Starting a business in California involves several key steps, from planning and registration to complying with legal requirements. Here’s a detailed guide:
1. Choose a Business Idea
- Identify Your Niche: Decide on the type of business you want to start, research market demand, competition, and target customers.
2. Write a Business Plan
- Outline Your Strategy: Create a detailed business plan that includes your business goals, target audience, marketing strategy, operational plan, and financial projections. This helps you stay organized and may be required for securing loans or investors.
3. Choose a Business Structure
- Legal Entities: Select the appropriate legal structure for your business, such as:
- Sole Proprietorship
- Partnership
- Limited Liability Company (LLC)
- Corporation (C-Corp or S-Corp) Each structure has different legal, tax, and operational implications.
4. Register Your Business Name
- Choose a Name: Ensure the name is unique and not already in use. You can check for name availability on the California Secretary of State website.
- File a Fictitious Business Name (DBA): If you’re operating under a name different from your own or the legal entity’s name, you must file a Doing Business As (DBA) name with your county.
5. Register Your Business with the State
- File Formation Documents:
- For an LLC, file Articles of Organization.
- For a corporation, file Articles of Incorporation with the California Secretary of State.
- Pay the Filing Fee: California requires a filing fee depending on the business structure.
6. Obtain an Employer Identification Number (EIN)
- IRS EIN: Apply for an EIN from the Internal Revenue Service (IRS) if you plan to hire employees or need to open a business bank account. Sole proprietors without employees can use their Social Security number.
7. Apply for Licenses and Permits
- Local and State Licenses: Depending on your industry and location, you may need specific licenses and permits. Check with the California Department of Consumer Affairs or your local city/county government.
- Seller’s Permit: If you sell taxable goods, you’ll need a Seller’s Permit from the California Department of Tax and Fee Administration (CDTFA).
8. Register for California State Taxes
- California Franchise Tax: All LLCs and corporations must pay an annual minimum franchise tax of $800, regardless of profit.
- Payroll Taxes: If you have employees, you’ll need to register with the California Employment Development Department (EDD) to handle payroll taxes.
9. Open a Business Bank Account
- Separate Finances: Open a business bank account to keep your personal and business finances separate. This helps with accounting and taxes.
10. Comply with Employment Laws
- Hiring Employees: If you’re hiring employees, ensure compliance with state and federal labor laws, including workers’ compensation insurance, and reporting new hires to the EDD.
- Workers’ Compensation: You are required to have workers’ compensation insurance if you have employees.
11. File a Statement of Information
- Annual or Biennial Filing: LLCs and corporations must file a Statement of Information with the Secretary of State every year or every two years, depending on the entity type.
12. Maintain Ongoing Compliance
- Tax Filing: File state and federal taxes annually. Corporations also have additional filings, like annual reports.
- Renew Permits and Licenses: Ensure that all required business licenses, permits, and certifications are kept up to date.
Following these steps will ensure that your business is legally established and compliant with California laws.
For a checklist, log onto California’s Secretary of State’s website.
https://www.sos.ca.gov/business-programs/business-entities/starting-business-checklist
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