California is certainly one of, if not the most popular state to live, work, and register a business in due to the state’s efficient and consistent support for new businesses and the business community as a whole.
There are many different support systems in place in California to aid entrepreneurs and those with existing businesses to flourish and grow in their community and throughout the state.
California’s support for small businesses is evident in its approach to encouraging new businesses to register in the state. California has decreased its red tape, has low business licensing fees, affordable registration fees, and the state allows businesses to register for two years at a time, rather than having to register/renew every year.
The state is remarkably business-friendly and it means that for a small capital outlay you can get your new business started and registered in California conveniently, and cost-efficiently.
How to Register a Business in California – 7 Simple Steps
The California Business Portal makes it fairly easy to register your business name. There are three ways you can do this:
- 1. Do it yourself directly on their website.
- 2. Pay a document filing company that can register everything online for you – there is a modest fee for this.
- 3. Hire an attorney or accountant to file and register your new company – there are higher fees associated with this.
Step 1 – Determine your registered name
Firstly, you must determine that your business name is unique and not being used by someone else. A business registration company can do this on your behalf or alternatively, you can search directly on the California Secretary of State website as well.
Once you have established your name is available you can register a business name in California directly on the state’s website or use an online registration service to do this for you. Before doing this, you must decide on the right structure.
Step 2 – Choose the right entity
You need to choose the right type of business to register and the most common options are a limited liability company (LLC) or an incorporated company (Inc.). If you are keeping things really small and simple (one or two people), then you may consider a sole proprietorship or a general partnership.
Even if you plan to be a solopreneur, it still might be more beneficial for you to register an LLC to make sure, as the owner, you have limited liability under this structure, and so you can benefit from the pass-through tax advantages.
Here is a quick rundown of the various options and what they might mean to you:
- Limited Liability Company: This is often the best route for most entrepreneurs because the structure comes with personal asset protection, no double taxation, it is fairly easy to maintain, and does not have high registration or annual renewal costs.
- Incorporated Company: Corporations offer personal asset protection and your company can own property, vehicles, incur liabilities, and is responsible for its own debts and can conduct business without the owners risking their personal assets such as their homes, cars, personal savings, retirement, etc. On the flip side, owners of sole proprietorships or partnerships face unlimited liability for both business and personal assets.
Step 3 – Make sure your name is not being used by another company
This may seem obvious, but if you check the California Secretary of State website and see that your chosen business name is available, that is all well and good, but that doesn’t mean someone else is not using that same name, particularly in another state.
Many people register an “official name” and trade under a different name. This is called a dba, or “doing business as” name or assumed trading name, and needs a separate DBA certificate.
You will want to do a Google search for your official name and your desired trading name (if different) to make sure no one else is using this name. Most importantly, you will want to make sure you can register an easy-to-remember website domain name that is not being used by someone else.
Having an awesome name or trading name for your business can be crucial to your success, so make sure the domain name is available too and register it right away before someone else does.
Finally, if you go to the California Secretary of State website and find that someone else has registered the name you would like, you can search for variations of that name by adding a word before it or after it, or using some other variations until you find a name that is available and acceptable for you.
Step 4 – Request an Employer Identification Number (EIN)
Once you have registered your new business in California you will need to get an EIN for a number of reasons. These include paying taxes for your business, opening a bank account, obtaining credit cards or lines of credit, establishing terms with vendors and suppliers, hiring employees, and more.
There are only a few instances where you likely won’t need an EIN. More often than not, many business activities are just not possible without having an EIN.
An EIN is the business equivalent of a social security number and is used to track your business dealings. Even if you do not intend to hire employees, you will almost certainly still need an EIN for your California company.
For more information on how to get an EIN number in California use our guide where you will find downloadable forms and links to the online process.
An EIN is free to obtain from the IRS and you can apply online but if you are not comfortable filling in forms you can use a third-party document filing service to do this for you for a small fee. This ensures you are 100% compliant with the law and they handle everything with the IRS.
Step 5 – Obtain the Required Business Licenses and Permits
To operate your business in California you must comply with federal, state, and local government regulations. As a business owner in California, you must obtain a general business license in the city your business is located, this license is also considered a business tax certificate. So, once you have obtained a valid business tax certificate, your business can legally operate throughout the entire state.
You will also need specific permits for specific businesses. For example, if you open a restaurant or similar food-related business you will most likely need a health permit, sales tax permit, facilities permit, and others. If you plan to sell alcohol, you will need a liquor license.
You must find out how to obtain the necessary California business licenses and permits for your business and fill out the appropriate forms. Alternatively, you could hire a professional document filing company to do this for you. It eliminates a lot of time and hassle and ensures you are correctly complying with the law.
Step 6 – Determine Your Business Employer Requirements
There are several things you need to check regarding your responsibilities as an employer in California because there are requirements you must meet at the federal and state level. These could include various workforce commissions, safety, and tax obligations, as well as labor law requirements including the minimum wage in California and employee rights and remedies under the California minimum wage act.
To learn more about California employer resources then take a look at the California Department of Labor website.
Step 7 – Open a Business Bank Account for your California Company
As a new business owner, you should seriously consider separating your personal and business bank accounts to make it easier to track and account for your income and expenses. For certain business types, such as an LLC or a Corporation, it is essential that you open a separate business bank account to maintain your liability protection.
Once you have your EIN and your company registration documents, coupled with your photo ID, you are ready to go to the bank and open your business checking account.
Don’t worry, this won’t be expensive or leave you burdened with hefty monthly fees to pay – there are many free business bank accounts out there for you to choose from. Each has its different features and benefits, so you can decide what bank and checking account best suits your needs.
Summarizing Registering a Business in California
California offers the top business ecosystem in the nation. The barriers to entry for those looking to start a business in California are comparatively low and the resources at your disposal are high – creating a win-win for entrepreneurs.
Small Businesses thrive in California because of its excellent geographic location, a predictable regulatory environment that won’t slow down your progress and expansion, a highly-skilled workforce, and overall, a business-friendly climate!
The Golden State is committed to your success and has many resources at your disposal that you can take advantage of.
Resources for Small Businesses in California
Whether you decided to register as an LLC, Corporation, or simply as a Sole Proprietor in California you are going to need to tap into the resources available to you to drive your small business forward.
California has a plethora of small business development centers that are dedicated to supporting the development and retention of small businesses. The support they provide to entrepreneurs covers everything from crafting business plans to navigating the state’s tax codes. Visit the California Small Business Development Center website to find out more.
Not only are there small business development centers tailored around working with small businesses and startups for growth and development, but SCORE’s volunteer business professionals and expert mentors are readily available and are free to use for those looking to begin their entrepreneurial journey.
These services are very useful and cost-efficient, and it makes perfect sense to arm yourself with all the help and information you can get.
Here are some additional small business resources in California:
- The Governors Office of Business and Economic Development: The GO-Biz office was established by Gov. Edmund G. Brown with the intention of acting as a small business guide for new startups, helping business owners go through the regulatory processes. The offices also help with international trade and services between small businesses and additional resource outlets.
- California SBA: The U.S. Small Business Administration (SBA) helps small business owners and entrepreneurs pursue the American dream. The SBA is dedicated to small businesses and provides counseling, capital, and contracting expertise as the nation’s only go-to resource and voice for small businesses.