From licenses and permits to taxes and insurance, learn what you need to do to start a business in California.
here ‘s an overview of the winder steps you ‘ll need to take to start your own clientele in California .
1. Choose a Business Idea
Take time to explore and research ideas for your business. At this stage, take into retainer your own interests, skills, resources, handiness, and the reasons why you want to form a business. You should besides evaluate the likelihood of achiever based on the interests of your community, and whether your occupation idea will meet an unmet want. Read our article for more tips on how to evaluate business ideas .
After you select an idea, consider drafting a occupation plan to determine your chances of making a profit. When you create a plan, you will have a better theme of the startup costs, your contest, and strategies for making money. Investors and lenders will want to review your business plan before providing fiscal aid, and you can be prepared by drafting a plan before you start soliciting fund.
2. Decide on a Legal Structure
The most common legal structures for a little business are :
- sole proprietorship
- limited liability company (LLC), and
There besides are special versions of some of these structures, such as limit partnerships and S corporations. You ‘ll want to consider which clientele entity structure offers the type of liability protection you want and the best tax, finance, and fiscal benefits for you and your business. Read our article for information on how to choose the best ownership social organization for your commercial enterprise .
3. Choose a Business Name
For LLCs and corporations, you will need to check that your name is distinguishable from the names of other business entities already on file with the California Secretary of State ( SOS ). You can check for available names by doing a commercial enterprise entity name search on the SOS web site. You can reserve an available list for 60 days by filing a name Reservation Request Form. There are certain name requirements for LLCs and corporations ( like including a password such as “ LLC ” for LLCs or “ pot ” for closely-held corporations ). See How to Form an LLC in California and How to Form a corporation in California for more information .
Is your commercial enterprise a sole proprietorship or partnership that uses a business mention that is different from the legal list of the business owner ( for a exclusive proprietorship ) or surnames of the individual partners ( for a partnership ) ? If so, you must file a fabricated Business Name Statement in the county clerk ‘s office for the county where your business is located. Check county websites for more information .
If you plan on doing business on-line, you may want to register your business name as a domain name. See Choose and Register a Domain name for more information. In addition, to avoid trademark violation issues, you should do a union and state trademark check to make sure the diagnose you want to use is not the same as or excessively alike to a name already in use. See How to Do a Trademark Search for more information .
4. Register Your Business Entity
5. Apply for California Licenses and Permits
Tax Registration. If you will be selling goods in California, you must register with the Board of Equalization ( BOE ) to obtain a seller ‘s permit. You can register on-line at the BOE web site. If your business will have employees, you must register with the California Employment Development Department ( EDD ) for employer withhold taxes. You can register on-line using the EDD ‘s Employer Services Online .
EIN. If your business has employees or is taxed individually from you, you must obtain a union Employer Identification Number ( EIN ) from the IRS. even if you are not required to obtain an EIN, there are frequently business reasons for doing so. Banks frequently require an EIN to open an account in the business ‘s name and other companies you do business with may require an EIN to process payments. You can get an EIN by completing an on-line application on the IRS web site. There is no file fee .
General Business License. Every California occupation must obtain a general occupation license from the city where the business is located. In the font of unincorporated sections of the state, the license is issued by the county where the business is located .
Regulatory licenses and permits. These cover areas such as health and safety, the environment, build and construction ; and specific industries or services. regulative licenses and permits frequently are issued by department of state agencies. For bit-by-bit guidance about country licenses or permits you may need, check the state of matter ‘s CalGold web site. For information about local regulative licenses and permits, check the websites for any cities or counties where you will do business .
Professional and occupational licenses. These screen people who work in respective fields. The state ‘s CalGold web site provides data on professional and occupational license.
6. Pick a Business Location and Check Zoning Regulations
You ‘ll need to pick a placement for your commercial enterprise and check local zoning regulations. Consider the needs of your customers, and if you have the kind of business that could benefit from foot or highway traffic. Before you commit to a location, take clock to calculate the costs of running your clientele in the coveted point, including lease and utilities. Refer back to your business plan to evaluate whether you can afford your hope placement during your company ‘s early months .
It is significant to verify that the blemish is zoned for your type of business. You might find partition regulations for your town or city by reviewing your local ordinances and contacting your town ‘s partition or planning department. Read our article for more tips on picking a location .
One alternative to opening your business at a newly location is running your company out of your home. If you decide to run a home-based business, again check your local zoning laws. You should besides review your lease ( if you rent your home ) and homeowners association rules ( if applicable ), either of which might ban some or all base businesses .
7. Register and Report Taxes
California taxes every kind of business. This includes imposing a corporate income tax that applies to corporations and early entities that are taxed as corporations, and a franchise tax that applies to corporations, LLCs, and many partnerships. See California State Business Income Tax for more information on state of matter business taxes in California .
Sole proprietorships. Pay submit taxes on business income as part of their personal state income tax returns ( Form 540 ) .
Partnerships. Partners pay state taxes on partnership income on personal tax returns. In addition, California partnerships besides must file Form 565, Partnership Return of Income .
LLCs. Members pay state taxes on their contribution of LLC income on personal tax returns. In addition, LLCs themselves have to file an extra state tax form. The specific form used will depend on how the LLC is classified for federal tax purposes. California LLCs besides are required to file a biennial statement of information. See California LLC Annual Filing Requirements for more information .
Corporations. Shareholders must pay submit taxes on their dividends from the corporation. A shareholder-employee with a wage besides must pay state income tax on his or her personal state tax return. furthermore, the pot itself is subject to California pot taxes. And, finally, corporations must file an annual statement of information with the California SOS .
If you have employees, you must besides deal with state employer taxes.
Read more: When Can You File Taxes? | H&R Block
And, apart from California taxes, there are constantly union income and employer taxes. Check IRS Publications 334, Tax Guide for Small Business, and 583, Taxpayers Starting a commercial enterprise .
8. Obtain Insurance
occupation policy can protect your business and your personal assets from the fallout of unexpected disasters, such as personal injury lawsuits and natural catastrophes. An indemnity agent can help you explore the different coverage options for your business, which might include general indebtedness policy to protect you against claims relating to bodily injury or property damage, or cyber liability indemnity to cover litigation and settlement fees following a datum security breach. To learn more, see Nolo ‘s article, What Types of Insurances Does Your Small Business Need ?
9. Open a Business Bank Account
No topic the character of occupation you form, you should consider opening a separate business account to make it easier to track your income and expenses. For some commercial enterprise types, including LLCs and corporations, a separate bank bill is necessary to maintain your liability security. To learn more, see Opening a Business Bank Account .