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How to Start a Business in California

California is home to the stars — not the ones up in the sky, but the ones on our TV screens and in our magazines. Though Hollywood and their penchant for In-N-Out Burger may be one of the major takeaways for people out of town, the Golden State has so much more to offer, particularly for business owners.

How to Start a Business in California

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.

Benefits of Opening a Business in California

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.

How to Start a Business in California Checklist

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:

Checklist for How to Start Your Business in California
 

1Create a Business Plan

2

LLC vs. Sole Proprietorship: Choosing a Business Structure

3
Determine Your California Business Costs and Find Funding
 
4
Create a Name for Your California Business
 
5
Register Your Business and Open Financial Accounts
 
6
Marketing Your Business in California

1: Create a Business Plan

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:

  • A clarification of your business idea
  • A market analysis: Most businesses fail because there is no market need, so you must fully understand what your target market actually wants.
  • A competitive analysis: How will you improve what your competitors are doing and what else do you bring to the table?
  • A pricing scheme for your products and/or services
  • A financial outline: Where are you getting revenue, how are you getting startup capital, and when do you expect to be profitable?

You can check out our complete guide to writing a business plan for more information.

2: LLC vs Sole Proprietorship: Choose a Business Structure

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.

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3: Determine Your California Business Costs

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.

4: Create a Name for Your California Business

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.

5: Register Your Business and Open Financial Accounts

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.

6: Market Your California Business

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.

Examples of Good Businesses to Start in California

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.

Bottom Line

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.

Plans

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 Check
Operating Agreement
+$35 Check
Name Reservation
+$10 Check
Accuracy Guarantee
Check
TOTAL COST
Do-It-Yourself (DIY)ZenBusiness Pro Plan
Starting Price
state fee$199 + state fee
Average Filing Time
2-3 weeks5-8 business days
Registered Agent
+$99/yr Check
Operating Agreement
+$35 Check
State Compliance Help
$119/yr Check
EIN
+$70 Check
DOMAIN NAME
+$25 No
DOMAIN PRIVACY
+$10 No
BUSINESS WEBSITE
+$100 No
BUSINESS EMAIL ADDRESS
+$25 No
SHOW ALL DETAILS
First Year Price
LegalZoom $1017
ZenBusiness $199
SAVE 80%
excluding State Fees3
Second Year Price
LegalZoom $529
ZenBusiness $199
SAVE 62%
TOTAL TWO YEAR PRICE
LegalZoom $1,546
ZenBusiness $398
SAVE 74%
First Year Price
LegalZoom $1017
ZenBusiness $199
SAVE 80%
excluding State Fees3
Second Year Price
LegalZoom $529
ZenBusiness $199
SAVE 62%
TOTAL TWO YEAR PRICE
LegalZoom $1,546
ZenBusiness $398
SAVE $1,148
Do-It-Yourself (DIY)ZenBusiness Pro Plan
Starting Price
state fee$199
Average Filing Time
15 business days5-10 business days
Registered Agent
+$249/yr Check
Operating Agreement
+$99 Check
State Compliance Help
$280/yr Check
EIN
+$60 Check
DOMAIN NAME
+$25 No
DOMAIN PRIVACY
+$10 No
BUSINESS WEBSITE
+$100 No
BUSINESS EMAIL ADDRESS
+$25 No
SHOW ALL DETAILS
1 All prices and services presented above were reviewed and verified as of 11/2/19.
2 The Starter plan is $49/year the first year and increases to $119/year after that
3 This chart does not include state fees because those will vary in each state.
LegalZoom Standard PackageZenBusiness Pro Plan
Starting Price
$329$179
Average Filing Time
15 business days5-10 business days
Registered Agent
+$159/yr Yes
Operating Agreement
+$99 Yes
State Compliance
$280/yr Yes
EIN
+$60 Yes
SHOW ALL DETAILS

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License

Alaska Licenses & Permits

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CORP Formation

Alaska Corporation

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EIN

Alaska EIN Number

Also called a Tax ID Number, from the IRS so you can hire employees, and protect your assets

Component

Alaska Sole Proprietorship

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Folders

Alaska Filing Forms

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Parnership

Alaska LLP

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Agreement

Alaska Operating Agreement

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Oklahoma DBA

Alaska DBA

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Registered Agent

Alaska Registered Agent

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Run an Oklahoma Business

Run an Oklahoma Business

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Get Everything You Need to Create Your California Business

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