How to Start a Business in California
California is the home of the stars. Not the ones in the sky, but those that are on TV and in magazines. Although Hollywood and its penchant for In-N-Out Burgers may be the most popular take-out for those outside of Hollywood, the Golden State has so many more options, especially for business owners.
California seems to have everything. California has many major cities, including San Francisco, Los Angeles, and Sacramento. It also boasts beautiful beaches and fertile land that can be used for vineyards. The land is also dry enough to support some of the largest deserts in the United States.
Some of the most successful technology companies in the world are located here. The tech industry has made Silicon Valley and the Bay Area a global hub, despite the skyrocketing rent prices.
This guide will help you find the best way to start a California business. If you plan to form an LLC you should visit our list of the best LLC services.
California Business Openings: Benefits
California is a great place to start a business. It’s home of many booming industries such as music, film, professional services, and agriculture. California boasts 25,000,000 acres of farmland and is the nation’s largest producer of grapes and lemons, plums and avocados. It also produces strawberries and peaches, surpassing Georgia in that regard.
California has an amazing GDP. The Guardian reports that if Silicon Valley were its own country, it would be one of the most prosperous in the world, with an annual GDP of $128,308 per person. Also, salaries are high. The area’s total output is $275 billion, which is more than all of Finland.
Checklist on How to Start A Business in California
California registration is the same as any other state. However, there are some differences. To obtain a California business license, you will need to deal with the California Secretary Of State. You also need to make sure you have all of your paperwork in order. However, California’s Business Portal can provide some assistance. You can also reach the Governor’s Office of Business and Economic Development for free consultations if you need help deciding where to locate (California has large).
1. Make a business plan
Because they help you stay on track, business plans are very useful. Because you are clearly describing what you want to do, they can help you get investor funding or business loans .
Small business owners might want to include the following items in their business plan:
- Clarification of your business idea
- A market analysis : Many businesses fail because they don’t have a market. You must understand your market to be successful.
- A Competitive Analysis: What can you do to improve the performance of your competitors?
- Pricing scheme for your products or services
- Financial overview: How are you generating revenue? How do you get startup capital? When are you going to become profitable?
2. Select a business structure
You need to choose a entity structure when you start your own business. How well your personal assets will be protected, how much you’ll have to pay in taxes and how many paperwork you’ll need are all affected by the type of business entity.
California’s corporations is a popular choice for tech companies looking to issue stock eventually. However, they are subject to double taxation, which means that profits are both taxed at the individual shareholder level as well as the business level. Corporations help protect shareholders’ personal assets from liabilities and debts. Small businesses might also consider forming nonprofits or general partnerships, as well as limited partnerships or S-corporations.
Sole Proprietorships In California
limited liability businesses (LLCs), and sole proprietorships are two of the most common business entities. Sole proprietorships do not have personal liability protection. This makes them more risky than LLCs and corporations. However, they are easier to form and require less paperwork.
General partnerships work like sole proprietorships but have multiple owners who share the profits, debts and liabilities.
California Limited Liability Companies
Limited liability companies are great for solo ventures or partnerships. An LLC can be regarded as the best option of sole proprietorships or corporations. It avoids double taxation and provides liability protection for its owners. An operating agreement gives LLCs more freedom to set their own rules and structure.
An LLC in California requires more paperwork than an unregistered company like a sole proprietorship, general partnership or other business entity. For service of process , you will need to file Articles of Organization. Online filing for your California LLC is possible, but it may be more expensive if you need it urgently.
California S Corporations
An S corporation is not a type of legal entity, but it’s a tax classification that LLCs and corporations can use, provided they meet certain qualifications. S corporations are becoming more popular because they allow C corporations to avoid double taxation. They’re also a way for self-employment tax savings.
3. Calculate your business’s costs
California and the Bay Area are not cheap places to start a business. To calculate your business expenses, add up fixed expenses like rent and insurance premiums. Add in variable expenses such as inventory costs and taxes. Also include one-time expenses such as equipment purchases and supplies. For emergencies, it’s a good idea keep at least six months of emergency funds in your business bank account.
Funding Your California Company
Next, you will need to finance your California business. You can put one-time expenses on a business credit, but this is not a long-term solution. Many tech startups are looking for investors. This could be family members or friends who can offer seed funding.
Many small business owners choose to apply for grants or loans for their small businesses. Online funding is available from the Small Business Administration. Check out California’s business portal for additional information.
4. For your California business, create a business name
Easy-to-understand business names can help you establish a strong online presence. Look at California’s search engine for business names to ensure your business name is not taken.
You will need to file a Fictitious business name statement with the county clerk if your new business is a sole proprietorship, partnership or uses a name other than that of the owners or the surnames of the partners. This is known as a doing Business as (DBA name) and is required for all California businesses.
5. Register your California business, open bank accounts and obtain business insurance
Without proper administrative work, you can’t launch a business. You will need to register your LLC, corporation or other business entity, open a bank account (to keep personal and business accounts separate), get the necessary permits and licensing.
Get Business Licenses and Permits
California businesses require permits or licenses to operate. Permits and business licenses are required at the local, state, or federal levels. You will need to research to verify that your business is legally licensed and permitted. You can use our business license report to do the research.
Apply for an Employer Identification Number
A federal employer identification number ( EIN) is required for many businesses. This federal tax ID can be used to hire employees and it comes along with the paperwork that an LLC or corporation must file in order to register with California. You may be able use your Social Security number to identify your tax ID if you are a sole proprietor without employees. However, many experts recommend that you obtain an EIN to avoid identity theft.
A permit is required by the California Department of Tax and Fee Administration for those who collect sales and use taxes.
You may need to obtain a business license. However, you might also need to submit an information statement to California Secretary of State. This is usually required every one to two years.
Insurance for businesses
General liability insurance is a good option for businesses looking to get business insurance. Some business insurance policies such as workers’ comp are required if you intend to hire employees. Your business idea may require you to purchase other specialized insurances such as commercial auto insurance or liquor liability insurance.
6. Market your California company
Do market research. A great marketing strategy can make a new company flourish. This includes creating a cross-platform, comprehensive social media plan for outlets such as Twitter, Facebook and Instagram. While creating an SEO campaign for your website, you can also look into the specialized communities on LinkedIn and Facebook.
Although word of mouth is important for many reasons, it should have a local focus. You can give it a boost by signing-up for Yelp, Google My Business and local business registrations. For assistance, connect with a California marketing partner.
California’s Best Businesses to Start
California is a leader in agriculture and technology, so these are great places to begin. California has over 4 million small businesses, employing half the workforce. This makes it a great place to expand business-to-business operations (B2B) and support professional workers like software and finance.
Manufacturing is also a major industry. This sector currently employs 9.4%. It focuses mainly on software development, computers, electronics, or aerospace (notably Lockheed Martin Corp. and Hewlett Packard Enterprises). It’s possible to create a niche for companies that specialize in this sector.
For more inspiration, check out our research about the best California businesses to start.
California offers many opportunities for business owners looking to start their own business. This is especially true if you are interested in tech, agriculture and professional services.
California Business FAQs
- Is there a city that is ideal for starting a business? Los Angeles is a large city with a lot of tourists. It’s an ideal place to open a restaurant or retail business. While Napa is well-known for its wineries, San Francisco and other cities are leaders in tech.
- Where is the best place to start your business in California? California isn’t cheap, but it’s possible to visit affordable cities such as Oxnard and Ventura. Avoid San Jose and San Francisco if you are looking for something cheap. They have startup costs that are over 50% higher than the average.
- What can I do to learn more about starting my own California business? USA.gov provides links to many resources regarding starting a business in the Golden State. These include financing and incentives, as well as information about moving an existing business.
- What did the California business filing process look like in 2022? Yes, California launched a brand new website for business filings in April 2022.
Brian Wilson is the content manager and founder of LLC Radar.
Brian grew up in North Texas, just outside of Dallas, and has a bachelor’s degree in business journalism from Southern Methodist University. Since graduating from SMU, Brian has gained over 10 years of experience in business writing for several online publications.
Brian resides in Plano, Texas and he can be reached by email: firstname.lastname@example.org