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How to Start a Business in California: 8 Easy Steps

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This post is for information only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, tax or business advice. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, tax and business advisors, as needed. Businesses outside of California will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy and any other applicable policies. 


Starting a business in California can be a great way to be your own boss while bringing new products, services and ideas to your community. Thousands of businesses in California are using Shopify to power their online stores, and every day, more entrepreneurs begin their journey to starting their own company. We’ve put together some resources to help you get started.

1. Choose a business idea

Step 1 when starting a business in California? Coming up with a great idea. If you already have something unique and commercially-viable in mind, you’re ready to get started. If you don’t have a fully realized concept for your product or service, Shopify has business resources available to help you understand how to start a small business in California, and work through the process of understanding what products to sell and who to market them to.

2. Name your California business

Naming your business is important for branding your business, but it’s also an essential step in the process of registering your operation. Most regulatory agencies ask for your business name on forms, so you’ll need to come up with a good name first.

If you don’t have a name in mind, you can get some ideas using Shopify’s Business Name Generator. Once you’ve settled on a few options, search for them online to see if any other businesses are already using them. You can also check the United States Patent and Trademark Office to see if any businesses have already trademarked your preferred name.

It’s a good idea to check to see if a corresponding domain name for your website is available, since your website’s address is also very important to your brand.

When you’re ready to make your name official, you’ll need to perform at least two actions:

3. Create a business plan

Most successful businesses start with a business plan, whether it is required for registration or not. A great business plan can help you stay organized and goal-oriented throughout the startup process, and is often required as part of applying for a business loan.

Although writing a business plan may seem like a daunting step in the process of figuring out how to start a business in California, it’s a fairly straightforward document. Shopify can help, with resources like an adaptable business plan template as well as several examples to inspire you.

4. Choose a business structure and get started

When starting a small business in California, it’s important to choose the right structure for your operation. Three common types of business structures are sole proprietorships, limited liability companies (LLC), and corporations. Each one has advantages and disadvantages. Below is a summary of each, as well as the initial steps required to set up your business. Looking for more detail on the various business structures? You can find it on the Shopify Blog.

Sole Proprietorship in California

What is a sole proprietorship? 

A sole proprietorship is an unincorporated business owned by one person, and the simplest structure available in California. They are easy to set up, inexpensive to get started, and you get to keep all of your business profits. The downside is that you could potentially end up paying more tax than the other business structures, and be without the legal protection afforded by a Limited Liability Company (LLC) or corporation, which means you could be personally liable for debts, lawsuits, and more.

Is a sole proprietorship right for you?

Sole proprietorship is great for small businesses that intend to stay small, operating locally with few or no employees. These types of businesses are perfect for someone who produces unique products like handmade goods, or someone who provides an individual service, like a tax accountant. If you’re researching how to start a business in California with no money, this is a good option.

Fictitious business name statement

As part of the startup process, you may need to register a fictitious name, which is any business name that does not include your last name. This is also sometimes called a DBA (doing business as), assumed name, or trade name. Registering a fictitious business name is meant to connect the true identity of a business owner with the name of the business they own, so that stakeholders are able to pursue legal action or debt collection.

Get an Employer Identification Number (EIN)

If you’re planning on hiring employees, you’ll need an Employer Identification Number (EIN). This is your federal tax number and serves a similar purpose to your personal Social Security Number (SSN), except for your business. You may be able to skip this step if you are operating your business without employees. 

Limited Liability Company (LLC) in California

What is an LLC? 

An Limited Liability Company (LLC) is a hybrid business structure that delivers many of the advantages of sole proprietorships and corporations with a reduced administrative burden and some legal protection from debts and liabilities. They are relatively easy to manage, though they are not available to businesses in every industry. Plus, LLCs may be subject to both state and federal tax, which can require filling out additional forms.

Is an LLC right for you?

An LLC may be a good choice for you if you are planning on starting a small to medium business or if you want to launch your early-stage enterprise with some legal protections.

Get an EIN

LLCs are required to register for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). This number is similar to your personal Social Security number (SSN), except it is for your business. The IRS provides a simple, interview-style application process and you will need your SSN or Individual Taxpayer Identification Number (ITIN) in order to complete your application.

Register your LLC 

Once you have a business name and an EIN, you can register your LLC with the California Secretary of State by filing a Statement of Information online, using the California bizfile service. Filing tips are also available on the California Secretary of State website. You can also submit your documents in person at some offices of the California Secretary of State.

Choose a registered agent 

A registered agent, or an agent for service of process, is a person or corporation who you designate to receive court documents in the event that your LLC is subject to legal action. This is part of the LLC structure that can protect your personal assets from debts and liabilities. You cannot be your own registered agent in California. The California Secretary of State provides a valuable FAQ on registered agents and how to find one.

Pay state tax

LLCs in California are subject to an annual tax that is administered by the California Franchise Tax Board. It is also likely that your LLC will need to pay sales tax—you can find out what types of sales qualify and how much to charge from the California Department of Tax and Fee Administration.

Prepare an operating agreement

Though an operating agreement is not required to be submitted to the California Secretary of State in order to register your LLC, it is a step that can give you the ability to outline how your business will operate, how it is managed, and how profits are allocated. The State has default rules but your operating agreement may provide better protection of your assets in the event of liability issues. There are operating agreement templates available to help get started.

Corporation in California

What is a corporation?

A corporation is a structure that entirely separates the individual owners from the business, protecting personal assets from financial and legal liabilities. Corporations in California typically enjoy a lower tax rate than individuals and they are also easier to sell than LLCs or sole proprietorships because they are separate entities from the people who own them. Corporations can issue stock, allowing businesses to raise funds from investors for expansion, development, and more. However, corporations have the most stringent regulatory and administrative requirements, including during the startup phase.

Is a corporation right for you?

A California corporation could be right for you if:

  • You plan on raising funds from investors
  • You’re starting a very large operation
  • Your goal is to build up a company and then sell it
  • You’re especially interested in protection from liabilities

Get an EIN

The first step on your path to incorporation is to register for an Employer Identification Number (EIN) with the Internal Revenue Service (IRS), which makes it easy to apply using an interview-style application process. You’ll need your Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) in order to complete your application.

This federal tax number functions similarly to your personal SSN. You’ll need your EIN for subsequent steps.

File Articles of Incorporation

Your Articles of Incorporation is a document that outlines the details of your company, such as the business name, location, and for-profit status. You can find details on the submission process via the website of the Secretary of State.

Choose a registered agent

There is some overlap between corporation and LLC requirements, one of which is the requirement for a registered agent, or an agent for service of process. This person or corporation receives court documents on your behalf if your corporation is subject to legal proceedings. Find more information in the California Secretary of State FAQ.

Prepare corporate bylaws

Corporate bylaws define how your corporation is structured and governed. This can be quite a long and detailed document, so set aside plenty of time for this step. Corporate bylaws determine details such as:

  • Annual meetings
  • Quorum (minimum number of voting board members or stockholders) 
  • Document handling
  • Stock
  • Directors
  • Conflicts of interest

If you’re looking for inspiration, there are corporate bylaw templates available.

Elect directors and hold board meeting

Every corporation needs a board of directors. While this is yet another thing to do on your startup checklist, a board of directors is a great way to assemble a group of people with useful knowledge and experience that can help your business become a success. California has rules and requirements around the composition of your board of directors, including a diversity requirement enacted January 1, 2021, that states that corporations with head offices located in California must have at least one female board member as well as board members from underrepresented communities.

Issue stock

In California, stock differentiates a corporation from other business structures. By issuing stock, you are raising funds and committing to collective ownership of your business. Stock is normally issued at the first board meeting. Setting share prices can be complicated so it is worthwhile to read up and understand the process.

File a Statement of Information

Like an LLC, corporations need to file a Statement of Information with the California Secretary of State.

Pay state tax

Corporations in California are subject to an annual tax administered by the California Franchise Tax Board. Your corporation may also have to pay sales tax. Find out which sales qualify and how much to charge from the California Department of Tax and Fee Administration

5. Obtain a business license and permits

Next up on your starting a small business in California checklist: your business license and permits. Regardless of the structure of your business, you may need to obtain a business license, permits, or both in order to operate in the state of California. For example, if your business will sell alcohol, you’ll need a license. The California Governor’s Office of Business and Economic Development maintains a handy search tool that can help you find which licenses and permits may be required for your operation. The California Department of Tax and Fee Administration also provides license and permit information, as well as an easy registration portal.

6. Examine insurance options

These days it’s a good idea to have insurance for your business, even if you have the protections of an LLC or corporation. The California Department of Insurance offers plenty of guidance on what kind of insurance you might need for your operation, including general liability, professional liability, and worker’s compensation.

7. Understand financial considerations

You can prepare to start operating your business, especially if you have set up an LLC or corporation, by opening a business bank account, applying for a business credit card, and possibly even contracting a business accountant. An accountant in particular can do wonders for ensuring your books are balanced and your business is positioned to achieve fiscal solvency.

If you are in need of additional funding during startup or ongoing operations, you may want to consider Shopify Capital to fuel your business.

8. Market your business

Once your sole proprietorship, LLC, or corporation is registered, it’s time to prepare for launch by getting your business ready to show off to the public.

Brand your business

Branding is the public-facing identity that helps potential customers recognize the value and personality that your business brings to the marketplace. Branding includes visual elements like your logo, official colors and imagery; text elements like your slogan or tagline, tone, voice, and fonts; and intangibles like positioning and brand persona. Building a brand can be a lot of fun and really allow you to get creative for your business.

Build a business website

Today, a website for your business is an essential part of the way you communicate with customers. Fortunately, platforms like Shopify make building a website easier, and there is some guidance available to help you through the process. The branding that you will have already done will be instrumental in designing your website. In order to get started, you’ll need:

  • Digital logo files in different sizes that suit your front page, footer, and anywhere else you want to brand your new website
  • Brand colors, so you can personalize your website theme and match it to your products, services, print materials, and more
  • Attractive product photos and images that engage users visually
  • Coordinated fonts to create a consistent look and feel across all of your promotional materials
  • A site map that outlines the page structure and makes it easier for you to organize all of the information you want to communicate to your customers
  • Your public contact information

Promote your business

Promotion is the last step in the startup process. You can focus your promotional efforts by creating a marketing plan that gets your product or service in front of your ideal potential customers, keeps your strategy on track, and ensures your brand is being used to the fullest. Marketing plans often include:

  • An executive summary that summarizes your overall plan
  • A mission statement that outlines your overarching goals and business philosophy
  • Objectives that detail the specific things you want to achieve through your LLC
  • A Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis that can help you identify what you’re doing right and what needs to be refined
  • Market research that helps you understand your industry, potential customers, and competitors
  • A market strategy that details your plan of attack
  • A budget that keeps your finances under control

For a little extra inspiration, have a look at these marketing plan examples. Once your marketing plan is ready to go, there’s only one thing left to do—launch your business!

FAQs

How long does it take to start a business in California?

Starting a business can take anywhere from just a few days for a sole proprietorship, to two months or longer for a corporation. It depends on the structure of your business, the complexity of operational requirements such as permits and licenses, and the speed at which you are able to assemble the required documents and fees,

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

You may be able to start a business in California for less than $100 USD in the case of a sole proprietorship. However, depending on your business structure and the number of permits and licenses your business requires, it could cost several hundred dollars or more to get started.

Do businesses pay taxes in California?

Businesses that are structured as LLCs or corporations in California may pay taxes at both the state and federal levels. Sole proprietors in California pay state and federal tax as part of their individual annual personal income tax.

This post is for information only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, tax or business advice. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, and tax and business advisors, asif needed. Businesses outside of California will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy and any other applicable policies. 

See our other state guides on How to start a business in Texas, How to start a business in Florida.

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