California LLC Articles of Organization
Forming a California LLC is a multi-step process that involves creation of two important formation documents: the articles of organization and the operating agreement.
- A California articles of organization is a publicly filed document that legally creates the company and establishes its existence in the public record.
- A California operating agreement is a private agreement between the business owners (or members) that lays the groundwork for the business’s management, internal affairs, and financial arrangements between the members.
A new California LLC should prepare its articles of organization and California operating agreement to work in tandem to structure the company in the members’ preferred manner. This articles focuses on preparing and filing the articles of organization as part of the process for forming a new California LLC.
What are California Articles of Organization?
A California articles of organization is the initial public formation document needed to create a California LLC.1 Filing an articles of organization officially creates the new California LLC.2 It establishes the LLC’s legal existence as a separate entity and provides public notice of basic information about the company.
Articles of organization and other publicly filed documents for California businesses are filed with the California Secretary of State’s office. The California Secretary of State publishes an articles of organization form (Form LLC-1). Form LLC-1 is a required form, though additional provisions may be added to the articles of organization as attachments.3
California also has alternate articles of organization forms designed for specific situations. For example, a Restated Articles of Organization allows an existing California LLC to make changes to the information in its initial filing. Or, an Articles of Organization – Conversion serves as the articles of organization for an existing out-of-state LLC that is converting into a California LLC.4
How Does a California Business Complete its Articles of Organization?
California law details the information that must be included in an LLC’s articles of organization.5 The California Secretary of State’s articles of organization form is designed to include all required information. Form LLC-1 is a relatively simple, straight-forward form with six sections:
- Limited liability company name. The LLC must have a name that complies with California’s naming rules for LLCs (described below).
- Business address. The LLC must have a street address in California that is the company’s designated office address, and it may list a different mailing address—which need not be in California.
- Service of process. Section 3 lists the name and California street address of the LLC’s agent for service of process (agent requirements are described below).
- Management. The LLC must identify how it will be managed from among three available options (described below).
- Purpose statement. The purpose statement is a non-editable phrase required by statute: “The purpose of the limited liability company is to engage in any lawful act or activity for which a limited liability company may be organized under the California Revised Uniform Limited Liability Company Act.”
- Signature. Section 6 includes the organizer’s affirmation and signature.
California Naming Rules for LLCs
The name that a new California LLC adopts in its articles of organization must comply with the following California naming rules for LLCs:
- LLC required. A California LLC’s name must have the words “limited liability company” or an acceptable abbreviation—such as “LLC” or “Ltd. Liability Co.”6
- Distinguishable name. The LLC’s name must be distinguishable from the names of other companies already registered or reserved with the California Secretary of State.7 The Secretary of State may reject a name it views as likely to mislead the public.
- Prohibited terms. Certain words that could cause confusion about an LLC’s permissible business areas are prohibited—bank, trust, trustee, insurer, and insurance company. Words suggesting an LLC is a corporation are also disallowed—incorporated, inc., corporation, or corp.8
California Agent for Service of Process
Each California LLC must appoint an agent for service of process to receive legal documents and important communications on the LLC’s behalf.9 The agent can be an individual who lives in California or a corporation that registered as an agent by filing a certificate with the California Secretary of State.10 In either case, the agent must have a California address, though there is no need to list the agent’s address if the agent is a corporation.
California LLC Management Structures
A California LLC may be governed by its members (a member-managed LLC) or by one or more managers appointed to govern the LLC’s day-to-day affairs (a manager-managed LLC).11 California law assumes an LLC is member-managed unless its articles of organization says the LLC is manager-managed.12 Section 4 of the articles of organization form instructs the LLC to indicate how the company is managed by selecting:
- One manager;
- More than One Manager; or
- All LLC Members.
The member-managed structure seems more intuitive for single-member and small LLCs, but using the manager-managed LLC may provide greater protection from creditors and helps protect against loss of management control to a member’s successor or creditor.
How Does a California Business Sign and File its Articles of Organization?
After the articles of organization is finalized, it must be signed and filed with the California Secretary of State with the appropriate filing fees.
Signing the California Articles of Organization
A new LLC’s articles of organization must be signed by an organizer—a person who is responsible for officially forming the company.13 An LLC’s organizer can be (but does not have to be) a member or manager of the company. The organizer’s signature is included in Section 6 of the articles of organization form—which also includes the organizer’s affirmation that the information in the form is correct and that the organizer has authority to file the document.
Future documents filed after the LLC is formed are signed by a manager, member, or officer delegated authority to sign and file official filings for the company.14
Filing the Articles of Organization with the California Secretary of State
A new California LLC’s legal existence does not officially begin until the signed articles of organization is filed with the California Secretary of State’s office.15 The Secretary of State accepts business filings via mail, hand-delivery, or online through the Secretary of State’s online filing site. Business filings submitted in paper form must be accompanied by a completed coversheet—a copy of which is usually included in the forms published by the California Secretary of State.
A new LLC’s articles of organization is effective when it is filed and accepted by the Secretary of State.16 An LLC can delay the effective date of most other filing by up to 90 days, but a delayed effective date is not permitted for articles of organization.
Filing Fees for the California Articles of Organization
The ordinary filing fee for a new California LLC’s articles of organization is $70.00. There is an additional $15.00 handling fee for documents filed via in-person delivery to the Secretary of State’s office.
The State of California authorized a fee waiver for new LLC’s formed between July 1, 2022, and June 30, 2023. There is no filing fee for forming a new California LLC during that period.
Are any Further Steps Needed to Form a California LLC?
An articles of organization officially forms a California LLC and establishes its existence in the public record. This is an important function, but it is insufficient to create a properly structured company. For that, business owners also need to adopt an operating agreement.
An operating agreement is an LLC’s governing document that is not filed publicly. It is much more customizable—with more detail than the articles of organization. Operating agreements address issues like:
- Allocation of profits and losses;
- Rules of distributions to members;
- Decision-making procedures and voting rules;
- Transfer of membership interests; and
- Admission and withdrawal of members.17
An operating agreement lets business owners optimize the company’s management and structure to their business plan and the financial relationships agreed by the owners. Although a California LLC can technically exist without an operating agreement, a company needs an operating agreement to fully benefit from the legal advantages and flexibility that the LLC business structure offers.
- Cal. Corp. Code § 17701.02(n).
- Cal. Corp. Code § 17701.02(b).
- Cal. Corp. Code § 17701.02(c).
- See Cal. Corp. Code § 17710.02.
- Cal. Corp. Code § 17701.02(b).
- Cal. Corp. Code §17701.08(a).
- Cal. Corp. Code §17701.08(b).
- Cal. Corp. Code §17701.08.
- Cal. Corp. Code § 17701.13.
- See Cal. Corp. Code §§ 17701.13(c); 1505.
- See Cal. Corp. Code §§ 17701.02(o) and (q).
- Cal. Corp. Code § 17703.01.
- Cal. Corp. Code § 17701.02(h).
- Cal. Corp. Code § 17702.03(a)(1).
- Cal. Corp. Code § 17701.02(b).
- Cal. Corp. Code § 17702.05(c).
- Cal. Corp. Code § 17701.10(b).