How to Start a Business in California

Step-by-step guide for new business owners.

Most people have a business concept in their heads but never get around to implementing it. So what motivates people to launch their own business? Is it more personal freedom, a more balanced work-life, a larger salary, or all of the above? Of course, there are numerous advantages to becoming your own boss. However, there are some disadvantages that you should be aware of.

This article will reveal how to establish a business in California in a simple step-by-step style. We’ll go over everything from the basic business concept to registering your business. Stay with us!

Have the Right Business Idea

Knowing the kind of business you want to start is one major step towards business ownership. First, you need to brainstorm for an idea that suits your business interests, natural abilities, and goals. This will also help you remain motivated even during tough times and significantly increase your success odds.

Do you need inspiration? Below are the most common ideas among our California website visitors:

  • Grocery Store
  • Barber Shop
  • Drive-In Movie Theater
  • Record Label
  • Security Company
  • Dog Breeding Business.

Additionally, it is advisable to choose a business that matches your interests and lifestyle to develop the right business idea.

Plan Your Business

Most successful businesses have detailed planning. Therefore, before investing substantial funds and other resources into your business, do well to analyze your business idea critically and design a game plan. Nevertheless, it is important to complete the following:

Find a Business Location

Do you have any location in mind? Whether it is a brick-and-mortar company or a business from home, your location determines the kind of licensing and permits you’ll require. Moreover, this also influences your business growth potential. For example, researching popular areas in California, such as Oakland or Los Angeles, can help boost foot traffic and attract customers.

Conduct Market Research

Are you familiar with your market? Before creating a business plan, it is important to conduct thorough market research. This process involves SEO research, conducting surveys, or organizing focus groups. However, the purpose of market research is to help you understand your target market and competitors to produce an ideal business plan.

Write a Business Plan

A well-designed business plan doesn’t only help you get organized, you can also use them to receive business funding and fulfill significant milestones.

You don’t need to stress if you don’t have an idea of how to create a business plan. Our Business plan guide can help you develop an effective business guide.

Below are some main features of a well-designed business plan:

Product Development: What are the things that make your product or service unique? What solution does your business offer?

Marketing and Sales: Who are your potential clients? How will you reach out to them and convert them into customers?

Partnerships: If you plan to hire staff, what roles will you need to fill, and what business relationships will you need to maintain for you to succeed?

Financial Planning: When it comes to clients or sales, what are the things you need to break even? What amount of funds will it take to achieve this, and how will you get the funding?

Get Funding

Undoubtedly, it would be best to have enough capital to start a business. However, before you can get the money to cover startup costs, you need to do a few things. First, you need to estimate your business expenditures before pursuing outside funding. Doing this helps you choose the best external source of capital for your California business. Next, you need to spend smartly and organize your business by creating a clear financial plan. However, you can explore the following business funding Opportunities.

  • Bootstrapping: This business funding approach suggests you fund your business with personal savings and income. Then, when you begin your business operation, you need to reinvest profit back into the business to ensure growth.
  • Family & Friends: Obtaining funds through family and friends loans can be a good way to start your business. However, it will be best to have a documented agreement and repayment plan when mixing business with friends and family.
  • Small Business Grants: These are basically business funding for your small business, which you don’t need to pay back. In addition, you can acquire these grants by completing all application processes.
  • Small Business Loans: You can get small business loans through banks or other financial institutions. However, this funding approach demands repayment but will provide enough funds to cover more startup expenses.

Naming Your Business

Choosing a name for your company is a big decision. However, a good company name can make all the difference in terms of success or failure. We’ll provide you with practical advice on how to come up with great company names, as well as what to keep in mind while formally registering your new company name. However, you can easily come up with an ideal business name with the help of our business name generator.

Business names can be divided into four categories:

Names that are expressive: In some manner, these describe the company’s operations. Big Al’s, The Washington Post, and Baskin-Robbins are just a few examples. When choosing a descriptive name, keep in mind that trademarking this type of name can be challenging.

Imaginative names: These are names that figuratively symbolize a brand. The name Apple, for example, is a symbol of something fresh and new. Likewise, Amazon brings together a diverse range of products under one roof.

Unprecedented names: These are names that don’t have any meaning even though they sound pleasant or visually appealing. Brands frequently utilize them because it is easier and less expensive to trademark random names.

Derivative names: These names are derived from a firm founder or a product feature. They’re simple to recall for the general audience, but they can also be quite generic and lack innovation. The distinction between derivative and descriptive names is razor-thin.

Define Your Brand

The most popular and prominent businesses we created on a trustworthy trademark. When creating your brand, it is important to consider the following.

  • What are your business objectives?
  • How will you express your core values?
  • How will you earn the trust of your customers?

Once you’ve found the answers to the questions above, you need to re-examine your business name. An ideal business name is the foundation of a good brand & a successful business. To know more about developing an ideal business name, see our How to Name a Business guide.

Build Your Business Website

After getting the required funding and developing an ideal brand name, the next step is creating a website for your business.

While this is an important step, some may think it is beyond their ability because they lack website-building experience. Although this may have been a challenging thing to do a few years back, thanks to the huge advancements in web technology which has made website development much more effortless. All you need to do is search for a web builder that suits your business needs and follow the guidelines. The process is straightforward, and it would not take you more than 2-3 hours to complete. You can read through our website building guides to get more insights.

Below are the major reasons why you must not delay your website creation:

  • First, all legal businesses have websites. Your business size or industry does not affect getting your business online. Moreover, customers can easily reach out to you and know more about your products and services through your website.
  • Using popular Social media platforms like LinkedIn profiles and Facebook pages shouldn’t replace a business website. Unlike having a website that you own and control, this may limit your potential customers to these platforms.
  • Website builder software like the GoDaddy website builder has made the development of a basic website incredibly simple. You don’t need the service of a website developer or designer to create an amazing website.

Establish your business structure

When you first start, your business structure will determine the taxes and laws that govern how your business runs. Each has its own set of pros and downsides.

The technicalities of business formations can be complicated, and consulting a legal/accounting professional before beginning your business will save you time and aggravation. That being stated, these are the three most typical business structures you should be familiar with:

Limited liability company (LLC)

LLCs shield you from personal liability; if your business fails or is sued, your personal assets (vehicle, house, savings account) are not in danger.

Sole proprietorship

As a sole proprietor, you have entire control over your business, which means your assets and liabilities are not distinct from your holdings. This is the best option if you’re launching a low-risk business and want to test the concept before developing anything more formal. Keep in mind that as a sole proprietor, it is often more difficult to obtain a bank loan.

Partnership

If you have a business partner(s), you should consider forming a Limited Partnership (LP) or a Limited Liability Partnership (LLP). Here’s a quick breakdown of the distinctions between these two types of business partnership structures:

Limited partnerships

  • One general partner should have unlimited liability, while all other partners should have restricted liability.
  • Profits are reported on personal tax returns.
  • Self-employment taxes must be paid by the general partner Limited liability partnerships
  • All owners are only liable to a certain extent
  • Safeguards each partner from debts owed to the partnership (you will not be held liable for the activities of your other partners)

File the appropriate taxes

To start a business in California, you must consider paying tax. Several agencies are accountable for issuing taxes on a federal & state level. Moreover, there are state programs and agencies that can help you check the small business taxes you need to pay. These include the California Tax Service Center, the Franchise Tax Board, and the California Department of Tax & Fee Administration.

There is a high possibility of most businesses paying a franchise tax for just having their operations in the state of California. Furthermore, corporate income tax also applies to many businesses in the state, while sole proprietors must pay income taxes on their personal income.

Members of an LLC need to pay income tax, and the LLC must also pay a state tax. In addition, corporation shareholders must pay taxes on their dividends, and the corporation is also liable for its California corporation taxes. This is one aspect where your EIN comes in handy. This way, you can file your business taxes differently from your personal taxes.

There are always federal taxes you must pay to the IRS plus the myriad of California state taxes you must pay as a business and individual.

Obtain all required business licenses/permits

Aside from the secretary of state not handling so many business-related forms & filings, permits and business licenses are also not part of the department’s services. However, the CalGold website provided by the California Governor’s Office of Business & Economic Development should be your go-to resource. While this website itself does not administer licenses or permits, it offers a list of the proper agencies to consult. First, you need to select your county or city and provide your business type.

You’ll get a list of licenses & permits related to your new business and the available resources to help you set up your business.

Hire Employees

Building a productive and strong team is an important step towards owning a successful business regardless of your business type. However, there is an exemption if you plan to be your business’s only employee.

Furthermore, creating an effective team isn’t just about gathering the right people. You have to make sure you remain compliant with the legal conditions for hiring employees. This includes registering with the IRS to report new hires to the state and record your business employee taxes.

Once you’ve created your team, we recommend using a payroll service to track time, issue paychecks, and manage tax seasons.

Conclusion

Remember to take your time when developing a strategy and completing the necessary paperwork for your business. It’s not a race, and rushing through it may later result in more road bumps. So instead, take your time, make sure you understand every aspect of starting a business in California and do well to prepare yourself the best way you can for the journey ahead. We wish you good luck!

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