Calling California the hub of startups won’t be wrong. With the largest population in the United States and an above average per capita income (as compared to the other states), California is already a home to startups and small businesses.
In fact, a vast array of potential customers, a lot of whom are comparatively wealthy individuals make California an ideal state to launch an innovation and or a luxury brand as well as a philanthropy project.
The overall small business ground in California is quite fertile, however, the opportunities may not be evenly distributed across the state, i.e. the coastal counties, the neighborhoods of Silicon Valley and Hollywood are full of rich population, while the interior is mainly comprised of working class.
But, this uneven distribution should not be a hurdle if you are an enthusiastic entrepreneur and want to live your dreams. The uneven distribution is not a big problem, but setting up a small business may look like a tough task because California’s complex tax code is relatively burdensome and
Get the latest news, resources and tips to help you and your small business succeed.
The uneven distribution is not a big problem, but setting up a small business may look like a tough task because California’s complex tax code is relatively burdensome and first time entrepreneurs may also find government regulations exorbitant.
If you are based in California and you are eager to step into the world of entrepreneurship, you might be looking for answers to queries like:
- Doing business in California guide
- Small business tax in California
- Doing business as a sole proprietor in California
- CA business tax rate
- Commercially domiciled in California
- Starting a sole proprietorship in California
- Step-by-step guide to doing business in CA
- California business requirements
- Starting a LLC in California
- How to start a business in California with no money
- How to start an online business in California
- How to start a home business in California
- How much does it cost to start a business in California
- How to register a business in California
This article will answer the queries listed above and will also provide some additional resources to help you start a small business anywhere in California. Here goes the list of actionable items that you can consider as a checklist for opening a small business in California.
1- Finding a Profitable Business Opportunity:
There can be hundreds of small business ideas that can be highly profitable if started and run perfectly, however, not every business idea is equally good for everyone. Choice of the right idea matters most because the business success partially depends on it.
Check out some of the best small business ideas for Los Angeles, small business ideas for San Diego, small business ideas for San Francisco, and small business ideas for San Jose. If you are based in a small city, you may want to look at the list of small business ideas for small towns.
2- Preparation of Business Plan:
Once you have a profitable business idea in mind and you are done with the feasibility check of the business idea, the next thing you should do is to develop a business plan.
For a business plan to be perfect and understandable, you should conduct a market research about potential competitors and determine the cost that will incur in starting a business and also what you can use as a competitive advantage.
A business plan is a blueprint of your goals and objectives that will be achieved through the different course of action and activities. If you need business plan help, you may check with the local SBA office. SBA provides assistance for business planning throughout the state and at 144 California resource partner office.
3- Financial Planning:
Securing finance for your business through different sources like personal savings or credit card business funding, bank loans, and family funding is one stream of options. Alternatively, you may be interested in running a crowdfunding campaign or reaching out venture capitalists.
Check various options forraising capital for your startup and make sure to have an emergency startup funding plan in hand too. Effective financial planning allows you to avoid running out of money!
Other than that you can also get financial help from Economic Development California Business Portal http://www.busienssportal.ca.gov . On this portal, you can find financial help according to your business needs. Some of the options available there include:
- Small Business Development Centers.
- Small Business Loan Guarantee Programs.
- Financial Development Corporation.
- California Capital Access Programs.
- Industrial Development Bonds.
4- Identify the Entity Type:
The first practical step in setting up a legal business entity is to register it with the relevant authorities. Start with the choice of the type entity, which will determine how your business participants and business will be taxed by the government. For that you will be needing the help from your private attorney. The business entity must be registered with California Secretary of State as one of the following options:
- Entities requiring registration: Limited Liability companies (LLB), Limited Partnership (LP), Limited Liability Partnership (LLP), and Nonprofit.
- Entity that may Require Registration: Simple Partnership do not fit in criteria of registration with (CSS).
- Entity not Requiring Registration: Sole Partnership.
5- Choose a Business Name:
The name that you will select for your business should not be copied, it should not Trademark, Name, and Logo of other businesses. It should be unique and registered in California Secretary of State.
Follow this link http://www.sos.ca.gov/business-programs/business-entities/name-availability/ to check the name availability. While registering the business name, make sure to register a relevant domain name, even if you do not have plans to build a website right now.
6- Register your Business:
To register your business it is important to download forms and information required from the Secretary of State website http://www.sos.ca.gov/business-programs/business-entities/forms/.
The fee information and the submission guidelines are also available on the website, however, getting it done by a legal expert or an attorney is highly recommended.
7- Consider Business location and Zoning Regulations:
Remember your business location is a public record from where you will operate your business. If you intend choose a building on lease for office space or operate from your home, you should contact your county or city office for legal permits and zoning regulations.
These regulations are updated frequently, so it’s better to keep an eye on updates via OPR website https://www.opr.ca.gov/ or by visiting the local office.
8- Obtain Necessary Business Permits:
Once you have registered your business with California Secretary of State, you must acquire business permit. A business permit is a legal certificate that authorizes a business to conduct its business activities. California State Board of Equalization https://www.boe.ca.gov/ is the authority to contact for permits and licenses.
9- Obtain Employer Identification Number (EIN) & Find Tax Requirements:
If you intend to have employees, you should obtain Employer Identification Number from IRS. The document may require information about number employees and the type of business.
As a business owner you will need assistance in tax related issues including federal and state taxes, i.e.:
- Internal Revenue Services (IRS) administrates all Federal Tax.
- Franchise tax Board administrates two major tax of California Personal Income Tax and Corporation Tax.
- Employment Development Department administrates Payroll Taxes, Employment Training Tax, State Disability Insurance and Personal Income tax.
- California Tax Service Center is partnership of tax agencies to improve taxpayer’s resources and educational programs that are offered by the State of California.
10- Lease an Office
You can either lease commercial space or organize separate a space for home office. You may want to convert that extra bedroom into a home office.
11- Purchase Equipment
The next step is to buy necessary equipment, inventory and supplies required to start operations.
12- Hire employees if Needed
You might not want to hire people right in the beginning, but at some point you do need a team to take your business to the next level. Make sure to hire people who help you grow your business.
13- Start Marketing
Get the marketing materials ready, i.e. business website, business cards, social media profiles, print materials, brochures etc. and start running your business!
The Bottom Line:
Please, be advised that starting a business for the first time is always challenging if you are not aware of legal requirements. You may hire an attorney to help you setup a business, but personnel assessment is also important.
So, go through the available guidelines and do as much research as possible. Moreover, the above checklist items are general guidelines for starting a business in California and you may require additional steps depending upon the type of your business. The best way is to keep educating yourself!
FAQs
What are the 7 steps to starting a business in California? ›
- Choose a name for your business.
- Choose the right type of business entity.
- Register your business with the California Secretary of State.
- Get your EIN Number (Federal Tax ID Number)
- Open a business bank account.
- Get any necessary business licenses or permits.
- Register for taxes.
- Choose a Business Idea. ...
- Decide on a Legal Structure. ...
- Choose a Business Name. ...
- Register Your Business Entity. ...
- Apply for California Licenses and Permits. ...
- Pick a Business Location and Check Zoning Regulations. ...
- Register and Report Taxes. ...
- Obtain Insurance.
How much does it cost to start a business in California? Registering an LLC, partnership or corporation in California costs between $30 and $150. If your business requires additional licenses or permits, you'll likely incur an additional fee, which averages between $50 and $100.
What are the checklist for starting a business? ›- Apply for an Employer Identification Number (EIN) if applicable.
- Select a business structure.
- Choose a tax year.
- If you have employees have them fill out Form I-9PDF and Form W-4.
- Pay your business taxes.
In general, most CA small businesses will pay between $50 and $100 for a general business license. Larger corporations may be subject to charges based on their projected revenue.
How do I get a small business license in California? ›- Name and form your LLC. ...
- Apply for your statewide license(s) (if applicable) ...
- Determine which local licenses you need. ...
- Apply for your California business license(s) ...
- Apply for federal licenses and tax treatment (as necessary)
California Corporate Taxes
The California corporate tax rate is 8.84% (flat rate). This tax rate applies to C corporations and LLCs that elect to be treated as corporations and report net taxable income (i.e. a profit). Without a profit, they pay a flat alternative minimum tax (AMT) of 6.65%.
There is no charge for a seller's permit, but security deposits are sometimes required. You can apply online using online registration or you may apply at a nearby CDTFA location.
What is considered a small business in California? ›Manufacturing: No more than 500 to 1,500 employees, depending on your subsector. Wholesale trade: No more than 100 to 250 employees, depending on your subsector. Retail trade: No more than $8 to $41.5 million in average annual receipts, depending on your subsector.
How much does an LLC cost in California? ›| If the total California income rounded to the nearest whole dollar is: | The fee amount is: |
|---|---|
| $250,000 - $499,999 | $900 |
| $500,000 - $999,999 | $2,500 |
| $1,000,000 - $4,999,999 | $6,000 |
| $5,000,000 or more | $11,790 |
Do I need a business license in California? ›
Though California does not require all businesses to obtain a business license, many types of businesses are required at a city or county level. LLCs are a type of legal entity and will still be required to obtain any appropriate business licensing depending on the type of work conducted.
Is it good to start a business in California? ›California is a place where many people go to start their own businesses. It's considered one of the best states to register a company because of the operating incentives offered by the state and private investors. More than half of the Fortune 500 companies are registered in California.
How do I start an online business checklist? ›- Select a Good Business Name. ...
- Select and Secure your Business Name Domain. ...
- Selecting the E-commerce Platform. ...
- Know About your Audience. ...
- Choose the Website Layout and Design. ...
- Select Supporting and Relevant Extensions. ...
- Do SEO of the Website.
- Cleaning service. Consider starting a cleaning business if you don't mind doing the dirty work others cannot do for themselves. ...
- Freelance Writing Business. ...
- Amazon Kindle Publishing. ...
- Daycare. ...
- Pet Grooming. ...
- Aerial Photography. ...
- Build and Sell Themes Online. ...
- Blogging.
- Choose the Best Form of Ownership for Your Small Business. ...
- Obtain an EIN, if Needed. ...
- Register and License Your Small Business. ...
- Set Up Your Business Bank Account. ...
- Obtain Insurance. ...
- Set Up a Recordkeeping System. ...
- Pay Estimated Taxes. ...
- Take Advantage of Tax Deductions.
Potential closure of your business if you don't comply with the licensing requirements. Your physical office might be padlocked by the government office that you didn't obtain a license through. Possibility of lawsuits. Loss of reputation.
How long does it take to get business license in California? ›How long does the approval process take? Review and investigation of a completed license application may take up to 45 days for a General Business License. An application is considered completed when all required information and fees have been submitted.
What happens if you don't have a business license in California? ›Failure to obtain a Business License is a violation of Title 7 of the County of Los Angeles Code and a misdemeanor. Continued failure to comply with the requirements of Title 7 will result in fines and possible legal action.
Do I need a business license to sell online in California? ›Yes, all companies are required to obtain a California business license, no matter whether they have a physical storefront or just sell online. All businesses are required to get a business license as it helps the government keep track of active businesses in the area and ensure taxes are being filed and paid.
Do I need a business license to sell online? ›All companies require a business license, whether they sell online or from a brick-and-mortar storefront. Businesses are required to apply for a business license because it provides a way for the government to keep track of enterprises operating in the area and keep track of tax revenue.
How do you register a business name in California? ›
For faster service, name reservations can be submitted online through our enhanced online services at bizfileOnline.sos.ca.gov. The reservation can be renewed to the same applicant or for the benefit of the same party, but not for consecutive 60-day periods.
What is California minimum tax rate? ›| Tax rate | Taxable income bracket | Tax owed |
|---|---|---|
| 1% | $0 to $9,325. | 1% of taxable income. |
| 2% | $9,326 to $22,107. | $93.25 plus 2% of the amount over $9,325. |
| 4% | $22,108 to $34,892. | $348.89 plus 4% of the amount over $22,107. |
| 6% | $34,893 to $48,435. | $860.29 plus 6% of the amount over $34,892. |
The two most common types of state and local tax requirements for small business are income taxes and employment taxes. Your state income tax obligations are determined by your business structure.
How do I pay my business taxes in California? ›Go to www.ftb.ca.gov/pay. Choose Web Pay Business or Web Pay Personal, depending on the entity type. For example, for a sole proprietorship, use Web Pay Personal. Follow the prompts to provide the requested information and pay the tax.
Do I need a sellers permit and business license in California? ›California Seller's Permit: If you are doing business in California and intend to sell or lease tangible personal property subject to sales tax sold at retail, you are required to have a seller's permit and prominently display it at your place of business. Read our Seller's Permit FAQ for more information.
Who needs a sales tax permit in California? ›Issuing a resale certificate allows you to buy items you will sell in your business operations without paying amounts for tax to your suppliers. Generally, if you make three or more sales in a 12-month period, you are required to hold a seller's permit.
How long does it take to get a sellers permit in California? ›Typically a Seller's Permit will be issued within 14 days if the application is received by mail. It can be acquired the same day, if applied for in person.
How do you prove you are a small business? ›- IRS form K-1.
- Business emails.
- Business meeting minutes.
- Business resolutions.
- Other business records.
- Sole proprietorship. ...
- General partnership. ...
- Limited partnership (LP) ...
- Limited liability company (LLC) ...
- Non-profit. ...
- C corporation. ...
- S corporation.
The average small business revenue with no employees is $44,000 per year, and the average revenue of a small business with employees is $4.9 million in 2021.
What taxes does an LLC pay in California? ›
Your LLC pays a minimum $800 franchise tax fee every year, except the first year it's in operation. Your LLC pays California corporation taxes. If taxed like a C Corp, you pay a flat 8.84% tax on net income. If taxed like an S Corp, pay a 1.5% tax on net income.
How fast can I form an LLC in California? ›You can form an LLC in California in 3-5 days if you file online (or 2-3 weeks if you file by mail).
How much is a EIN number in California? ›You can apply for and receive an EIN from the Internal Revenue Service by submitting a Form SS-4. This can be done online, by phone, by mail, or by fax. We suggest online filing, as this is the fastest and simplest method. There is no fee to obtain an EIN.
Does California require business insurance? ›California business insurance requirements
Most coverages aren't required by California state law except for workers' compensation. Any business that has employees is required to have workers' comp coverage through the state's insurance fund or through a private insurance carrier.
In California, you don't have to take special steps to register your business with the California Secretary of State if you operate as a sole proprietorship. You're simply a sole proprietor once you begin doing business – and earning business income. California doesn't require a statewide business operating license.
Can I apply for a business license online in California? ›You can obtain a California business license online. We provide the information and resources you'll need to get federal, state, and local licenses and permits for your small business, including the seller's permit.
Is it difficult to do business in California? ›You'll need to navigate a complex set of rules and regulations unique to California. Expect to pay more in taxes and have a higher cost of living than you would in almost any other state. Tap into the right resources to get the help you need and make sure you're within the law.
How much is business insurance in California? ›California small business owners typically pay about $37 per month for business insurance, according to NEXT Insurance data. However, costs differ by industry and the amount of risk each business faces.
Is it worth having an LLC in California? ›Is LLC Worth It in California? Having an LLC in California offers liability protection, which is worth the additional costs. In addition, an LLC protects all of your assets should your business get sued or be unable to pay its debts.
What does a company need? ›- Data and information. Businesses often require several forms of data to help them operate their company efficiently. ...
- Systems. ...
- Applications. ...
- Infrastructure. ...
- Processes. ...
- Customer experience. ...
- Marketing strategies. ...
- Products and services.
What should I know before starting e commerce? ›
- Know What You Are Selling. Do you have a defined product or product line which has demand? ...
- Know Your Consumer. Define who your consumers are and what their needs are. ...
- Understand Your Packaging. ...
- Establish Your Go-To-Marketing Strategy. ...
- Know How to Ship Your Product.
- Business Consulting. If you're an expert in your industry and have been working at it for years, you should consider consulting. ...
- IT Support, Technology Consulting, and Repair. ...
- Cleaning Services. ...
- Accounting and Tax Preparation. ...
- Auto Repair. ...
- Real Estate. ...
- Online courses. ...
- Marketing and PR Services.
- 22 Profitable Businesses to Start in 2022. ...
- Ecommerce Business. ...
- Dropshipping Business. ...
- Vacation or Home Rental. ...
- Online Courses. ...
- Bookkeeping or Accounting Services. ...
- Graphic Design Business. ...
- Digital Agency.
If you are setting up your business as self-employed or a sole trader, then you can choose to use your own name or you can come up with a completely different brand name. Using a personal name is becoming increasingly popular these days because it creates a more relatable brand.
Do you need a business bank account if you are self-employed? ›For sole traders, business bank accounts are not a legal requirement.… A self-employed bank account can mean one of two things: using a personal account for business conducted when self-employed, or using a business account instead. For sole traders, business bank accounts are not a legal requirement.
What legal documents do I need to start a business? ›...
Tax
- Bank statements.
- Invoices.
- Record of expenses.
- Past tax returns.
To form an LLC in California, go to bizfileOnline.sos.ca.gov, log in, select Register a Business under the Business Entities Tile, Articles of Organization - CA LLC and follow the prompts to complete and submit.
What are the steps to start a small business? ›- Conduct market research. Market research will tell you if there's an opportunity to turn your idea into a successful business. ...
- Write your business plan. ...
- Fund your business. ...
- Pick your business location. ...
- Choose a business structure. ...
- Choose your business name. ...
- Register your business. ...
- Get federal and state tax IDs.
LLCs, Corporations, LPs, LLPs, or GPs operating in California need to register and form their legal entity with the California Secretary of State's Office, file appropriate taxes, register as an employer, and obtain business licenses and other permits from appropriate cities or counties.
How much is LLC in California? ›| If the total California income rounded to the nearest whole dollar is: | The fee amount is: |
|---|---|
| $250,000 - $499,999 | $900 |
| $500,000 - $999,999 | $2,500 |
| $1,000,000 - $4,999,999 | $6,000 |
| $5,000,000 or more | $11,790 |
Do I need a California state tax ID number? ›
If you plan on selling taxable goods and services in the state of California, or if you'll owe excise taxes (which are associated with specific products, like alcohol or tobacco products), you'll need a California state tax ID in addition to your federal tax ID.
What is a good LLC name? ›Be distinctive. Choose a name that'll stand out and help customers remember you and distinguish you clearly from any other company for legal and branding purposes. Some branding experts recommend starting business names with a hard consonant or incorporating alliteration to make it more memorable.
What are the benefits of an LLC in California? ›...
Other California LLC benefits include:
- Pass-through taxation.
- Tax options like S corp.
- Simplicity.
- Ownership flexibility.
- Increased credibility.
- Name registration.
- Brainstorm and refine your business idea.
- Pick a business name.
- Create a professional website.
- Conduct market research.
- Write up a business plan.
- Build a pitch deck.
- Choose a legal structure.
- Secure capital and cash flow.
- Vet Your Business Idea. ...
- Tap Into Free Resources. ...
- Network With Communities of Support. ...
- Live on Personal Savings. ...
- Look for Alternate Funding Options.
You must obtain a seller's permit if you: Are engaged in business in California and. Intend to sell or lease tangible personal property that would ordinarily be subject to sales tax if sold at retail.
What can happen if you operate a business without a license? ›Potential closure of your business if you don't comply with the licensing requirements. Your physical office might be padlocked by the government office that you didn't obtain a license through. Possibility of lawsuits. Loss of reputation.
How long does it take to register a business in California? ›California LLC Approval Times
Mail filings: In total, mail filing approvals for California LLCs take 2-3 weeks. This accounts for the 3-5 business day processing time, plus the time your documents are in the mail. Online filings: In total, online filing approvals for California LLCs take 3-5 business days.
There is no charge for a seller's permit, but security deposits are sometimes required. You can apply online using online registration or you may apply at a nearby CDTFA location.
How long is an LLC good for in California? ›You'll need to file your first Statement of Information within 90 days after the state approves your California LLC. Afterwards, you must submit it once every 2 years to keep your business in good standing.
Do you need a registered agent in California? ›
Why Do I Need a Registered Agent? The California Corporation Code Section § 1700-1702 requires that all corporations, LLCs and other business entities appoint and maintain a registered agent. You can't start a business without one (unless you're a sole proprietor, in which case you don't have to form an entity at all).