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How to Start a Business in California in 11 Steps

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Anastasia Belyh

Last Update

Feb 11, 2025

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Starting a business in California can be rewarding but challenging. This guide will walk you through legal requirements, building your brand, and attracting your first customers.

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1. Choose Your Business Idea

Your business idea is the foundation of your success. In California, competition is fierce, so you need a clear and marketable idea.

  1. Identify your strengths. Think about your skills, passions, or industry expertise. Aligning your business with your strengths makes it easier to stay motivated and succeed.
  2. Solve a problem. Look for gaps in the market or pain points that your product or service can address. Unique solutions attract customers.
  3. Evaluate demand. Use tools like Google Trends, social media, or market research reports to gauge interest in your idea. Ensure there’s a customer base for what you’re offering.
  4. Think about scalability. Choose an idea that has potential for growth, whether it’s expanding your offerings or entering new markets.

By validating your business idea early, you’ll save time and money while increasing your chances of long-term success.

2. Decide on a Business Structure

Your business structure determines your legal and financial obligations. Choosing the right one ensures compliance and protects your personal assets.

  1. Sole proprietorship. This is the simplest structure, ideal for solo entrepreneurs. However, it doesn’t provide liability protection.
  2. Limited Liability Company (LLC). An LLC separates personal and business assets, offering liability protection and flexibility. It’s a popular choice for small businesses.
  3. Corporation. Corporations provide the most protection but involve complex regulations. They’re best for businesses planning to raise capital or grow significantly.
  4. Partnership. This structure works for businesses with multiple owners. Each partner shares profits, losses, and responsibilities.

Consult a business attorney or tax professional to ensure you choose the structure that fits your needs. Register your chosen structure with the California Secretary of State.

3. Register Your Business Name

Your business name is your brand’s first impression. Registering it ensures no one else can legally use it in California.

  1. Check name availability. Use the California Secretary of State’s online database to see if your desired name is available.
  2. File a Fictitious Business Name (DBA). If operating under a name other than your legal name, file a DBA with your county.
  3. Secure your domain name. Check if your business name is available as a website domain. A matching domain strengthens your online presence.
  4. Trademark your name. For extra protection, consider applying for a trademark with the United States Patent and Trademark Office (USPTO).

A strong, unique name establishes your identity and helps customers recognize your brand.

4. Obtain Necessary Licenses and Permits

California has strict licensing and permit requirements. Ensuring compliance helps you avoid fines and operate legally.

  1. General business license. Most cities and counties in California require a basic business license to operate. Check with your local government.
  2. Industry-specific permits. Certain businesses, like food services or construction, need additional permits. Research regulations for your industry.
  3. Seller’s permit. If you plan to sell physical goods, you’ll need a seller’s permit from the California Department of Tax and Fee Administration (CDTFA).
  4. Health permits. Businesses like restaurants and salons may require health department inspections and permits.

Keep track of renewal deadlines for licenses to avoid disruptions to your business.

5. Get an Employer Identification Number (EIN)

An EIN is like a social security number for your business. It’s required for taxes, hiring employees, and opening a business bank account.

  1. Apply online for free. The IRS allows you to apply for an EIN online, and the process takes only a few minutes.
  2. Separate personal and business finances. An EIN ensures you can keep your personal and business taxes separate, simplifying bookkeeping and tax filing.
  3. Required for employees. If you plan to hire workers, an EIN is mandatory for payroll and tax withholding.

Even if you’re a sole proprietor, having an EIN adds professionalism and makes it easier to work with vendors and clients.

6. Open a Business Bank Account

A dedicated business bank account keeps your finances organized and protects your personal assets. It also adds credibility to your business.

  1. Choose a local or online bank. Compare fees, account features, and services like merchant processing to find the best fit.
  2. Keep personal finances separate. Mixing personal and business funds complicates bookkeeping and puts your personal assets at risk.
  3. Build business credit. A business bank account is the first step toward establishing credit, which is essential for securing loans or lines of credit.

Setting up a business account streamlines financial management and prepares you for growth.

7. Build a Professional Website

Your website is your online storefront and a critical tool for attracting customers. A professional, user-friendly site builds trust and credibility.

  1. Choose a platform. Use website builders like Wix, Squarespace, or WordPress to create a site without needing technical skills.
  2. Secure your domain. Purchase a domain name that matches your business name. This makes it easier for customers to find you online.
  3. Include key pages. Add an About page to share your story, a Services page to outline your offerings, and a Contact page for inquiries.
  4. Add online booking or e-commerce. If you sell products or services, enable secure payments or appointment scheduling directly through your site.
  5. Optimize for SEO. Use keywords like “California small business” or “[your industry] services in California” to improve search engine visibility.
  6. Make it mobile-friendly. Many users will access your website on their phones, so ensure it looks great and works seamlessly on mobile devices.

A professional website is essential for establishing your brand and making it easy for customers to connect with you.

8. Register for California State Taxes

California’s tax system can be complex, so understanding your responsibilities is key to staying compliant.

  1. Sales tax registration. If you sell physical goods, register for a seller’s permit with the California Department of Tax and Fee Administration.
  2. Employment taxes. If you hire employees, you’ll need to register for payroll taxes and unemployment insurance with the Employment Development Department (EDD).
  3. Income tax. Sole proprietors and LLCs report business income on their personal state tax returns. Corporations file separate tax returns.

Consult with a tax professional to understand your obligations and avoid penalties.

9. Get Business Insurance

Business insurance protects you from unexpected risks and adds credibility to your operation.

  1. General liability insurance. Covers accidents, injuries, or property damage related to your business.
  2. Professional liability insurance. Essential for service-based businesses, this covers mistakes or negligence claims.
  3. Workers’ compensation. If you have employees, California law requires you to carry workers’ compensation insurance.
  4. Commercial auto insurance. If you use vehicles for your business, ensure they are covered under a commercial policy.

Investing in the right insurance safeguards your business and builds client trust.

10. Create a Marketing Strategy

Effective marketing helps you reach your target audience and grow your business.

  1. Leverage social media. Platforms like Instagram, Facebook, and LinkedIn allow you to connect with potential customers and share updates about your business.
  2. Use local advertising. Distribute flyers, run ads in local newspapers, or participate in community events to boost visibility.
  3. Offer promotions. Discounts, referral programs, or loyalty rewards encourage customers to choose your business.

A solid marketing plan ensures steady growth and builds awareness for your brand.

11. Launch Your Business Officially

Once everything is in place, it’s time to announce your launch and start serving customers.

  1. Host a launch event. Invite friends, family, and potential clients to celebrate and learn about your business.
  2. Spread the word. Share your launch on social media, through email campaigns, and in local community groups.
  3. Track progress. Use tools like Google Analytics or customer feedback to evaluate your early performance and make adjustments.

A strong launch sets the tone for your business and establishes momentum.

Frequently Asked Questions

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Author

Anastasia Belyh

Anastasia Belyh is a senior tech writer with over 15 years of experience in marketing, sales, and business software. Having worked in investment banking, management consulting, and founded multiple companies, her in-depth knowledge and hands-on expertise make her software reviews authoritative, trustworthy, and highly practical for business decision-makers.