The Sun, the Surf, and the Paperwork.. Oh, the delights of launching a company in California!
Are you already picturing late evenings at work? Don’t worry. We’ll get you back to enjoying life in the Golden State as soon as possible. Here are the nine simple steps to starting a business in California:
1. develop a business plan
Making a business plan is similar to creating a blueprint for how your firm will operate. It not only helps you become organized to start your firm, but you can also use it afterward to ask for a loan or attract investors. And once your company is up and running, you can refer back to your business plan to help you stay on track with your objectives and plan for the future.
Market research and corporate documentation are two essential components of any business plan. Countick‘s skilled team helps you out with how to build a business plan for a more in-depth look. Also, don’t forget to include an attention-grabbing cover page.
2. select your entity type
In California, you can form any of the four IRS-approved business entities:
- Sole proprietorship
- Limited liability company
- Partnership
- Corporation
There is also a fifth type you can consider: A limited liability partnership (LLP). This format is primarily intended for lawyers, accountants, and other professionals. It is not federally recognized, but it provides some liability protection inside California.
In addition, LLPs, LLCs, and corporations insulate you from liabilities. Sole proprietorships do not provide liability protection but are the simplest to establish. You do not need to file forms with the state to form one.
Countick team of professionals can guide you through business entity types and help you learn more about the advantages and disadvantages of each business structure.
3. give your company a name
The form of your business determines the procedures you must follow to name your company.
Sole Proprietorships and Partnerships that Operate under the Names of their Owners
There is no need to register your name with the state of California if you are starting a sole proprietorship or a partnership and doing business under your own name or the surnames of your partners (respectively).
Sole Proprietorships and Partnerships that Operate under Names Other than those of their Owners
If your sole proprietorship or partnership operates under a name other than the owners. In that case, you must file a Fictitious Business Name (FBN) statement with the county clerk or wherever your county’s offices are situated.
corporations, LLCs, and LLPs
In addition to filing an FBN, you’ll need to file a Name Reservation Request with the state if you’re forming an LLC, LLP, or corporation. You must also conduct a business name search to ensure that your name is distinct from those of existing firms registered with the Secretary of State.
how do you file a name reservation request in California
Filing a Name Reservation Request in California reserves the rights to a business name for 60 days. Following that, you may renew the request. To determine what standards your name must meet in order to be valid, use the California Name Reservation Request form. Each Reservation Request for a name costs $10.
how to file a California fictitious business name statement
In California, an FBN is the same as a Doing Business As (DBA) statement. It does not imply that your company is fictitious—”fictitious” refers to the fact that your company name differs from your given name.
You must submit an FBN within 40 days of founding your company. After that, the FBN is valid for five years before it expires.
The form you use to file an FBN, as well as the accompanying fees, vary by county. You may be able to print a form from your county clerk’s website, or you may need to pick one up at their office.
in California, you can publish your FBN
Following registration, you must publish your FBN in a newspaper in the community where your business is located. You must do this within 30 days of submitting your FBN form.
The notice must run once a week for four weeks in a row. Following that, you have 30 days to provide the county clerk with a signed affidavit from the publication proving that your notice was published.
Some counties have approved newspapers on their lists where businesses can publish their FBNs. Check with the clerk’s office in your county to see whether they have one.
in California, look for business names
You must come up with a unique name for your company. You may search for business names in California on the Secretary of State’s website.
Your goal should be to provide no results, indicating that no one else has chosen your name.
in California, you can trademark your company name
Filing an FBN and a Name Reservation Request does not legally protect your name or mark. There’s still a chance that someone else will copy it or closely imitate it. Submit Form TM-100 to the Secretary of State to trademark your company name. There is a minimum cost of $70 to do so.
4. register your company in California
Here’s an explanation of how to officially register your business in the state of California, broken down by entity type. You will be sending formal documentation to the Secretary of State in all circumstances.
read more: the 14 must have startup tools
how to register a company in California
| The type of entity | How to Create Legally | Additional Documents | Form |
| Sole proprietorship | It is unnecessary to register your sole proprietorship with the state. | n/a | n/a |
| LLC | File articles of incorporation with
the state. When you file your articles of incorporation, you must register an individual or corporate agent. Fill out a Statement of Information |
Operating Agreement
(this does not have to be filed with the state). |
LLC-1 (Articles of Organization)
Form Form LLC-12 (Information Statement) |
| Partnership | A general partnership must not be
registered with the state partnership agreement. |
Although you are not
required to submit a copy to the state, you should have one prepared before forming your partnership. |
n/a |
| LLP | File an Application to Register a Limited
Liability Partnership (LLP) with the Secretary of State |
Partnership agreement (necessary but
not required) |
LLP-1 (Application
for the Formation of a Limited Liability Partnership) |
| corporations | Articles of Incorporation are filed with
the state by corporations. When you file your articles of incorporation, you must register an individual or corporate agent. Submit an Information Statement |
Corporate bylaws (which
are not required to be filed with the state) |
Articles of Incorporation-
General Stock (ARTS-GS) SI-550 (Statement of Information) Form |
5. establish a business bank account
Opening a company bank account is a critical step in getting your finances in order. It separates your business and personal banking transactions, making it easier to manage your bookkeeping and stay on top of deductible spending.
explore more: the power of double entry bookkeeping for business owners
6. determine your location
Local zoning regulations will influence where you locate your firm. Check out the Municode Library for California to search for zoning and ordinance information by location.
7. obtain business licenses and permits
You’re almost ready to start conducting business once you’ve completed all the necessary steps to register your company with the Secretary of State in California. However, you must first ensure that you have the necessary licenses.
tax registration for the sale of commodities
If you plan to sell items in California, you must register with the Board of Equalization. On the Board’s website, you can Register online.
tax registration is required when hiring staff
If you intend to hire people, you must register with the California Employment Development Department. This can be done online through the Department’s e-Services for Business.
helpful resource: business entities understanding tax implications
identification number for tax purposes
At the federal level, you must ensure that you have a tax identification number. If you already have one, that is surely good news.
state and county business license
A general business license from the city where you intend to operate is required. If you do not operate in an incorporated area of the state, you must apply for a general business license with the county.
additional licenses and permits
Depending on the nature of your business, you may require additional permits for health, safety, and other rules. Search the CalGold website for rules and business permits based on area and business type.
8. purchase business insurance
If your company employs people, you must obtain workers’ compensation insurance. You’ll also need to ensure corporate automobiles are available if you use them.
Aside from that, there is no legal requirement in California for you to have business insurance. However, we strongly advise you to purchase insurance. Without it, the risk of going out of business is significantly increased.
9. discover the california minimum franchise tax
In addition to other state business taxes, California has one that is unique to the Golden State: the $800 Minimum Franchise tax. All LLCs, LLPs, limited partnerships, and corporations must pay the California Minimum Franchise Tax.
This implies you must pay the Franchise Tax Board (FTB) at least $800 per year, or a percentage of your income at your appropriate corporate tax rate, whichever is greater. Use the FTB’s tax calculator to determine which taxes you must pay.
the minimum franchise tax exemption for the first year
If you start a business in California for the first time, you may not have to pay the $800 minimum franchise tax.
The minimum franchise tax is waived your first year in business if you operate a corporation, LLC, LLP, or limited partnership. However, you must still pay income tax at your regular rate.
This rule only applies to LLCs if you have opted to be considered a corporation rather than a disregarded entity.
Ready to get your business off the ground? One of the most essential initial investments you can make is setting up bookkeeping. With complete insight into your finances, you’ll have all the necessary information to make crucial early business decisions. Try one month of free bookkeeping with countick.
