How to Start a Business in California (9 Steps)

  • Accracy
  • 26th Nov, 2023

Sun, surf, paperwork. Oh, the joys of starting a business in California.

How to Start a Business in California (9 Steps)
Starting a Business

1. Prepare a business plan

Creating a business plan is like making a blueprint for how your company will run. Not only does it help you get organized to start your business, but you can use it later to apply apply for a loan or bring on investors. And once your business is established, you can refer back to your business plan to help keep you on track with your goals and plan for the future.

Market research and company documentation are two key ingredients for your business plan. For a more detailed look, check out our guide on how to write a business plan. And don't forget to include a cover page that can catch people's attention.

2. Choose your entity type

In California, you can form any of the four business entity types recognized by the IRS:

Also, there's a fifth type you can choose from: A limited liability partnership (LLP). For the most part, this structure is only meant for lawyers, accountants, and similar professionals. It isn't recognized at the federal level, but gives you some liability protection within the state of California.

In addition to LLPs, LLCs and corporations provide you with liability protection. Sole proprietorships don't offer liability protection, but they're the easiest to set up. You don't need to file any forms with the State to form one.

You can learn more about the benefits and drawbacks of each business structure from our guide to business entity types.

3. Name your company

The steps you need to take to name your company depend upon your business structure.

Sole proprietorships and partnerships operating under owners' names

If you're forming a sole proprietorship or a partnership, and you're doing business under your own name or the surnames of partners (respectively), there's no need to register your name with the state of California.

Sole props and partnerships operating under different names than their owners'

If your sole prop or partnership is going to operate under a name different from the owners', you'll need to file a Fictitious Business Name (FBN) Statement with the county clerk, or wherever your county's offices are located.

LLCs, LLPs, and corporations

In addition to filing an FBN, if you're starting an LLC, LLP, or corporation, you'll first need to file a Name Reservation Request with the state. You'll also need to make sure your name differs from other businesses registered with the Secretary of State by doing a business name search.

How to file a Name Reservation Request in California

When you file a Name Reservation Request in California, you reserve the rights to a business name for 60 days. After that, you're can renew the request. Use the California Name Reservation Request form to see the requirements your name needs to meet to be valid, and to file the request. Each Name Reservation Request costs $10.

How to file a Fictitious Business Name Statement in California

A FBN in California is identical to a Doing Business As (DBA) statement. It doesn't mean your business is fictional—"fictitious" refers to the fact that your business name is different from your own given name.

You're required to file an FBN within 40 days of forming your business. After that, the FBN lasts five years before expiring.

The form you use to file an FBN, as well as associated fees, differs from county to county. You may be able to print a form from your county clerk's website, or you may be required to pick up a copy at their office.

Publishing your FBN in California

After registering, you're required by law to publish your FBN in a newspaper that runs in the community where your business is based. You have to do this within 30 days of filing your FBN paperwork.

The notice must run once per week for four consecutive weeks. After that, you have 30 days to give the county clerk a signed affidavit from the publication, proving that your notice ran.

Some counties maintain lists of approved newspapers where businesses can publish their FBNs. Check with your county clerk's office to see if they have one.

Search for business names in California

You need to choose a unique name for your business. On the Secretary of State's website, you can search for business names in California.

Your goal should be to turn up zero results—in that case, nobody else has chosen your name.

Trademark your business name in California

Filing an FBN and a Name Reservation Request doesn't legally protect your name or logo. There's a chance it could still be copied, or very closely imitated, by someone else. To trademark your business name, file Form TM-100 with the Secretary of State. There is a minimum $70 fee to do so.

4. Register your business in California

Here's a breakdown, by entity type, of how to officially register your business in the State of California. In all cases, you'll be submitting official documents to the Secretary of State.

How to Register your Business in California

Entity type How to legally form Additional documents Forms
Sole proprietorship There's no need to register your sole proprietorship with the state n/a n/a
LLC File articles of organization with the state

Register an individual or corporate agent (when you file articles of organization)

File a Statement of Information
Operating agreement (doesn't need to be filed with the state) Form LLC-1 (Articles of Organization)

Form LLC-12 (Statement of Information)
Partnership There's no need to register a general partnership with the state Partnership agreement. You don't need to submit a copy to the state, but you should have one written before forming your partnership. n/a
LLP File an Application to Register a Limited Liability Partnership (LLP) with the Secretary of State Partnership agreement (doesn't need to be filed with the state) Form LLP-1 (Application to form a Limited Liability Partnership)
Corporation File Articles of Incorporation with the state

Register an individual or corporate agent (when you file articles of incorporation)

File a Statement of Information
Corporate bylaws (do not need to be filed with the state) Form ARTS-GS (Articles of Incorporation"“General Stock)

Form SI-550 (Statement of Information)

5. Open a business bank account

Opening a business bank account is an essential step in setting up your finances. It keeps your business transactions and your personal banking transactions separate, which makes it easier to manage your bookkeeping and stay on top of deductible expenses.

To set up with a bank you can access anywhere—not just California—check out our list of best business checking accounts.

6. Choose your location

Where you establish your business will be affected by local zoning regulations. To search zoning and ordinance information by location, check out the Municode Library for California.

7. Get licenses and permits for your business

Once you've taken all the necessary steps to register your company with the Secretary of State in California, you're almost ready to start doing business. First, though, you'll need to make sure you have the right licenses.

Tax registration for selling goods

If you'll be selling goods in the State of California, you need to register with the Board of Equalization. Register online on the Board's website.

Tax registration for hiring employees

If you plan on hiring employees, you need to register with the California Employment Development Department. You can do this online with the Department's e-Services for Business.

Tax Identification Number

At the federal level, you'll need to make sure you have a tax identification number. The good news? You may already have one. Learn more about tax identification numbers.

Business licenses by state and county

You'll need a general business license from the city where you're operating. If you don't operate in an incorporated section of the state, you should file for a general business license with the county.

Other licenses and permits

Depending on what kind of business you have, you may need additional licenses for health, safety, and other regulations. Use the CalGold website to search for regulations and business licenses according to location and business type.

8. Buy business insurance

If your business has employees, you're legally required to get workers' compensation insurance. And if you use company vehicles, you'll need to insure them as well.

Beyond that, there's no legal requirement for you to have business insurance in California. However, we highly recommend you buy insurance. Without it, the danger of going out of business is much higher. Learn more about how to buy business insurance.

9. Learn about the California Minimum Franchise Tax

In addition to other state business taxes, there is another tax in California specific to the Golden State: The $800 Minimum Franchise Tax. LLCs, LLPs, limited partnerships, and corporations are all required to pay the California Minimum Franchise Tax.

This means that you are required to pay at least $800 annually to the Franchise Tax Board (FTB), or else a percentage of your income at your applicable corporate tax rate—whichever amount is largest. To find out which you'll need to pay, use the FTB's tax calculator.

The First-Year Minimum Franchise Tax Exemption

The first year you operate your business in California, you may not have to pay the $800 minimum franchise tax.

If you run a corporation, LLC, LLP, or limited partnership, the minimum franchise tax is waived your first year in business. However, you'll still need to pay income tax at your normal tax rate.

For LLCs, this rule only applies if you've elected to be treated as a corporation, not a disregarded entity.

Further reading: The Small Business Owner's Guide to California State Taxes

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