starting a business in california

A complete step-by-step guide to start your business and get on the fast track to financial success.

Doing Business In California

Business Facts

California is the largest and wealthiest state in the United States. Major industries include technology (Silicon Valley), entertainment (Hollywood), agriculture/farming as well as millions of small businesses.

Small businesses play an essential role in California’s regional economies and industry sectors, generating an annual payroll of $204.1 billion in 2012. 

California is 4th in the nation with 0.40% of the population starting a new business, over one-third higher than the national average of 0.28%. 

Small Business and Startup Environment

There are 3.9 million small businesses in California, making up 99.8% of the state’s businesses. Those companies employ nearly 50% of the state’s workforce.

Silicon Valley has emerged as the destination of choice for establishing technology businesses. Apple, Google, HP, Intel, Adobe, Ebay and many more major tech giants have established their headquarters in Silicon Valley, and they operate from the region with continued business success. 

Southern California has a lot going for it as a tech hub. It produces more tech PhDs per year than any other region in the country. The California Institute of Technology—Caltech—generates more patents than any other university in the US, and the University of California at Los Angeles (UCLA) more startups.

Major Companies

The state of California is home to many big-name employers, and it’s well-known for tech companies such as AppleGoogleeBayIntel, Disneyland, Naval Base San Diego.

Step 1: Choose A Business Structure

The most common business structures are sole proprietorship, partnership, limited liability company (LLC), and a few different types of corporations—the standard corporation (often called a C corporation or “C corp”), the small business corporation (often called an S corporation or “S corp”), and the benefit corporation (often called a B corporation or “B corp”).

The most common business structures are:

The same thing as a Sole Proprietorship, but just with 2 or more people. Like a Sole Proprietorship, a Partnership doesn’t create a separate legal entity and the partners are responsible and personally liable for any business activity or wrongdoing.

A more complex legal structure that requires a board of directors, corporate officers, and shareholders. Corporations don’t usually work for most small business owners since they face double taxation. Corporations can be beneficial to companies that are looking to raise capital investment, take the company public, or have large healthcare expenses for their employees. The most common types of companies that form Corporations are high-growth technology and startup companies.

Unlike a Sole Proprietorship or a Partnership, a Corporation is a separate legal entity from its owners (called shareholders). It provides them with personal liability protection.

A legal entity that combines the benefits of a Corporation and a Sole Proprietorship/Partnership.

An LLC in California is a separate legal entity under the law. And like a Corporation, it provides personal liability protection for the owners. If the LLC is sued, the owner’s personal assets – like their home, cars, and bank accounts – are protected. And like a Sole Proprietorship/Partnership, an LLC has pass-through taxation (so there’s no double taxation).

A California LLC is the most popular option and a good choice for people who want to run a small business for two reasons:

  • Personal liability protection (personal assets are kept safe)
  • No double taxation

Unlike a Sole Proprietorship (and a Partnership), your California LLC’s assets are separate and distinct from your personal assets. In the event your LLC gets sued, your personal assets are protected.

And unlike a Corporation, your LLC is not subject to double taxation. Instead, your LLC’s profits will “pass-through” to your personal tax return and federal taxes are paid just once.

Step 2: Choose The Right Business Name

Choosing a business name is important, you want to make it easier for your customers to remember it, here are some tips:

  1. Avoid hard-to-spell names.
  2. Don’t pick a name that could be limiting as your business grows.
  3. Conduct a thorough Internet search.
  4. Search and purchase a domain name.
  5. Use a name that conveys some meaning.
  6. Conduct a trademark search.

Step 3: Register Your Business

Depending on the business structure you chose you will need to register your business.

For California DBA (Doing Business As) go to:

https://www.sos.ca.gov/business-programs/business-entities/name-availability/

For Corporations go to:

https://dbo.ca.gov/division-of-corporations/

For LLC’s go to:

https://www.sos.ca.gov/business-programs/business-entities/filing-tips/filing-tips-llc/

Step 4: Obtain an EIN Tax Number

With limited exceptions, most businesses require an Employer Identification Number (EIN), also known as a Tax ID Number. An EIN is used to identify a business in its federal tax filings. Without an EIN, you can’t hire employees or open a business bank account.

Click Here to Apply for EIN number online

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Step 5: Open A Bank Account

– Open a business bank account:

  • Separates your personal assets from your company’s assets, which is necessary for personal asset protection.
  • Makes accounting and tax filing easier.

– Get a business credit card:

  • Helps you separate personal and business expenses.
  • Builds your company’s credit history, which can be useful to raise capital later on.

Step 6: Licenses & Permits

Now that you’ve registered your business name you need to obtain a business license for your company – this authorizes your company to do business in your city or county. Typically this also involves registering for state taxes and permits (the city may require them as part of the business licensing process).

Here are some links for California Businesses:

Selling products? Check California Resale Permit

Business Licensing for the State of California

Step 7: Branding & Marketing

Your brand is the image customers have of your business, so it’s important to determine who is your audience and what is the message that you want to project. That way, your company’s image will be what you intend it to be. It should be strategic and intentional.

Step 8: Establish a Web Presence

Creating an optimized website helps you to gain important visibility for the right terms. A website is a powerful sales tool and one that allows you to address your customers’ concerns, give them the information they need to make a decision and create compelling calls to action.

In addition to a website, you should also consider other avenues for promoting your business online:

Join Local Networks

California Business portal

Angel.co