How to Start a Business in California
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Starting a business in California can be confusing without support. Whether you’re looking to start a small business, big corporation, home business, or online business, dealing with the state of California’s paperwork and requirements can take up a lot of your time, especially if you’re new to the process.
Our corporate filers start California businesses every day on behalf of our clients. It’s what we do. For $150 plus California filing fees, we’ll form your business and provide you with a year of California registered agent service. And we get it done in a day.
If you want to save time, hire us to form your company. If you want to save money on the formation and start a business in California on your own, hire us for registered agent service –you’ll need a California registered agent anyway! Either way, we’re excited for you to start your California business. Here are the steps you’ll need to take if you go it alone.
1. Choose a California Entity Type
The first step in starting a business in California is deciding on a business structure. This is an important legal decision with implications for how your business will be owned, managed, and taxed. The business structure you choose will also determine the degree to which you’ll be shielded from personal liability. Most small businesses in California are LLCs.
Unlike a sole proprietorship or general partnership, the California LLC and California corporation structures create a legal separation between you and your business. They cost a little more money to form and keep up, but can protect you down the road if – heaven forbid – a creditor shows up on your doorstep.
2. Decide on your California Business Name
If you’re starting a business in California, you’re going to need a business name. Have the perfect business name in mind? Slow down – before you get your hopes up, check that it’s available. If another company is using it, you’ll have to choose another one. You can do a preliminary search on the California SOS business search. If your preferred name is available but you’re not quite ready to pull the trigger on starting a California business, you can reserve the name for 60 days with the California Name Reservation Request Form.
Besides being unique, your new California business name needs to meet some other legal requirements. California has 27 pages of naming regulations, but basically, you’ll need to make sure the name includes an identifier (“Inc,” “LLC,” etc.) and doesn’t use words that imply your business is something other than what it is (like a bank or school).
3. Appoint a California Registered Agent
Before you file the documents that will officially form your company, you’ll need to have your California registered agent information ready to go. A California registered agent must have a physical office location, keep regular office hours, and agree to accept legal mail on your behalf. If you meet these requirements, you can be your own registered agent, but your name and address will end up on the public record. That means you’ll be seeing a lot more junk mail. We offer California Registered Agent Service for $50/year – a great option if you want to limit your exposure.
4. File formation documents with the California Secretary of State
This is it – the big step. Filing formation documents with the California Secretary of State is the act that officially forms your business.
Corporations: Articles of Incorporation
LLCs: Articles of Organization
Any information you list on these documents will become part of the public record. If you make mistakes, the CA Secretary of State will reject your filing. Wait times are pretty long in California (around two weeks) so this could set you back quite a bit.
Hire us for LLC formation or incorporating service and our expert staff will prepare and submit your formation documents within one day. We’ll also give you a California business address to use on your documents so that you can keep your home address private.
5. File an Initial Statement of Information
Within 90 days of starting a California business, you’ll have to file the California Statement of Information. It costs $25 to file and is included in our LLC and corporation formation package price.
6. Get a Business License & Check Zoning Regulations
Depending on where in California your business is located, you might need a business license. Business license requirements vary from city to city, so you’ll need to inquire at the local level to see what kind of permit or license you may need. California’s CalGOLD system is a good place to start.
You should also check your local zoning regulations to make sure your business activity is allowed. This applies even for web-based businesses or small businesses operating out of a home.
7. Open a Business Bank Account
A key step in starting your own California business is opening a business bank account. It’s important to keep your personal finances and your business finances separate. If you let your funds intermingle, you’re at risk of “piercing the corporate veil,” which basically means a court might be able to hold you personally liable for your company’s debts.
The bank will probably ask to see a copy of your California LLC Articles of Organization, your LLC operating agreement, and your California LLC’s EIN when you open a business account.
8. Get an EIN
The last major step in starting a business in California is obtaining an EIN (Employer Identification Number). An EIN (Employer Identification Number) is the number the IRS will use to identify your business. You’ll need one. You can get an EIN yourself on the IRS website. For an additional $50, we’ll get one for you.
9. Pay the Franchise Tax
All entities doing business in California have to pay the annual California Franchise Tax, which is a minimum of $800. This is true for LLCs and corporations that don’t make any company and businesses that are headquartered in another state. There’s no way around it, so be prepared to pay up.