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Questions like “how to open a retail store in California?” and “how to start a consulting business in California? often pop up among would-be entrepreneurs, and for good reason.
California has always been a place for dreamers and innovators—a land of diverse opportunities and promise. And because it ranks as #30 on the Forbes Best States for Business list, starting a business in California is a goal for many entrepreneurs.
Despite its popularity, California has notoriously strict rules and regulations when it comes to owning and operating a business. That’s why understanding exactly how to start a business in California is so important.
In this blog post, we’ll take you step by step through the process, including general requirements you need to prepare for and the resources you need to to succeed. This way you can learn how to start a new business in California without the headache.
Let’s get started!
Table of contents
Choose a Business Entity
Learning how to start a business in California begins with entity formation. The most popular entity structures are Limited Liability Companies (LLCs) or Corporations. What’s the difference between an LLC and a Corporation? The answer is simple…
A corporation is a legal entity created separately from those who own and operate it. A corporation’s debts and taxes are separate from its owners, thereby offering the greatest personal liability protection of all business structures. The two most common types of corporations are S and C corporations.
LLCs are the most popular business structure, blending the aspects of corporations, partnerships, and sole proprietorships into a simple and flexible business entity. Like corporations, LLCs protect the owners and operators from personal liability similar to a corporation, and they possess the “pass-through” tax benefits of a partnership.
So, whether you’re trying to figure out how to open a new retail store in California or even how to start a consulting business in California, starting with an LLC or corporation is the first and most important step.
Create a Business Name
When considering how to start a business in California, figuring out your business name is one of the biggest decisions you’ll make. It may not seem as important as choosing the type business entity, but it is. As a matter of fact, many legal issues can arise from choosing the wrong name for your business startup. California local law has especially strict restrictions on certain business names.
So, let’s look at how to register a business name in California:
- First off, come up with a unique business name that captures what your business will do, is easy to pronounce, and isn’t era specific or too niche. This is easier said than done, so take your time.
- Once you’ve decided on a name, search the web to make sure no one is using it. This may force you to go back to the drawing board. You might also want to check if your desired website URL name is already taken, then plan for an alternative,
- After doing a basic search, you’ll need to do a more thorough trademark search. This is an important step that can lead to a lawsuit if done incorrectly. A good rule of thumb to follow when doing a trademark search is to search for misspellings, plurals, variations of spelling, sound-alike and more…
- Finally, to register a business name, California law requires you to run your chosen name through the California Secretary of State’s business entity database making sure to follow the same rules mentioned above.
Register Your Business
Now that you’ve decided on an entity structure and created an original business name, here’s how to register a business in California.
You’ll need to file what is known as Articles of Organization with the California Secretary of State LLC Division.
Once filed and approved, you’ll need to properly organize your LLC with an Operating Agreement.
You’ll first need to file Articles of Incorporation with the office of the California Secretary of State Corporation Division.
After that, you’ll need to hold an “Organizational Meeting” to determine the percentage of ownership for each shareholder as well as resolve to do a number of other tasks.
To elect S-Corporation status with the IRS, corporations must file IRS Form 2553.
Some entrepreneurs try to tackle these steps on their own, but most hire a business formation company, like Inc Authority, to handle these steps for them.
So, if you’re here trying to figure out how to start a business in California and are a little overwhelmed by the process, contact the business experts at Inc Authority!
Get Your Employee Identification Number or EIN
The next step you’ll want to tackle is getting your EIN or Tax ID Number (TIN). This federal number is like your business’s social security number, separating you from your business. This protects you from fraud and identity theft.
Additionally, an EIN is required by your bank to open a Business Checking Account, file tax returns, obtain payroll services, and credit cards.
Attain Your Business Licenses and Permits
The final step you must learn is how to get a business license in California. Getting the proper licenses and permits for your small business, authorizes your company to do business in your city/county.
When is comes to applying for a business license, California fortunately makes it easy with a simple system called CalGold to help entrepreneurs discover what licenses/permits they need. This will vary depending on your operating city county and industry.
Let’s get started
Starting a business in California is an exciting opportunity, but like starting most businesses it can be overwhelming. Why not let the business experts at Inc Authority do all the heavy lifting for you?
We’ll form your LLC or corporation, run a business name check, get your EIN, and make sure you have all the licenses and permits needed to run your business in California.
Not to mention we offer a ton of free management tools to help make running your business as simple as possible. Contact us today to get started!
Incorporating is the most powerful thing you can do to legitimize your business. And at IncAuthority.com, our setup LLC services are 100% free. Always. So, don’t wait. Form your free LLC today and enjoy the protection due to you and your business under the law.