8 Steps to Start Your Business in California

Starting a business in California is a terrific opportunity to be your own boss and give your neighborhood fresh goods, services, and concepts. Shopify powers the online storefronts of thousands of businesses in California, and every day, more entrepreneurs take the first steps toward launching their own enterprises. To assist you with getting started, we’ve put together a few resources.

1. Pick a business idea

How do you begin a business in California? generating a brilliant concept. You’re prepared to begin if you already have an original and financially viable idea. If you don’t yet have a completely developed concept for your product or service, some popular brands have business tools that can assist you in learning how to launch a small business in California, as well as how to decide which goods to sell and who to target your marketing efforts toward.

2. Give it a name

In addition to being crucial for branding, choosing a name for your company is also a necessary step in the registration process. You’ll need to first think of a solid name for your firm since most regulatory authorities ask for it on forms.

The Shopify Business Name Generator will help you come up with suggestions if you’re stuck on a name. Once you’ve chosen a couple, look them out online to see whether any other companies are already utilizing them. To see if any companies have already registered your preferred name as a trademark, you can also check with the USPTO.

Since the address of your website is equally crucial to your brand, it is a good idea to examine if a matching domain name is available.

When you’re prepared to give your name official status, you must take the following two steps:

3. Create a business plan

Whether a business plan is necessary for registration or not, it is the foundation of the majority of prosperous enterprises. A strong business plan is frequently required as part of the loan application process and can help you keep focused and organized during the beginning phase.

Writing a business plan may seem like a challenging step in learning how to launch a company in California, but it’s actually a rather simple document. Wise business plans can be of assistance by providing tools like a flexible business plan template and a number of examples to serve as inspiration.

4. Start your business with a structure

It’s critical to select the appropriate organizational structure for your enterprise when beginning a small business in California. Corporations, LLCs, and sole proprietorships are the three most typical forms of business structures. There are benefits and drawbacks to each. A synopsis of each is provided below, along with the preliminary actions needed to set up your firm. Interested in learning more about the different company structures?

California sole proprietorship

Who are sole proprietors?

A sole proprietorship is the simplest type of business organization that can exist in California. It is an unincorporated company owned by one person. They are simple to set up, affordable to start, and you keep all of the revenues from your company. The disadvantages include the possibility of paying higher taxes than with other business forms and the lack of corporation or Limited Liability Company (LLC) protection, which leaves you open to personal liability for debts, legal actions, and other matters.

Do you need a sole proprietorship?

A sole proprietorship is ideal for small enterprises operating locally with few or no workers and planning to stay that size. These kinds of enterprises are ideal for someone who creates distinctive commodities, such as handmade goods, or who offers specialized services, like a tax accountant. This is a wonderful choice if you’re looking for how to start a business in California on a shoestring budget.

Business name fictitious

You might need to register a fictitious name—any business name that excludes your last name—as part of the beginning process. This is sometimes referred to as a trading name, assumed name, or DBA (doing business as). The purpose of registering a fictitious business name is to establish a link between the real name of a business owner and the name of the company they control so that creditors or other parties may take legal action.

Get an Employer Identification Number (EIN)

You will require an Employer Identification Number if you intend to hire staff (EIN). Similar to your personal Social Security Number (SSN), but for your business, this is your federal tax identification number. If you run your business yourself, you might be able to skip this stage.

Limited Liability Company (LLC) in California

What is an LLC? 

A Limited Liability Company (LLC) is a hybrid business structure that combines the benefits of corporations and sole proprietorships with less administrative hassles and a modicum of legal protection against obligations and debts. Although they are not accessible to organizations in every industry, they are manageably simple. Additionally, LLCs might be subject to both state and federal tax, which could necessitate completing extra papers.

Do you need an LLC?

If you want to launch your early-stage firm with certain legal protections or if you want to start a small to medium business, an LLC can be a smart option for you.

Get an EIN

The Internal Revenue Service (IRS) requires LLCs to apply for an Employer Identification Number (EIN) (IRS). This number is comparable to your Social Security number (SSN), except that it pertains to your company. You will require your SSN or Individual Taxpayer Identification Number (ITIN) in order to complete the IRS’s straightforward, interview-style application process.

Register your LLC 

You can register your LLC with the California Secretary of State by submitting a Statement of Information online using the California bizfile service once you have a business name and an EIN. On the website of the California Secretary of State, filing advice is also accessible. At a few of the California Secretary of State’s offices, you can also deliver your paperwork in person.

Find a registered agent

In the event that your LLC is the target of legal action, you can appoint a person or company to serve as your registered agent or agent for the service of the process. This is a feature of the LLC structure that can shield your private assets from obligations and liabilities. California prohibits you from serving as your own registered agent. A useful FAQ on registered agents and where to find one can be found on the California Secretary of State’s website.

Pay state tax

The California Franchise Tax Board, which administers taxes in the state, levies a yearly tax on LLCs. Additionally, it is likely that your LLC will be required to pay sales tax; you can learn more about this from the California Department of Tax and Fee Administration, including what kinds of sales are allowed and how much to charge.

Make a contract

Although you are not needed to submit an operating agreement to the California Secretary of State in order to register an LLC, doing so can provide you the opportunity to specify how your company will run, how it is governed, and how earnings are distributed. Although the State has default regulations, your operating agreement may offer superior asset protection in the event of liability concerns.

Company in California

What is a corporation?

A corporation protects personal assets from monetary and legal responsibilities by completely separating the individual owners from the firm. Because they are different legal entities from the people who own them, corporations in California often have lower tax rates than individuals do. They are also simpler to sell than sole proprietorships or LLCs. Corporations have the ability to issue stock, which enables them to raise money from investors for purposes such as development and growth. However, businesses must adhere to the strictest administrative and regulatory regulations, even when they are just starting out.

Do you need a corporation?

If any of the following apply to you: 

  • Do you intend to raise money from investors?
  • You’re beginning a massive operation.
  • Your objective is to grow a business and then sell it.
  • Particularly, you’re interested in liability protection.

Get an EIN

It is simple to apply using an interview-style application process by registering for an Employer Identification Number (EIN) with the Internal Revenue Service (IRS) as the first step on your journey to incorporation. To finish your application, you will require your Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).

The way this federal tax ID works is identical to how your SSN does. Your EIN is required for the following stages.

Articles of incorporation

Your Articles of Incorporation are legal document that contains information about your firm, like its name, address, and whether it is a for-profit or not. The Secretary of State’s website has information on the filing procedure.

Find a registered agent

There are specific requirements that apply to both corporations and limited liability companies (LLCs), one of which is the need for a registered agent, also known as an agent for service of process. If your corporation is involved in legal proceedings, this individual or organization will accept court filings on your behalf. The California Secretary of State’s FAQ has more details.

Meet the board and elect directors

The board of directors is essential to every corporation. Even though creating a board of directors is another task for your startup checklist, it’s a terrific approach to bring together a group of individuals who can provide your company with valuable insight and experience. There are regulations and requirements in California regarding the make-up of your board of directors, including a diversity requirement that took effect on January 1, 2021, and mandates that corporations with head offices in California have a minimum of one female board member as well as board members from underrepresented communities.

Issue stock

Stock distinguishes a corporation from other company arrangements in California. You raise money and agree to share ownership of your company by issuing shares. Normally, the first board meeting is when stock is issued. It is important to read up on and comprehend the process because setting share prices can be challenging.

Information Statement

Corporations must submit a Statement of Information to the California Secretary of State, much like an LLC.

Pay state tax

The California Franchise Tax Board is in charge of collecting an annual tax from corporations in the state. Sales tax may also be due from your company. Obtain information from the California Department of Tax and Fee Administration regarding which sales are eligible and how much to charge.

5. Licensing and permits

Your business license and permits should be the next item on your checklist when beginning a small business in California. No matter how your company is set up, you might need to get a business license, permits, or both in order to function in California. For instance, you will require a license if your firm will sell alcohol. You can use the helpful search tool maintained by the California Governor’s Office of Business and Economic Development to discover which licenses and permissions might be necessary for your organization. Information about licenses and permits is also available through the California Department of Tax and Fee Administration, along with a simple registration page.

6. Look into insurance

Even though your company is protected by an LLC or corporation these days, it is still a good idea to get insurance. The California Department of Insurance has a wealth of information on the different types of insurance you might require for your business, such as general liability, professional liability, and worker’s compensation.

7. Make sure you understand your finances

Opening a company bank account, applying for a business credit card, and perhaps even hiring a business accountant are all steps you can take to get ready to run your business, especially if you have established an LLC or corporation. Particularly for making sure your books are balanced and your company is set up to reach financial soundness, an accountant may work miracles.

8. Promote your business

Once your company, LLC, or sole proprietorship has been registered, it’s time to make your firm ready for launch by presenting it to the public.

Brand your business

In order for potential customers to understand the value and character that your company delivers to the marketplace, it is important to have a strong brand. Branding encompasses tangibles like positioning and brand persona as well as intangibles like visual components like your logo, official colors, and imagery as well as text components like your tagline or slogan, tone of voice, and fonts. Building a brand can be a lot of fun and give you a lot of creative freedom for your company.

Create a website for your business

In order to effectively engage with clients nowadays, your company needs a website. Fortunately, there is some advice available to guide you through the process, and platforms like Wix, WordPress, and Shopify,  make designing a website easier. Your website’s design will heavily rely on the branding you’ve already done. What you’ll need to get started is

  • You may mark your new website with digital logo files in various sizes that fit your main page, footer, and other areas.
  • Brand colors enable you to customize the look of your website and tie it in with your services, goods, print materials, and other elements.
  • Product graphics and photos that are visually appealing and draw users in
  • coordinated typefaces to provide all of your promotional materials with a unified look and feel
  • A site map that describes the page structure and streamlines the organization of all the information you wish to convey to your audience
  • Your accessible contact details

Promote your business

The final stage of the startup process is promotion. By developing a marketing strategy that places your product or service in front of your ideal target market, maintains your strategy on the course, and guarantees your brand is utilized to the maximum, you may concentrate your promotional efforts. Marketing strategies frequently include:

  • An executive overview of your overall strategy
  • A mission statement that summarizes your main objectives and business tenets
  • Objectives that spell out the precise goals you have for your LLC
  • You may determine what you’re doing well and what needs to be improved with the aid of a SWOT analysis, which considers your strengths, weaknesses, opportunities, and threats.
  • Understanding your industry, potential clients, and competition through market research
  • A market strategy outlining your course of action
  • a spending plan that helps you maintain financial control