How To Start a Business in California: 12 Step Checklist

“With the 2028 Olympics approaching and the heightened focus on clean energy, Southern California presents unique opportunities for entrepreneurs to expand or launch a new business,” says Dr. Pamela S. Williamson, president and CEO of Women’s Business Enterprise Council West.

Here are some resources to help you get started.

How to start a business in California

1. Choose a business idea
2. Name your business
3. Create a business plan
4. Choose a business structure
5. Register a fictitious name
6. Get an EIN
7. Choose a registered agent and register your business with the state
8. Pay state taxes
9. Obtain a business license and permits
10. Examine insurance options
11. Understand financial considerations
12. Market your business

1. Choose a business idea

Coming up with a great idea is the cornerstone of starting a business. If you already have something unique and commercially viable in mind, you’re halfway there. If not, there are business resources available to help you work through the process of understanding what products to sell and who to market them to.

According to Williamson, there are certain types of small businesses poised for success within the state. Based on 2024 sourcing requests from California corporations, some businesses ideas tailored for success in Southern California include:

• Electric vehicle (EV) infrastructure development
• Greed construction and sustainable building materials
• Renewable energy solutions

2. Name your business

Naming your business is important for branding it, but it’s also an essential step in the process of registering your new entity. Most regulatory agencies ask for your business name on forms, so you’ll need to come up with a good name first.

If you don’t have a name, get ideas using a business name generator. Narrow down your options and conduct an online search for any other businesses with that name. Next, visit the US Patent and Trademark Office to check if any businesses have already trademarked your preferred name. From there, consult the California Secretary of State Business Entity Name Regulations to ensure your name is compliant.

Before you commit to a business name, check to see if a corresponding domain name for your website is available. Once you’ve found a name you like, reserve your business name with the California Secretary of State.

3. Create a business plan

Most successful businesses start with a business plan. A great business plan can help you stay organized and goal-oriented throughout the startup process, and it is often required as part of applying for a business loan.

The process of creating the document is fairly straightforward, especially with help from resources like an adaptable business plan template and several examples for inspiration.

4. Choose a business structure

When starting a small business in California, it’s important to choose the right structure for your operation. Three common types of business structures are sole proprietorships, limited liability companies (LLCs), and corporations. Each one has advantages and disadvantages. Looking for more detail on the various business types? Here’s a summary and initial steps to setting up your business.

Sole proprietorship

A sole proprietorship is an unincorporated business owned by one person, and it’s the simplest structure available. This type of business is easy to set up and inexpensive to get started. The downside: It doesn’t offer the legal protection afforded by an LLC or corporation, which means you could be personally liable for debts and lawsuits.

A sole proprietorship might be a good fit for someone who produces unique products like handmade goods or provides a service like a tax accountant.

Limited liability company

A limited liability company (LLC) is a type of business structure offering some legal protection from debts and liabilities. This hybrid model delivers advantages of sole proprietorships and corporations. If you plan to start a small- to medium-sized business or if you want to launch an early stage enterprise with some legal protections, then an LLC may be a good choice.

To register your LLC with the California Secretary of State, file a statement of information online using the California bizfile service and filing tips for guidance. You can also submit your documents in person at some offices of the California Secretary of State.

An operating agreement is not required to be submitted to the California Secretary of State to register your LLC. However, creating one can provide structure and direction on how your business operates and is managed, and how profits are allocated. The operating agreement may provide better protection of your assets in the event of liability issues. There are operating agreement templates available to help you get started.

Corporation

A corporation is a business structure separating the individual owners from the business, protecting personal assets from financial and legal liabilities. Corporations can issue stock, allowing businesses to raise funds from investors for expansion, development, and more. However, corporations have more stringent regulatory and administrative requirements, including during the startup phase.

You might consider starting a corporation in California if: 

• You plan on raising funds from investors
• You’re starting a very large operation
• Your goal is to build up a company and then sell it
• You’re especially interested in protection from liabilities

To set up a corporation, follow these steps.

File Articles of Incorporation

Articles of Incorporation are a document outlining the details of your company, such as the business name, location, and for-profit status. You can find details on the submission process on the Secretary of State’s website.

Prepare corporate bylaws

Corporate bylaws define how your corporation is structured and governed. They also include details such as annual meetings, quorum (minimum number of voting board members or stockholders), stock, and directors. You can use corporate bylaw templates to get started.

Elect directors and hold a board meeting

Corporations must install a board of directors. A board of directors assembles a group of people with useful knowledge and experience to help guide the direction of your business. California has rules and requirements around the composition of your board of directors.

Issue stock

Stock differentiates a corporation from other business structures. By issuing stock, you are raising funds and committing to collective ownership of your business. Stock is normally issued at the first board meeting.

File a statement of information

Corporations must file a statement of information with the California Secretary of State.

Pay state tax

Corporations in California are subject to an $800 minimum franchise tax (Form 100). Your corporation may also have to pay sales and use tax. Find out which sales qualify and how much to charge from the California Department of Tax and Fee Administration.

5. Register a fictitious name

As part of the startup process, you may want to register a fictitious name. This is also sometimes called a DBA (doing business as), assumed name, or trade name.

For instance, if you’re a sole proprietor, but you don’t want to publicly operate under your own name, a DBA allows you to choose a unique name for your business. The same goes for a corporation or an LLC; if you don’t want to include the word “Incorporated” or “LLC” in your public-facing business name, you can use a DBA.

Registering a fictitious business name is meant to connect the true identity of a business owner with the name of the business they own, so stakeholders are able to pursue legal action or debt collection. A fictitious name must register with the California Board of Accountancy (CBA). There is no fee for the application.

6. Get an EIN

Employer identification numbers (EIN) are distributed by the Internal Revenue Service (IRS). This number is similar to your personal Social Security number (SSN)—except it’s for a business. The IRS provides a simple application process, and you will need your SSN or individual taxpayer identification number (ITIN) in order to complete your application.

As a sole proprietorship in California, you are not required to register with the state, but may choose to get an EIN. Doing so can help protect you from identity theft—you won’t have to use your personal SSN on as many documents.

7. Choose a registered agent and register your business with the state

A registered agent, or an agent for service of process, is a person or corporation who you designate to receive court documents in the event that your LLC or corporation is subject to legal action. You cannot be your own registered agent in California. The California Secretary of State provides valuable FAQs on registered agents and how to find one.

8. Pay state taxes

Businesses in California are required to pay an annual $800 franchise tax, with some exceptions. The state income tax rate for corporations and LLCs taxed as corporations is 8.84%. LLCs may be subject to additional fees, depending on their total income. Sole proprietorships file as individuals using Form 540 for taxes, so state income tax rates may vary.

All employers in California have to collect and pay payroll taxes. There are four main types:

• Unemployment insurance (UI): This funds unemployment benefits for workers who lose their jobs. It's paid from employer contributions and has a maximum tax of $434 per employee.
• Employment training tax (ETT): This tax has a flat rate of 0.1% on the first $7,000 of each employee's wage. It's also paid from employer contributions. 
• State Disability Insurance (SDI): This tax provides disability benefits for employees unable to work. As of 2024, the SDI withholding rate is 1.1% of an employee's wages. 
• California Personal Income Tax (PTI): Employers withhold this tax from employees' wages and remit it to the state. 

9. Obtain a business license and permits

Obtaining any necessary business licenses and permits is next on your checklist. Regardless of business structure, you may need a business license, permits, or both to operate in the state of California. 

For example, if your business sells alcohol, you’ll need an alcohol beverage control (ABC) license. The California Governor’s Office of Business and Economic Development maintains a handy search tool to help you find which licenses and permits may be required for your operation. 

If you are in business selling tangible goods in California, you will need a seller’s permit. Contact your city or county agency responsible for business licensing.

The California Department of Tax and Fee Administration also provides license and permit information, as well as an easy registration portal.

10. Examine insurance options

Having business insurance is a best practice for any business, even if you have the protections of an LLC or corporation. The California Department of Insurance offers plenty of guidance on what types of insurance you might need for your operation, including:

• General liability
• Professional liability
• Workers’ compensation

11. Understand financial considerations

You can prepare to start operating your business by opening a business bank account, applying for a business credit card, and possibly even contracting a business accountant.

This is also important for keeping your business and personal finances separate. An accountant can ensure your books are balanced and your business is able to handle its financial responsibilities.

📖Read more: Small Business Accounting: 12 Tips for Taxes and Bookkeeping

You'll also want to consider business funding. Top options include startup loans, SBA loans, and business grants.

• Self-funding: Many business owners pull from their own savings to start a business. This is a good option if you have minimal upfront costs.
• Small business loans: These loans offer competitive rates and can give you access to funds as you need them.
• Small business grants: California state offers grants to certain entrepreneurs that you don't need to pay back.
• Small Business Administration (SBA) loans: These government-backed loans offer competitive rates, low fees, and large amounts of capital for small business owners. 

12. Market your business

As you prepare for launch, it’s key to market your business to the public. Here are the steps to take:

Brand your business

Branding is the public-facing, visual identity to your business. It helps potential customers recognize the value and personality your business brings to the marketplace. Branding includes visual elements like:

• Logo
• Brand colors
• Slogan or tagline
• Tone
• Brand voice
• Brand positioning
• Brand persona

Building a brand can allow you to tap into your creativity when starting your business.

Build a business website

A website for your business is essential for communicating with customers. Platforms like Shopify help make building a website easier, with tools, resources, and other guidance. Strengthen your brand by designing a website that is safe, efficient, and engaging. To get started, you’ll need:

• Digital logo files in different sizes to suit your homepage, footer, and elsewhere
• High-resolution product photos
• A site map outlining the website structure
• Your public contact information including business name, address, social media handles, and customer service phone number or email

Promote your business

Promotion is key to effectively selling online. Focus your promotional efforts by creating a marketing plan to get your product in front of your ideal customers, keeps your marketing strategy on track, and ensures your brand is being leveraged to the fullest. Marketing plans often include:

• An executive summary of your overall marketing plan
• A mission statement outlining your overarching business goals and philosophy
• Objectives detailing the specific milestones you want to achieve
• A SWOT analysis to help identify what you’re doing right and what needs refinement
• Market research supporting your understanding of your industry, potential customers, and competitors
• A market strategy detailing your plan of action
• A budget supporting your financial goals

For additional inspiration, review a few marketing plan examples.

Tips for starting a business In California

Williamson—who works closely with women business enterprises providing tools, resources, and networking opportunities through WBEC-West—identifies three best practices for any entrepreneur or small business owner starting or expanding into a new business: research, research, and more research. To set your business up for success, she specifically advises to:

1. Research the market. Find out who is buying your product and service.

2. Research the top competition. Identify who currently offers the product or service you want to sell.

3. Research your competitors’ products. Take a deeper dive to assess and learn everything you can about competing businesses and identify what sets your product or service apart from theirs.

“By doing the three Rs, you will identify your business’s unique value proposition, which is a powerful tool to have,” explains Williamson. “It is what sets you apart from your competitors.”

*This post is for information only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, tax, or business advice. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, and tax, and business advisers, as needed. Businesses outside of California will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy, and any other applicable policies.