Start your business
California seemingly has everything. There are major cities (think: Los Angeles, San Francisco, and Sacramento), gorgeous beaches, land fertile enough for vineyards, and land dry enough to contain some of the United States’ largest deserts. It’s also home to some of the most successful tech companies in the world. While the Bay Area, and more specifically Silicon Valley, has skyrocketing rent costs, it’s become a worldwide hub for the tech industry.
If you’re wondering how to start a business in California, this guide can help put you on the right path.
California is one of the best places in the United States to start a small business because it’s home to a number of booming industries, from music and film to professional services and agriculture. The state boasts 25 million acres of farmland, and it’s the country’s leading producer of grapes, lemons, plums, avocados, strawberries, and peaches (yup, it even tops Georgia for that last one).
Beyond that, California boasts an astounding GDP. According to The Guardian, if Silicon Valley was its own country, it’d be one of the richest in the world with $128,308 per capita in annual gross domestic product. In other words: salaries are high. Overall, the area’s output is $275 billion, or more than the entirety of Finland.
Starting a business in California is similar to starting a business in any other state. You’ll deal with the California Secretary of State to get a business license, and you’ll need to have all your paperwork tidy, though you can get a lot of assistance through California’s business portal. If you have trouble deciding on your location (California is huge) or understanding the legal business licensing regulations and zoning, you can also contact the Governor’s Office of Business and Economic Development, who offer free business consultations.
Also consider using this checklist as a guide:
1Create a Business Plan
2
LLC vs. Sole Proprietorship: Choosing a Business Structure
Business plans are helpful because they keep you on track. They can help you land investor funding or business loans because you’re laying out exactly what you intend to do.
When crafting a business plan, small business owners may want to include:
You can check out our complete guide to writing a business plan for more information.
When you’re starting your own business, you need to choose a business structure to pay state taxes and federal taxes to the IRS. In California, corporations are popular for tech companies that want to eventually issue stocks, but they’re subject to additional taxes. Other small businesses may wish to form nonprofits, general partnerships, limited partnerships, or S corporations. The latter is a type of professional corporation that avoids the double taxation of C corps, which have to pay income taxes on dividends at a corporate level and shareholder level.
The two most popular business entities are LLCs and sole proprietorships. A limited liability company (LLC) is great for partnerships or solo endeavors. While this also avoids the double taxation of corporations, the main draw is limited liability protection as opposed to corporations on the owners’ personal assets (the owners, in this case, should be listed within the operating agreement). This type of business does require a bit of paperwork. You will have to file articles of organization, name a registered agent, and pay a $70 fee. You can file for your California LLC online, but if you need it rushed, it will cost you extra.
Sole proprietors don’t have any personal liability protection, making them a riskier endeavor, but they do enjoy a speedier formation process than LLCs. The main hurdle here is applying for an employer identification number (EIN), which can be done on the IRS’ website. You can also use your social security number as a tax ID number when you file business taxes, but it leaves you open to identity theft.
California, and particularly the Bay Area, isn’t exactly a cheap place to start a business, so you need to make sure you have enough capital before you get started. In order to determine your business costs, you’ll need to add up fixed expenses (like insurance premiums and rent) with variable expenses (like inventory costs and taxes) and one-time costs (like equipment purchases and supplies). It’s a good idea to keep at least a six-month cushion in the bank for emergencies.
Next, you’ll actually need to fund your business. One-time costs can be put on a business credit card, but that’s not a long term solution. Most tech startups look for investors, whether it’s family and friends who can pitch in for seed funding or angel investors.
Small business owners often opt for business loans or grants. Both the Small Business Administration (SBA) and California’s Employment Development Department have funding resources available online. Alternatively, check out California’s business portal.
The best business names are easy to understand and can help you form a solid online presence, including domain registration. You can make sure your name isn’t taken by looking at California’s Business Search and other local registration services, then file a Name Reservation Request Form.
If your new business is a sole proprietorship or partnership using a name that’s different than the legal name of the business owners or surnames of the partners, you’ll need to file a Fictitious Business Name Statement with the county clerk. This is commonly known as a doing business as (DBA) and is a requirement for all California businesses that fall in this category.
You can’t launch your business without the proper administrative work. This means you’ll need to register your LLC or other business entity, open up a business bank account, obtain the proper insurance, and get the required permits and licensing.
Calgold, a business web portal from the Governor’s Office of Business and Economic Development, can help you find the proper permits and licensing for your new company. Those collecting sales and use taxes will need a permit. In addition to obtaining a business license, you may also need to submit a statement of information to the California Secretary of State, which is typically required every one or two years.
As far as insurance, most businesses need general liability insurance. If you plan to hire employees, some insurances such as workers’ compensation are mandated by the federal government. Other specialized insurances, like commercial auto plans or liquor liability insurance, depend on your business idea.
A great marketing plan can help a new business soar. This includes crafting a comprehensive, cross-platform social media plan on outlets like Twitter, Facebook, Instagram, and YouTube. You can even look at specialized communities within Facebook and LinkedIn while developing an SEO campaign for your webpage.
Word of mouth is important, but that has a more local focus. Give it a boost by signing up for Yelp, Google My Business, and local business registrations as well as advertising in local papers and bulletins. Connect with a California marketing partner for help.
California is a leader when it comes to agriculture and tech so those are great places to start. Overall, the state has 4 million small businesses that employ half of the workforce, which lends itself to more business-to-business (B2B) operations and those that help professional workers, like finance, software, and education.
Manufacturing is also a large industry, and this sector already employs 9.4% of the state’s workforce. Mostly, it’s focused on software development, computers, and electronics or aerospace (notably Lockheed Martin Corp and Hewlett Packard Enterprises). Companies that serve that sector can carve out a niche.
California is large and diverse enough that there are a wealth of business opportunities across the state, particularly in the world of tech, agriculture, and professional services. Though starting a business takes careful planning, California’s business portal can point new entrepreneurs in the right direction.
| Do-It-Yourself (DIY) | ZenBusiness Starter Plan |
|---|---|
| Articles of Organization (state filing fee) | |
| $100 | $100 |
| ZenBusiness filing | |
| N/A | $49 |
| Average Filing Time | |
| ??? | 2-3 weeks |
| Registered Agent | |
| +$159/yr | |
| Operating Agreement | |
| +$35 | |
| Name Reservation | |
| +$10 | |
| Accuracy Guarantee | |
| | |
| TOTAL COST | |
| Do-It-Yourself (DIY) | ZenBusiness Pro Plan |
|---|---|
| Starting Price | |
| state fee | $199 + state fee |
| Average Filing Time | |
| 2-3 weeks | 5-8 business days |
| Registered Agent | |
| +$99/yr | |
| Operating Agreement | |
| +$35 | |
| State Compliance Help | |
| $119/yr | |
| EIN | |
| +$70 | |
| DOMAIN NAME | |
| +$25 | |
| DOMAIN PRIVACY | |
| +$10 | |
| BUSINESS WEBSITE | |
| +$100 | |
| BUSINESS EMAIL ADDRESS | |
| +$25 | |
| SHOW ALL DETAILS | |
| Do-It-Yourself (DIY) | ZenBusiness Pro Plan |
|---|---|
| Starting Price | |
| state fee | $199 |
| Average Filing Time | |
| 15 business days | 5-10 business days |
| Registered Agent | |
| +$249/yr | |
| Operating Agreement | |
| +$99 | |
| State Compliance Help | |
| $280/yr | |
| EIN | |
| +$60 | |
| DOMAIN NAME | |
| +$25 | |
| DOMAIN PRIVACY | |
| +$10 | |
| BUSINESS WEBSITE | |
| +$100 | |
| BUSINESS EMAIL ADDRESS | |
| +$25 | |
| SHOW ALL DETAILS | |
| LegalZoom Standard Package | ZenBusiness Pro Plan |
|---|---|
| Starting Price | |
| $329 | $179 |
| Average Filing Time | |
| 15 business days | 5-10 business days |
| Registered Agent | |
| +$159/yr | |
| Operating Agreement | |
| +$99 | |
| State Compliance | |
| $280/yr | |
| EIN | |
| +$60 | |
| SHOW ALL DETAILS | |
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