $100 (corporation) or $70 (LLC) plus the same $800 California franchise tax.
Expedited filing in California: $350 for 24-hour, $750 for same-day in Sacramento.
I do not pay these fees out of the formation flat fee. The flat fee is for my legal work (drafting and reviewing documents, filing on your behalf, advising you). State filing fees and franchise tax payments go directly from you to the state.
What you have to keep current after formation.
Formation is the start, not the end. California entities have ongoing compliance obligations that, if missed, lead to penalties, suspension, and personal liability for the owners. The basics:
Statement of Information. LLCs file Form LLC-12 within 90 days of formation and every two years thereafter ($20 fee). Corporations file Form SI-550 within 90 days of formation and annually thereafter ($25 fee). Missing the deadline triggers a $250 late penalty (Cal. Corp. Code 17713.07 / 2204) and eventually suspension under Cal. Rev. & Tax. Code 23301. I file the initial SOI; you handle the recurring filings.
California minimum franchise tax: $800 per year. Cal. Rev. & Tax. Code 23153 (corporations) and 17941 (LLCs). Due by the 15th day of the 4th month after entity year-end (April 15 for calendar-year entities) on Form 3522 (LLC) or Form 100/100S/100W (Corporation). The first-year exemption under AB 85 expired for entities formed in tax years beginning on or after January 1, 2024.
Federal income tax filing. Single-member LLC defaults to disregarded entity (Schedule C on owner's 1040). Multi-member LLC defaults to partnership (Form 1065). C-corp files Form 1120. S-corp files Form 1120-S. Returns are due 3.5 months after year-end (4.5 for C-corps), with extensions available.
California state income tax filing. LLCs file Form 568 (single-member) or Form 568 plus Form 565 (multi-member). Corporations file Form 100 (C-corp) or Form 100S (S-corp).
BOI (Beneficial Ownership Information) reporting. As of FinCEN's March 2025 interim final rule, U.S.-created entities (formerly designated domestic reporting companies) and their beneficial owners are generally exempt from federal BOI reporting under the Corporate Transparency Act (31 U.S.C. 5336). Certain foreign entities registered to do business in the United States may still have BOI obligations. I include a compliance-calendar note at formation; BOI filing itself is not bundled into the flat fee.
Operating agreement and bylaws maintenance. Update when ownership changes, when management changes, when new equity is issued, when a major loan or transaction is approved.
Corporate formalities for corporations. Annual shareholders' meeting, annual board meeting, written consents for major actions, accurate stock ledger. Skipping formalities is the most common reason for alter-ego liability ("piercing the corporate veil") under cases like Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290.
I provide a one-page compliance calendar at formation. Ongoing compliance work (annual SOI, franchise tax payments, BOI reporting, tax returns) is your responsibility unless you hire me separately on an hourly basis.
Licensed professionals have a different formation pathway.
California prohibits licensed professionals from practicing their profession through a standard LLC. Under Cal. Corp. Code 17701.04(e) and the Moscone-Knox Professional Corporation Act (Cal. Corp. Code 13400 et seq.), licensed professionals must form a Professional Corporation (PC) or a registered Limited Liability Partnership (LLP, for lawyers, accountants, and architects).
Which professions are restricted
Attorneys
Physicians and surgeons (medical corp under Moscone-Knox)
Dentists
Optometrists
Pharmacists
Psychologists
Architects (LLP available)
Engineers and land surveyors
Accountants (LLP available)
Veterinarians
Chiropractors
Marriage and family therapists, licensed clinical social workers, professional clinical counselors
All shareholders must be licensed in the profession (with limited exceptions for specific entity types).
The entity name must include "Professional Corporation," "P.C.," "A Professional Corporation," or similar designations as specified by each profession's licensing board.
The entity must register with the relevant licensing board (CA State Bar for law corps, Medical Board for medical corps, etc.) in addition to the Secretary of State.
Specific officer/director eligibility rules vary by profession.
The entity is taxed as a C-corp by default and typically elects S-corp tax status.
Forming a Professional Corporation is more involved than a standard corporation because of the dual registration with the licensing board. I handle Professional Corporation formation on an hourly basis at $240 per hour because each licensing board has its own forms and procedures. Typical PC formation runs 3 to 6 hours of legal work.
Entity selector
Which entity is right for your business?
Tell me about your planned activities, founders, and funding plan. I will recommend LLC vs C-corp vs S-corp with rationale and an estimated California filing fee plus franchise tax for the first year.
Recommended structure
California LLC
$500 formation package
CA filing fee$70
Year 1 franchise tax$800
Total year 1 state cost$870
A services business with 2 to 3 California founders and bootstrap funding is a textbook LLC. Pass-through tax keeps things simple, the operating agreement governs profit splits and decisions, and you avoid the formalities a corporation requires.
Recommendation only. State filing fees and the $800 minimum franchise tax are paid by the client directly to the California Secretary of State and Franchise Tax Board. The recommendation does not account for industry-specific licensing or specialized tax planning. For regulated professions, the Professional Corporation structure is required by California law; see the Professional services tab above.
How it works
Four steps from intake to formed entity.
1
Intake
You submit the formation intake form with your proposed entity name, founders, funding plan, and state preference. I respond within one business day to confirm the structure and any preliminary name-availability concerns.
2
Engagement and filing
Engagement letter, payment, and state filing fee submission. I file the Articles with the Secretary of State (Sacramento for CA, Dover for DE) and submit the EIN application to the IRS.
3
Governance documents
While Articles are processing, I prepare the operating agreement (LLC) or bylaws plus organizational minutes (Corp). For corporations, I prepare stock purchase agreements and 83(b) election notices. You sign electronically.
4
Closing and compliance memo
Once formation is complete and EIN is issued, I deliver the final document set plus a one-page ongoing-compliance calendar (franchise tax deadline, Statement of Information deadline, year-end tax filing).
Pricing
Three formation packages.
Most formation engagements fit one of these three packages. Custom entity structures (Professional Corporations, series LLCs, holding-company stacks, multi-state restructurings) are handled hourly at $240 per hour with a written estimate before any work starts.
Common alternative: for venture-backed startups, the Delaware C-corporation with California foreign qualification path runs $750 (DE Corp) + $750 (CA foreign qual) = $1,500 total in legal fees, plus state filing fees paid by the client directly. Standard NVCA documents assume Delaware C-corp, so this path matches what institutional investors expect.
Before you hire any formation service
Three things to understand before forming.
Formation is genuinely commoditized, but the cheap routes leave you with a shell entity and no governance documents. Whether you hire me or someone else, these three things matter.
1. Formation is not legal advice on operations
The formation engagement covers entity creation: Articles, EIN, governance documents, founder equity, initial filings. It does not cover ongoing operational legal questions (employment law, contract review, dispute resolution, regulatory compliance, tax planning). After formation, you have a working entity and a compliance calendar; you do not have an ongoing retainer with me unless you sign a separate engagement letter.
2. Recurring compliance is your responsibility
Statement of Information filings, annual franchise tax payments, federal and state tax returns, BOI reporting, corporate-formality maintenance (for corporations), operating-agreement updates when ownership changes: all of these are your responsibility after formation. Missing deadlines triggers penalties under Cal. Rev. & Tax. Code 23153 and Cal. Corp. Code 17713.07. I provide a compliance calendar memo at formation; ongoing filings are not bundled into the flat fee.
3. The $800 franchise tax is separate, and it is real
The $800 minimum annual franchise tax (Cal. Rev. & Tax. Code 23153 for corporations, 17941 for LLCs) is owed every year regardless of revenue, profitability, or activity level. It is not part of the formation flat fee. The AB 85 first-year exemption expired for entities formed in tax years beginning on or after January 1, 2024. Plan for this expense: California is one of the most expensive states to maintain a small business in, and the $800 floor catches many founders by surprise. Delaware or Wyoming entities operating in California also owe the $800.
Start an intake
Send the formation details.
No call required. Tell me what you want to form, who the founders are, and how you plan to fund it. I respond within one business day with the recommended structure and engagement letter.
For most California small businesses, the LLC is the right default: pass-through taxation, flexible governance, fewer formalities. The C-corporation is the right choice when you plan to raise priced equity from venture investors (who almost always require Delaware C-corps), issue stock options to employees, or qualify for QSBS treatment under IRC 1202. The S-corp election (a tax election, not a separate entity type) reduces self-employment tax for operating-profit-heavy businesses but adds restrictions on shareholder eligibility. The entity selector above walks through the decision based on your specific facts.
Venture capital and institutional investors almost always require a Delaware C-corporation because Delaware law is the most predictable for corporate governance, the Delaware Chancery Court is the most experienced at handling shareholder disputes, and standard VC documents (NVCA forms) assume Delaware law. If you are bootstrapping or raising friends-and-family money, Delaware adds cost without much benefit. If you expect to raise priced equity from professional investors within 24 months, Delaware is usually the right starting point. Note that forming in Delaware does not exempt you from California obligations if you operate in California; you still register as a foreign entity and pay the $800 franchise tax.
The Statement of Information is a California Secretary of State filing that lists the entity's officers, directors or managers, agent for service of process, and principal office address. LLCs file Form LLC-12 within 90 days of formation and every two years thereafter ($20 fee). Corporations file Form SI-550 within 90 days of formation and annually thereafter ($25 fee). Missing the deadline triggers a $250 late penalty and eventually entity suspension under Cal. Rev. & Tax. Code 23301. I file the initial Statement as part of formation; ongoing filings are your responsibility.
Yes. California Corporations Code 17701.02(s) and 17701.10 explicitly recognize the operating agreement as the governance instrument of an LLC. Without one, the California Revised Uniform Limited Liability Company Act supplies default rules, most of which are not what founders actually want (equal voting, equal distributions regardless of contribution, dissociation rights, mandatory dissolution events). Even a single-member LLC needs an operating agreement to demonstrate separation between the owner and the entity for liability and tax purposes. The operating agreement is included in the $500 LLC formation package.
An EIN (Employer Identification Number) is the federal tax ID issued by the IRS. Every entity needs one to open a business bank account, file federal tax returns, hire employees, or pay vendors via 1099. The application (Form SS-4) is free directly from the IRS. I file the SS-4 as part of formation, usually receiving the EIN within 1 to 4 business days.
Every California LLC and corporation owes the state an $800 minimum annual franchise tax under Cal. Rev. & Tax. Code 23153 and 17941. For LLCs, an additional gross-receipts fee applies above $250,000 in gross receipts under Cal. Rev. & Tax. Code 17942. The $800 minimum is owed even in years the entity has no income. The first-year exemption under AB 85 expired for entities formed in tax years beginning on or after January 1, 2024. Delaware or Wyoming entities operating in California also owe the $800.
Yes, but the tax and structural consequences vary. An LLC can elect S-corp tax status by filing IRS Form 2553 within 75 days of formation or by March 15 for an existing entity. Converting an LLC to a C-corporation (statutory conversion under Cal. Corp. Code 1150 et seq. or merger) is common before a priced equity round. Converting a C-corporation back to an LLC is more complex and often triggers taxable events. Plan the structure before forming if you can.
California Secretary of State processing times vary. Standard online filing through bizfileOnline is typically 3 to 5 business days. 24-hour expedited service is available for an additional $350. Same-day service in Sacramento is available for an additional $750. The EIN application typically takes 1 to 4 business days. Operating agreements and bylaws are prepared during the filing window. Plan for 7 to 10 business days from start to fully operational, faster if you pay for expedited filing.
Legal notice. This page describes legal services offered by Sergei Tokmakov, Esq., a California-licensed attorney (CA Bar No. 279869). Content on this page is for informational purposes only and does not constitute legal advice or create an attorney-client relationship. An attorney-client relationship is formed only by a signed written engagement agreement. Past results do not guarantee future outcomes. California Rules of Professional Conduct govern this practice. Statute citations and tax-fee references are accurate as of the date of publication; California legislative and regulatory changes may modify the figures or rules cited.