How to Start a Business and Form Your LLC in California
- California Business Facts and Environment
- Step 1: Decide on a Business Structure
- Step 2: Pick a Business Name
- Step 3: Register the Business
- Step 4: Obtain Your Federal Employer Identification Number
- Step 5: Open Company Bank and Credit Accounts
- Step 6: Set-up An Accounting System
- Step 7: Obtain Licenses and Permits
- Step 8: Hire Employees (if applicable)
- Step 9: Obtain Business Insurance
- Step 10: Systemize and Organize
- Step 11: Branding and Marketing
- Step 12: Annual and Ongoing Requirements
- Important California Contacts
California Business Facts and Environment
CA Business Facts
California is the largest and wealthiest state in the United States. Major industries include technology (Silicon Valley), entertainment (Hollywood), agriculture/farming as well as millions of small businesses.
Major Companies
Major companies include Google, Apple, and dozens more you would recognize.
Startup Environment
California, while a hotbed for startups and top corporations, currently ranks #31 on Forbes Best States for Business list and is known for being more difficult to operate in as well as taxing businesses higher than most other states.
Step 1: Decide on a Business Structure
There are 3 basic options: a DBA, a Corporation or an LLC. Click here to learn more about business entities.
- A DBA or “Doing Business As” (also known as a “Fictitious Business Name” or FBN) is not really a separate structure, but just a different name that an individual or partners use as their business name.
- A Corporation is a separate entity (provides liability protection to the owners) that has a structure that includes shareholders, directors and officers. More complex than a DBA but the entity of choice for large companies and startups that intend to raise funding. Some professions are required to choose what is known as a “Professional Corporation” or PC (doctors, lawyers, architects, etc.).
- An LLC or “Limited Liability Company” is a newer type of business that is both a separate entity but provides very easy management (doesn’t require directors or officers) and taxation. Has largely replaced the DBA and Corporation in popularity recently as it provides liability protection but with much less complexity (and taxation) than a Corporation.
Step 2: Pick a Business Name
Picking a business name is easier said than done – many legal and business problems can arise from picking the wrong name (you can always change it later but the less times you have to do that, the better). In Step 3 we’ll show you how to search for the name in California, but we highly recommend you do the following before searching California state databases:
- Make sure you’ve covered the basics: unique, easy to understand/pronounce (practice saying it out loud: “Thanks for calling XYZ”) and can survive over time (“DVD World” is not timely). Here are some of our tips on business identity including logo and trademarks.
- Search the web for your proposed name. Search Google, Bing and DuckDuckGo as a “first sweep” for any potential conflicts, especially in your state or local jurisdiction. NOTE: If you intend to operate nationally or even internationally it will be even more important that your name be unique. This should cover many cases where a company name is being used but not officially trademarked (see next tip).
- Do a trademark search with the US Patent and Trademark Office (USPTO). This will be a very good indicator if you’re name will have any conflicts. There’s an art to trademark searches (trademark specialists will charge you handsomely to do a thorough search) but in our experience if you can use google at a fairly advanced level you can reasonably clear a name yourself.
TIP: search misspellings, plurals, variations of spelling, sound-alikes and other versions of your chosen name to be sure it’s not already registered. - Make sure your company name choice is available by searching the California Secretary of State’s business entity database. NOTE: Make sure to search variations of spelling, plurals and misspellings as the state may reject a name that is too similar (then you have to start all over again, wasting valuable time).
Restrictions on California Business Name & Business Purpose
California business names must adhere to the following restrictions
- Your company name must include the correct corporate identifier: Corporations: “Corporation”, “Incorporated” or an abbreviation.
- May not contain the word “bank,” “trust,” “trustee,” and shall not contain the words “insurer” or “insurance company” or any other words suggesting that it is in the business of issuing policies of insurance and assuming insurance risks.
- The following business purposes require the formation of a “Professional Corporation” or “PC”:
- Accounting
- Acupuncture
- Architecture
- Chiropractic
- Clinical social work
- Dentistry
- Law
- Marriage, family, and child counseling
- Medicine
- Speech-language pathology and audiology
- Nursing
- Optometry
- Osteopathy
- Pharmacy
- Physical therapy
- Physician assistants
- Podiatry
- Psychology
- Shorthand court reporters
Step 3: Register the Business
Each state has its own requirements for registering a business. Now that you’ve chosen a business structure and picked your business name, here are the requirements to register your business in California.
How to form an LLC in California
- File Form LLC-1 (Articles of Organization) with the California Secretary of State LLC Division.
- Once the articles are filed and approved you will then need to properly organize the LLC (yes, even “1 person LLC’s”) by holding an “Organizational Meeting” which takes contributions from the members, issues Member Certificates, adopts the company Operating Agreement and more.
How to Incorporate in California
- File form ARTS-GS (Articles of Incorporation) with the California Secretary of State Corporation Division.
- Hold an “Organizational Meeting” to determine the percentage of ownership for each shareholder as well as resolve to do tasks like open a company bank account, pay back pre-incorporation expenses, elect S-Corporation status and more.
- Corporations can elect S-Corporation status with the IRS by filing IRS Form 2553. Click here to learn more about S-Corporations.
Note: When registering registering a new company The Secretary of State can take several weeks to file the paperwork (California is one of the slower states in the US). You can expedite the process by hand delivering the documents directly to them or one of their field offices and paying an additional fee.
TIP: Check our order form to see how long California is currently taking to process regular and expedited orders.
How to File a DBA in California
DBAs are filed with the county. You’ll want to contact your local County Recorder to find out exactly what forms to submit and what they’re submission process is. You can find the local county recorder’s office by searching “YOURCOUNTY county recorder”.
- Obtain and file the correct forms with the count to register your DBA. NOTE: some counties let you search the name and register online. Others require the form to be notarized.
- Publish a notice in an approved newspaper. The county can instruct you on approved newspapers. Publication must be once a week for four consecutive weeks. After the 4th publication, the newspaper company should send you a Proof of Publication, (as a signed affidavit indicating dates of publication in their newspaper).
- File Proof of Publication with the County Clerk’s Office within 30 days after the 4th publication. NOTE: Some newspaper companies may provide this service for you, but filing the proof is still your responsibility.
Optional Considerations when registering a California business
- Hire a professional Registered Agent. Many people list their home or business address on the Articles of Organization. This can cause issues because it becomes public record (you’ll get lots of junk mail). A professional Registered Agent will provide their address and forward any important documents to you, this is also convenient if you have to move (you don’t have to file forms or pay fees, just update your address with your agent)
Ready to Start Now? Let Us Do The Work
Sure, you could do all the steps above or you could spend 5-10 minutes on our order form and let us take care of it while you work on more important things.
- Learn more about our business formation service
- Read our verified reviews and 100% Satisfaction Guarantee
- Contact our friendly support team if you have any questions
Step 4: Obtain Your Federal Employer Identification Number
Your EIN is like your Social Security Number for your company. It’s required for Corporations and LLC’s and optional for DBA’s (if you don’t have any employees, then it’s required). However, if you are a DBA and don’t obtain an EIN you will be forced to use your Social Security Number on many documents so it’s typically recommended you obtain the EIN to prevent identity theft.
To obtain an EIN you can apply online with the IRS or via IRS Form SS-4.
TIP: We will obtain your EIN for you if you we form your company.
Step 5: Open Company Bank and Credit Accounts
To keep business and personal expenses separate, you should open a separate account for your business. In addition, getting business credit cards is how you begin to build a company credit profile (corporation or LLC required) and can later qualify for larger loans and lines of credit. To open the account simply call your chosen bank and inquire on the steps to open a business bank account. Typically you’ll need a) your filed paperwork b) your EIN c) a company resolution authorizing your company to open the account (signed by the owners, members, officers or directors, etc.).
TIP: Our business formation service includes a free banking resolution for your use.
Step 6: Set-up An Accounting System
Setup your Accounting and Record-keeping system and learn about the taxes your new company is responsible for paying.
Company documents generally are required to be kept for 3 years, including: a list of all owners and addresses, copies of all formation documents, financial statements, annual reports, amendments or changes to the company. All Tax and Corporate Filings should be kept for at least 3 years. View our “Accounting & Financial Management” section for help with setting up an accounting system and purchasing accounting software.
Step 7: Obtain Licenses and Permits
Now that you’ve registered your business name you need to obtain a business license for your company – this authorizes your company to do business in your city or county. Typically this also involves registering for state taxes and permits (the city may require them as part of the business licensing process).
California has a very good business license portal called CalGold which we highly recommend and here is their page on taxes.
TIP: We work with a company that can obtain and prepare business licenses and permits for you. Click here to learn more.
Step 8: Hire Employees (if applicable)
If you intend to hire yourself or others as a full or part-time employee of your company, then you may have to register with the appropriate State Agencies or obtain Workers Compensation Insurance or Unemployment Insurance (or both). View our “Employees & Payroll” section for help with hiring employees and processing payroll.
Step 9: Obtain Business Insurance
There are many types of insurance for businesses but they are usually packaged as “General Business Insurance” or a “Business Owner’s Policy”. This can cover everything from product liability to company vehicles. A decent policy can run as little as $300/year and offers a great extra level of protection. Click here to view our preferred provider of business insurance online.
Step 10: Systemize and Organize
Prepare the business as if someone needed to take it over and run it for you. This means have a method to process orders, pay bills, pay employees, pay taxes, maintain your permits, etc. Basically, try to make the operational aspect of the business as automated and efficient as possible so you can concentrate on growing your business. View our “Manage Your Company” section for help with systemizing and automating your business.
Step 11: Branding and Marketing
Now that you’ve set-up the company for success, you need to get the word out. Create a marketing plan for your products and services that targets your ideal customer. View our “Marketing & Sales” section for help for more information.
Step 12: Annual and Ongoing Requirements
DBA: your Fictitious Business Name should be valid for 5 years (unless you change company name or other information listed on the FBN) at which point you’ll need to renew it with the county.
LLC: Every 2 years you’ll need to file the “Statement of Information” which updates the state on your business address and other things.
Corporation: Every year you’ll need to file the “Statement of Information” which updates the state on your business address and other things. LLCs and Corporations will pay a filing cost of $25.
Franchise Taxes: the California Franchise Tax board imposes a Franchise Tax on Corporations and LLC’s of a minimum of $800/year (increasing depending on revenue).
Important California Contacts
California State Taxation Departments
California State Treasurer’s Office
Department of Consumer Affairs Licensing
California State Labor and Employment Departments
Labor and Workforce Development Agency
California Startup Resources
1. California Small Business Administration
Small Business Administration (SBA) California State District Office
2. SCORE Mentors
SCORE is made up of active and retired business people who volunteer their time to support startup businesses. From coaching to funding resources, finding a local SCORE mentor can save precious time and money.
- California Business Programs
- California Small Business Development Center (SBDC) Network
- California Job Link Employer Portal
- Tax Information For California Businesses
3. California State Legal Statutes:
- California Business Corporation Act
- California State Limited Liability Companies – the specific act that applies to California State LLCs.
- California State Businesses and Professions – includes regulations on topics such as business and professions codes.
4. California State Chambers of Commerce
5. Angel.co California State Startups
6. California Business News
7. California State Small Business Development Center
