How to start a business in California: a step-by-step guide to launching in 2023

They say everything’s bigger in Texas—except the population! At more than 39 million people, California is the most populous state in the union. That means your new service business will have access to more customers than you can shake a sourdough at. Plus the weather is good and the avocados are cheap. So take a guac on the wild side and start a small business in California!

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Thankfully, starting a California-based business doesn’t have to be a giant hassle. Let’s take a look at how to start a small business in California.

Checklist: starting a business in California

1. Check local zoning regulations
2. Create business plan
3. Choose a business structure
4. Register your business name
5. Register your business
6. Hire employees
7. Get business license and permits
8. Get insurance

1. Check local zoning regulations

Before registering your business, make sure that your business is allowed to operate in the location you want. Why? Because California has over 39 million residents, 58 counties, and 482 incorporated cities and towns. Business requirements and regulations are not uniform across the entire state and you may find it difficult or impossible to get a California business license. For example, Fortune telling is not allowed as a home-based business in the City of Dublin.

You can find zoning regulations for your town or city by reviewing your local ordinances and contacting your local zoning or planning department.

If you do plan to operate a home-based business, we also recommend reviewing your lease or HOA rules, some of which may ban home-based businesses.

California has over 39 million residents, 58 counties, and 482 incorporated cities and towns.

2. Create a business plan

Now that you’ve confirmed that local zoning regulations are on your side, it’s time to hop onto the next step: writing a business plan. Done right, a business plan can help you map out the feasibility and long-term growth of your business.

Make sure that your business plan includes a clear strategy for achieving short- and long-term goals. It’ll help you stay on track and maximize your business’ overall profitability.

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You can get help writing your business plan from the U.S. Small Business Administration.

3. Choose a business structure

Every business needs to choose a legal business structure (aka “a business entity”). Each of the available options offers a unique set of pros and cons that will impact your business’ formation, ownership, control, funding options, size, taxation, and more. The trick is to choose a business structure that’s advantageous for your business.

In California, you have the following options for business entities:

• Sole Proprietorship
• General Partnership
• Corporation (S corporation and C Corporation)
• Limited Liability Company (LLC)
• Limited Partnership (LP)
• Limited Liability Partnership (LLP)

Ask an attorney to advise you on the best business structure for your business. Many small business owners choose to register a sole proprietorship in California, since it is the simplest way to get your operation off the ground quickly.

Be sure to check out our guide to business structure types to compare your options.

4. Register your business name

If you plan to operate with a business name that doesn’t include the owner’s last name, you’ll need to follow these steps to name your business in California.

Check business name availability

Naming a business in California is a little bit more complicated than naming your child.

Once you’ve decided on a business name that complies with California’s business entity name rules, check the California Secretary of State’s office database, your local county database, and federal and/or state trademarks, to make sure it’s available.

Get a Fictitious Business Name (FBN)

Also known as a Doing Business As (DBA), a Fictitious Business Name (FBN) is a registered business name that you want to use in business operations instead of your legal name or anything other than the registered business name.

Many small business owners choose to register a sole proprietorship in California, since it is the simplest way to get your operation off the ground quickly.

How do you file for a FBN in California?

1. Conduct a name search. You'll need to check your business name availability on the California Secretary of State's and county database. You'll also want to check if the business name has a federal or state trademark.
2. File your FBN form with your country clerk in the county of primary business operations
3. Publish your FBN In California, it's required that you publish your FBN/DBA statement within 30 days of registration. This statement should appear in a newspaper of general circulation in the county where you are registering and appear at least once a week for four consecutive weeks. You will then file an affidavit of publication with your county to verify completion.

Why do you need an FBN in California?

You need an FBN (aka DBA) in California if the name of the business does not include the owner’s last name. According to the Franchise Tax Board’s Guide to DBAs, “an individual or a business entity must file a fictitious business name (FBN) statement with the Registrar-Recorder/County Clerk's office in the county where the business will be located when the name of the business does not include the owner's last name.”

The purpose of registering your FBN/DBA is to ensure that consumers have access to the true name and address of the owner of the business. An FBN is filed at a county level and you will need to file your FBN in the county in which you primarily operate.

5. Register your business

Now it’s time to register your business in California. Registration requirements differ according to your business type.

Sole proprietorship

To operate as a sole proprietorship in California, you’re not required to file any documents with the state. However, if you would like to operate under a Fictitious Business Name (FBN) or Doing Business As (DBA), you need to register your business with your county of primary business operations.

General partnership

To create a general partnership in California, you don't need to file any organizational documents with the state. The first thing you should do is draft a California General Partnership Agreement (General Partnership Template) between everyone involved in the partnership. This will avoid complicated legal disputes in the future.

It is optional to register your business at a state level, but if you want to, you will need to complete a Statement of Partnership Authority (Form GP–1) and file it with the California Secretary of State’s Office.

Corporation

For both S corporations and C corporations, you must file Articles of Incorporation with the California Secretary of State (SOS). You will also need to appoint an individual agent or corporate agent for service of process in California (in other states, this is known as a registered agent).

How do you register a C corporation in California?

• Choose a name for your corporation
• Provide a specific address
• Assign a Registered Agent
• File Articles of Incorporation and Statement of Information

A Registered Agent is an official position of someone who receives official legal and tax correspondence on behalf of the corporation. The agent also has the responsibility of filing reports with the California Secretary of State.

How do you turn a C corporation into an S corporation in California?

In addition to the process above, the shareholders only need to do two things. First, all shareholders should give their consent to turn the C-corp into an S-corp. Second, file IRS Form 2553. The biggest benefit of an S-corp is that, unlike a C-corp, it's only taxed once, at the level of the business owners or shareholders.

Limited liability company (LLC)

Like a corporation, an LLC must file Articles of Organization with the California Secretary of State (SOS). You will also need to appoint an individual agent or corporate agent for service of process in California.

How do you form an LLC in California?

1. Choose a name for your LLC
2. Assign a Registered Agent
3. File Articles of Organization (form LLC-1)
4. Decide on member vs. manager management
5. File a biennial report

Every LLC, foreign or local, that’s registered in California must file a Statement of Information form, Form LLC-12, with the California Secretary of State within 90 days of filing their articles of organization. This LLC-12 must be filed every two years.

Limited partnership (LP)

To register a limited partnership in California, you will need at least one general partner that acts as the controlling partner and one limited partner.  

How do you form an LP in California?

1. Choose an LP name
2. Assign a Registered Agent
3. File the Certificate of Limited Partnership with the California Secretary of State's Office
4. Create a Limited Partnership Agreement

        This agreement is not legally required in the state of California, but it is           nonetheless important to have to keep your partnership agreement in writing to           avoid legal disputes in the future

5. File and pay Partnership Return of Income (form 565).

Limited liability partnership (LLP)

A limited liability partnership is a kind of partnership that offers partners limited personal liability, similar to limited partnerships. In California, all the partners in an LLP must be a licensed professional– accountant, lawyer, or architect.

How do you form an LLP in California?

To register an LLP in California, you will need to file an Application to Register a Limited Liability Partnership with the California Secretary of State. After your application is approved by the SOS, Attorney run LLPs will need to register with the California State Bar.

How much does it cost to register a business in California?

Sole proprietorship: $26

First-time filing fee one business name and one registrant.

General Partnership: $31 and up

First-time filing fee one business name and one registrant $26 + $5 per additional registrant.

Corporation (C-corp and S-Corp): $226 + $800 annual franchise fee

First-time filing fee one business name and one registrant $26, plus:

• $100 (file articles of incorporation)
• $25 (file statement of information)
• $75 (average business license cost)
• $800 (annual California Franchise Fee)

Limited Liability Company (LLC): $160 + $800 annual franchise fee

California LLC Fee of $85, plus:

• $25 (Statement of Information Filing Fee)
• $50 (Small business license average price)
• $800 (annual California Franchise Fee)

Limited Partnership (LP): $151 + $800 annual franchise fee

First-time filing fee one business name and one registrant $26, plus:

• $5  (per additional registrant)
• $70 (Certificate of Limited Partnership)
• $50 (Small business license average price)
• $800 (annual California Franchise Fee)

Limited Liability Partnership (LLP)

First-time filing fee one business name and one registrant $26, plus:

• $5  (per additional registrant)
• $70 (LLP Filing fee)
• $50 (Small business license average price)
• $800 (annual California Franchise Fee)

6. Hire employees

When you’re ready to scale your business, and you need to hire a few more hands to help run your operations, there are a number of steps you need to take before you can hire your first employee.

1. Register for your Employer Identification Number (EIN) In California, your EIN is the equivalent of the federal tax identification number. After you apply and receive your EIN, you will receive all the state tax and employment requirements.
2. Get your Worker’s Compensation Insurance Coverage. All employers are required to have workers’ compensation insurance or state-approved self-insurance with required benefits. You can contact several insurance companies or the State Insurance Fund to make these benefits available to your employees. Employers who fail to have workers’ compensation insurance may be subject to hefty fines, criminal, and civil penalties.
3. Make sure to provide a Notice of Rights of Victims of Domestic Violence, Sexual Assault, and Stalking to your employees Employers are required to provide a Notice of Rights of Victims of Domestic Violence, Sexual Assault, and Stalking  to new or existing employees when they request it.

4. Check your businesses’ Required Registration, Certification, or Licensing for Certain Industries Certain businesses that offer specific products or services may need to be registered, certified, or licensed before starting business operations

Familiarize yourself with the state’s hiring requirements before you hire employees in California.

7. Get business licenses and permits

Not all businesses are required to file for a state-wide business license in California. The licenses and permits you need will generally depend on your business type, professional service, and zoning.

There are three main jurisdictions for permits and licenses: local, state, and federal. Applying for a business license in California is usually accomplished through each jurisdiction’s web licensing service.

Local

At the local level, you will need to check with your county if your industry is required to file for a business license to operate. Of the 58 counties in California, 26 of them require you to file for a business license.

1. Alameda
2. Alpine
3. Butte
4. Calaveras
5. Colusa
6. Contra Costa
7. El Dorado
8. Humboldt
9. Kern
10. Los Angeles
11. Madera
12. Marin
13. Mendocino
14. Merced
15. Mono
16. Placer
17. Riverside
18. Sacramento
19. San Francisco
20. San Joaquin
21. San Luis Obispo
22. San Mateo
23. Santa Barbara
24. Siskiyou
25. Tulare
26. Yolo
    

However, even if your business is located outside of these counties, you may still be required to obtain licenses at a state or federal level.

Not all businesses are required to file for a state-wide business license in California.

State

At the state level, service businesses that require extensive training will likely need to file for licenses and permits in the state of California.

Here are some examples of services that require state licenses and permits in California:

• Lawyers
• Medical professionals
• Real estate brokers and salespersons
• Building contractors and other construction-related occupations
• Barbers and cosmetologists
• Architects and engineers
• Private investigators and other security services
• Accountants

You can search business license California details and apply for a business license in California using CalGold and The California Department of Consumer Affairs.

The cost of a business license in California is usually between $50 and $100, depending on the industry and location.

Federal

At the federal level, most small businesses won’t need licenses and permits unless their business operates in any of the following industries:

• Agriculture
• Alcoholic beverages
• Fishing and wildlife
• Mining and drilling
• Aviation
• Commercial fisheries
• Nuclear energy
• Firearms, ammunition, and explosives
• Radio and television
• Transportation and logistics

For a complete list of necessary permits at a federal level, visit the SBA.gov website.

How much is a business license in California?

‍The cost of a business license in California is usually between $50 and $100, depending on the industry and location. Larger companies may incur a California business license cost calculated based on a percentage of their profits.

8. Get business insurance

You may be required to get certain types of business insurance depending on the nature of your business.

Here’s a list of the small business insurance that is required or highly recommended in California:

California Workers’ Compensation Insurance

If you have one or more employees, you’re legally required to get workers comp in the state of California. Failing to purchase workers comp could see you facing a misdemeanor offense, up to a year imprisonment, or a $10,000 fine.

California Auto Liability Insurance

If your business operations make use of a car, van, or truck, you will be required to have this insurance. Auto liability insurance will protect you and your business from claims resulting from accidents involving your vehicle.

General Liability Insurance

This will protect your business from claims of bodily injury or property damage.

Commercial Property Insurance.

This insurance will protect the owned or rented property that you operate out of.

Professional Liability Insurance

This insurance can protect you from damages caused by professional services rendered that caused financial harm.

Remember, although California does not typically require General, Commercial, or Professional insurance for business to operate, the state also doesn’t put a cap on liability lawsuits.

For more comprehensive advice on small business insurance, check out What type of small business insurance do I need?

Starting a business in California is easier than you think

It might seem like there are a lot of rules and regulations when it comes to starting a business in California. But remember, these are the requirements that cover every type of business, from tiny solo service operations to huge corporations. If you’re just starting out, you can stick to the basics to get up and running quickly: register as a sole proprietor, get the right business license for your region, and get a basic insurance package that protects you from liabilities. You can worry about the rest of it later. So get out there and build your career!

Starting a business in California Frequently Asked Questions

Do I need a business license in California?

There is a good chance that you need a business license in California. Business licenses are regulated at the local, state, and federal levels, and depending on your industry, you are likely to need a license to operate from one or all three regulatory bodies.

How do I get a business license in California? How do I apply for a business license in California?

At the local level, you can check with your county office to see if your business requires a license and then follow their application procedure.

At the state level, use CalGold to apply for a business license.

At the federal level, the U.S. Small Business Administration handles licensing.

How much is a business license in California?

For most small businesses, licenses cost between $50 and $100. For larger corporations, licensing fees are calculated based on a percentage of profits.

Do I need a business license to sell online in California?

If you make three sales or more in a year (12 months) you must have a California seller’s permit, even if those sales are online.

When do I need a business license in California?

You need a business license in California when your industry falls into a category regulated at the local, state, or federal level. Check with your county office, CalGold, and the U.S. Small Business Administration for more information.

Do I need a business license to sell on Etsy in California?

Yes, if you make three or more sales on Etsy in a 12-month period you must have a California seller’s permit.

Do I need a business license to sell on eBay in California?

Yes, if you make three or more sales on eBay in a 12-month period you must have a California seller’s permit.