How To Start a Business in California: 7 Simple Steps
Starting a business in California has been appealing to entrepreneurs and go-getters since gold was discovered at Sutter’s Mill in 1848. As settlers and entrepreneurs rushed into the state, they soon learned that the area’s beautiful coast, scenic mountains, and temperate climate made for an ideal place to settle down and thrive. Today, the Golden State is known for its unique history and unconventional spirit, as well as tremendous business success, as exemplified by the entertainment industry, the tech industry, and the agricultural industry.
If you’re interested in starting a business in California, read on for 6 simple steps to make things easier!
Start a business in California
Starting a business in California is a manageable task when you follow these seven simple steps:
- Choose a name for your California business
- Select a location for your California business
- Write a business plan
- Choose a business structure
- Obtain all necessary California business licenses and permits
- Prepare for your business’s financial success
- Market your California business
1. Choose a name for your California business
If you’re reading this post about starting a California business, you probably already have a business idea. Perhaps you’ve even started doing business, and you’re looking to take your side hustle to the next level or make your enterprise a little more official. Wherever you are on the timeline of starting your California business, the first official step is to choose a name. Pick a name that tells your customers exactly what you’re all about. Keep it simple, as long and complicated business names can be hard for customers and clients to remember. And perhaps most importantly, make sure your business name is available in the state of California. Be sure to study California’s name regulations, requirements, and restrictions to ensure you are in compliance. You should also run a business name search with the California Secretary of State to make sure no other entity has already claimed the name you want to use. Once you’ve confirmed that your name is available, you’ll want to reserve it by filling out a name reservation form with the California Secretary of State. Note – the business entity structure you choose (see step 3) can affect the official name you use to register your business. California LLCs must include the phrase “Limited Liability Company” or its abbreviations (“LLC” or “L.L.C.”) in their business names, while California corporation names must include “Corporation,” “Company,” “Incorporated,” or “Limited” or their abbreviations. If you’re not sure which entity you’ll use, hold off on filing the official name reservation form until you complete step 3.
One last note about choosing your California business name: although it’s not strictly required, it’s a good idea to check for domain name and social media profile availability as well. You want your customers to be able to find your digital presence quickly and easily.
2. Choose a specific location for your California business
This might be something that’s easy for you – if you’re already living in California you probably want to set up your business in the municipality in which you live. But if you need some help deciding where exactly to make your business’s home, check out the resources that the Governor’s Office of Business and Economic Development provides. The California Business Investment Services unit offers customized site selection services for businesses of all types.
3. Create a business plan for your California business
A well-thought out business plan can be immensely helpful when starting a business in California. Your business plan will serve as a guiding document that helps you structure, operate, and grow your business. It’s especially important to write a solid business plan if you are planning to seek funding from investors, banks, or other financial institutions.
Your business plan should contain the following key elements:
- Executive summary
- Company description
- Market analysis
- Organization and management
- Service or product description
- Marketing and sales plan
- Funding request
- Financial projections
For more detailed information about writing a business plan, check out our handy guide or reach out for a free consultation with a Prime business advisor.
4. Choose a business entity structure for your California business
When starting a business in California, you’ll need to choose a business structure. The three main types are: a sole proprietorship, a limited liability company (LLC), and a C corporation. Each entity type offers unique benefits when it comes to personal liability, ownership, taxation, and funding:
- Sole proprietorship. A sole proprietorship is an informal business structure. Legally, they are simply extensions of their owner, so there is no protection or separation for your personal assets. If you operate as a sole proprietorship and your business is sued, you may personally be liable.
- LLC. A limited liability company (LLC) is a more formal business structure in which each owner (individual) is a member. The LLC structure offers personal liability protection, meaning that if someone sues the LLC, the members are not personally liable.
- Corporation. A corporation is a legal business entity owned by a group of shareholders. This is the most formal of the three entities, with more reporting rules and regulations. Because the business is divided into shares that can be bought and sold, it is easy to add owners, sell the business, and raise funds. Corporations also offer personal liability protection for their owners.
Obtaining a federal employer identification number (EIN)
No matter what state you’re in, if you incorporate your business or plan to hire employees, you’ll need a federal employer identification number (EIN) from the IRS. (Sole proprietorships with no employees do not need an EIN.) The EIN will function as your business’s federal tax number, and will be useful for other things such as setting up business bank accounts.
Once you have the EIN, you need to register your corporation, LLC, or limited partnership with the California Secretary of State. That office maintains a terrific website with the resources you need to file online. You can find all the required paperwork for online registration of LLCs, corporations, and partnerships here.
The fee to register an LLC in California is $85 with the initial filing, with an additional $20 due within 90 days when you file the statement of information.
The fee to register a corporation in California is $100. Again, you must also file a statement of information within 90 days at a cost of $20.
Note that all fees are subject to change – you can confirm the most current fee schedule for the state of California here.
5. Obtain the proper business license and permits
The state of California does not issue or require state-wide business licenses, but most municipalities do require licenses and permits for specific business types. The California Licensure Guide can help you determine what licenses and permits your business needs.
6. Prepare for your California business’s financial success
One of the most important first steps when setting up a California business is setting up a business bank account and establishing business credit. This will help you keep good accounting records and avoid commingling funds.
If you need startup capital, you can get connected to grants, other funding, and tax benefits through California’s Start-Up Business Financing site.
Finally, you may want to consider business insurance to provide additional protection for your assets. The state of California funds a network of small business technical assistance centers that provide no-cost one-on-one consulting and low-cost training services to small businesses and entrepreneurs. You can find more information about business insurance in the state of California here.
7. Prepare for your California business’s financial success
To make sure your business starts out successful and stays that way, you will probably need to consider some marketing plans. Research your market and your consumer base so that you can make smart decisions about what kinds of marketing strategies make sense for your business. Options include:
- Digital marketing. This includes everything from websites and social media accounts to more sophisticated pay-per-click web ads, social media influencer campaigns, SEO strategy, and more.
- Print marketing. This means flyers, signs, banners, business cards, and more.
- TV and radio ads. These traditional ads can be expensive, but they reach a large audience.
Following these simple steps will help you get your California business started quickly and correctly. If you’re feeling overwhelmed or just want an expert to review things, set up a free consultation with our Prime advisors. We’ve been doing this a long time, and we’ve helped thousands of entrepreneurs and small business owners get started on their journeys. We can help you too!