Starting a business in California can seem overwhelming, but with the right guidance, it’s entirely manageable. While the paperwork and legal requirements may feel intimidating at first, they’re essential steps that lay a strong foundation for your company’s future success.
This guide will walk you through the process of registering your business in California in 9 straightforward steps. Remember that specific rules, forms, and fees may vary depending on your business type and even by city or county.
Always confirm requirements with the California Secretary of State, the California Department of Tax and Fee Administration (CDTFA), and your local county or city clerk’s office to ensure you meet all legal obligations.
Step 1: Choose Your Business Structure
Your choice of business structure in California will affect everything from your personal liability to your taxes, management flexibility, and ongoing compliance requirements. Here’s a breakdown of the most common options in California:
Sole Proprietorship
The simplest and most common way to start a business, there’s no legal separation between you and your company.
- Liability: You have unlimited personal liability. If your business is sued or owes debts, your personal assets (like your home, car, or savings) could be at risk.
- Taxes: All business income and expenses are reported on your personal California and federal tax returns (Form 1040, Schedule C). No separate business tax filing is required.
California Note: You’ll still need to obtain the required local business licenses and permits.
Partnership
A business owned by two or more people.
- Liability: In a General Partnership (GP), all partners share unlimited personal liability, including responsibility for the other partners’ actions. In Limited Partnerships (LP) or Limited Liability Partnerships (LLP), certain partners have limited liability protection.
- Taxes: California partnerships generally don’t pay income tax at the entity level (except for an $800 annual minimum tax in some cases). Profits and losses pass through to the partners’ personal tax returns.
California Note: LLPs are common for licensed professionals such as lawyers, architects, and accountants.
Limited Liability Company (LLC)
A flexible structure that separates personal and business liabilities.
- Liability: Members’ personal assets are protected from most business debts and legal claims.
- Taxes: By default, LLCs enjoy pass-through taxation, avoiding corporate double taxation. They can also elect corporate taxation if beneficial.
California Note: All LLCs must pay the state’s $800 annual franchise tax (plus an additional fee if income exceeds $250,000). Note that the previous first-year exemption for this tax expired at the end of 2023, meaning all new LLCs formed from 2024 onward are required to pay the $800 tax in their first year.
Corporation
A more formal and complex legal entity, separate from its owners.
- Liability: Strongest protection for personal assets. Shareholders are generally not personally liable for business debts.
- Taxes: A C Corporation is subject to double taxation, meaning the business pays taxes on its profits at the corporate level, and shareholders are taxed again when those profits are distributed as dividends. In contrast, an S Corporation avoids this issue by passing profits and losses directly to shareholders, who report them on their personal tax returns.
California Note: Corporations must file Articles of Incorporation with the Secretary of State and pay the annual $800 franchise tax.
Quick Tip: In California, many small business owners opt for an LLC because it provides strong liability protection, tax flexibility, and less paperwork compared to corporations. However, don’t skip the math.
California’s $800 annual tax applies to both LLCs and corporations, and it’s now due in the first year of operation for new businesses. This is an important factor to weigh into your decision, as it adds to your initial startup costs.
Step 2: Choose and Secure a Business Name
In California, your business will have a legal name, the official name listed on your formation documents (e.g., Pacific Solutions LLC), and you can also choose a “Doing Business As” (DBA) name for branding purposes (e.g., Pacific Consulting).
The legal name is used on all official paperwork and tax filings, while a DBA lets you operate under a different public-facing name without creating a new legal entity. Before finalizing your name, search the California Secretary of State’s Business Search database to ensure it’s available and not already in use.
If you want to secure it before filing, you can reserve the name for 60 days by submitting a Name Reservation Request and paying a $10 fee.
For broader protection, check for existing trademarks through the U.S. Patent and Trademark Office (USPTO). Registering your trademark can safeguard your brand from being used by other businesses nationwide.
Step 3: Draft Your Business Formation Documents
In California, the paperwork you need depends on your chosen business structure:
- LLC – Articles of Organization (Form LLC-1): File this with the California Secretary of State to officially form your LLC. It includes your LLC’s name, address, registered agent information, and management structure.
- Corporation – Articles of Incorporation: File this with the Secretary of State to establish your corporation’s legal existence. You’ll include the business name, purpose, number of authorized shares, and registered agent details. Corporations should also draft corporate bylaws, which outline how the company will operate internally.
- Partnership – Partnership Agreement: While not filed with the state, this document is crucial for defining the rights, responsibilities, and profit-sharing arrangements between partners, helping prevent disputes later.
Step 4: Register With the State
Once your documents are ready, file them with the California Secretary of State to officially register your business.
- LLCs: File Articles of Organization (Form LLC-1) online, by mail, or in person.
- Corporations: File Articles of Incorporation using the state’s designated forms.
California typically processes online filings fastest, often within a few business days.
Important: Unlike New York, California doesn’t have a newspaper publication requirement for LLCs. However, within 90 days of formation, LLCs and corporations must file an Initial Statement of Information (Form LLC-12 or SI-550) with the Secretary of State, including basic details about the business, its address, and management.
Step 5: Obtain an Employer Identification Number (EIN)
An Employer Identification Number (EIN), also called a Federal Tax Identification Number, is a unique nine-digit number issued by the IRS to identify your business. Think of it as your business’s Social Security number.
Most California businesses need an EIN for key tasks such as:
- Hiring employees
- Opening a business bank account
- Filing federal and state tax returns
- Applying for business licenses and permits
If you’re a sole proprietor with no employees, you can technically use your Social Security number instead. However, many still opt for an EIN to protect personal information, keep finances separate, and appear more professional to clients and banks.
Applying is free and easy through the IRS website. The online form usually takes just a few minutes, and you’ll receive your EIN immediately after completing it.
Step 6: Apply for Licenses and Permits
In California, obtaining the right licenses and permits is a legal must. These requirements come from three different levels of government: federal, state, and local, each with its own jurisdiction and purpose. Federal agencies handle licenses for industries regulated at the national level.
This means if your California business deals with activities like producing alcohol, selling firearms, or running certain types of transportation services, you’ll need to apply directly with the relevant federal body, such as the Alcohol and Tobacco Tax and Trade Bureau, the Bureau of Alcohol, Tobacco, Firearms, and Explosives, or the Department of Transportation.
Most small businesses in California won’t need a federal license, but it’s important to verify before launching.
State agencies regulate a much wider range of business activities. In California, this can include getting a Seller’s Permit from the California Department of Tax and Fee Administration if you sell goods or taxable services, securing professional licenses through the California Department of Consumer Affairs or industry-specific boards, or applying for environmental permits if your operations have an impact on the environment.
The state level is often where most licensing obligations arise. Local agencies, such as your city or county government, focus on rules that apply to your immediate area.
This might involve obtaining a general business license to operate legally within your jurisdiction, confirming your business location complies with local zoning laws, or securing a health permit from your county’s health department if you serve food or beverages.
Local requirements can vary dramatically from one California city to another, so you should always check with your municipal and county offices before opening your doors.
A helpful tool for California entrepreneurs is CalGold, offered by the Governor’s Office of Business and Economic Development. By entering your business type and location, you can see a customized list of licenses, permits, and contact information for the agencies you need to work with.
Step 7: Open a Business Bank Account
In California, opening a separate business bank account is more than just smart money management. It’s an essential step for protecting your personal assets and keeping your books clean.
When your personal and business finances are mixed, it can weaken the legal separation between you and your company, potentially exposing your home, savings, or other personal property if your business faces a lawsuit or tax audit.
Most California banks and credit unions will require a few key documents before you can open a business account.
You’ll need your Employer Identification Number (EIN) from the IRS, which serves as your business’s federal tax ID; your official formation documents, such as Articles of Organization for an LLC or Articles of Incorporation for a corporation; and valid government-issued identification for the person opening the account.
For LLCs and corporations, maintaining a separate bank account isn’t just best practice. It’s often necessary to uphold the liability protections these entities provide.
If you don’t, a court could determine that your business isn’t truly separate from you, a legal situation known as “piercing the corporate veil.” This can completely remove the shield that normally protects your personal assets.
Step 8: Register for State and Federal Taxes
In California, understanding and setting up your tax obligations early can save you a lot of headaches and possibly money down the road. Your business structure will determine how you’re taxed at both the federal and state levels, so it’s worth getting this right from the start.
At the federal level, the IRS requires all businesses to file taxes, but the process varies. Sole proprietorships and partnerships are “pass-through” entities, meaning the business itself doesn’t pay income tax. Profits and losses flow directly to the owners, who report them on their personal returns.
LLCs in California follow the same general rules by default, but have the flexibility to elect taxation as an S corporation or C corporation if that structure better suits their goals.
Corporations, meanwhile, are taxed differently: a C corporation pays taxes on its profits and then shareholders pay taxes again on dividends, while an S corporation avoids this double taxation by passing income through to owners.
On the state side, California has its own tax obligations. Most businesses need a California State Tax ID from the Franchise Tax Board or California Department of Tax and Fee Administration (CDTFA).
If you sell goods or certain taxable services, you’ll need to register for a seller’s permit to collect and remit sales tax. California also imposes an annual LLC tax and, in some cases, a franchise tax, flat fees, or revenue-based charges simply for the privilege of doing business in the state.
Local taxes may also apply, depending on where your business operates. Some cities and counties in California require additional tax registrations or business license fees.
Because these obligations can vary, it’s smart to review the requirements on the IRS website, the California Franchise Tax Board, and your city or county’s business office. Partnering with a CPA or tax professional familiar with California law can help you choose the best tax setup and stay in compliance year-round.
Step 9: Maintain Ongoing Compliance
Registering your business in California isn’t a one-and-done process. You’ll need to stay compliant to protect your legal status and avoid penalties. This includes filing required reports, renewing licenses, and keeping your registered agent information up to date.
Key Compliance Tasks in California:
- File Statements of Information: LLCs and corporations must file a Statement of Information with the California Secretary of State. After the initial filing, which is due within 90 days of formation, LLCs must file a Statement of Information every two years, while corporations must file annually. This updates the state with details like your business address, owners, and registered agent.
- Renew Business Licenses and Permits: City or county-issued licenses often expire annually. It’s your responsibility to track renewal dates and submit fees on time to avoid fines or operational suspensions.
- Update Registered Agent Details: If your registered agent’s name or address changes, you must update this with the Secretary of State immediately to keep your business in good standing.
Frequently Asked Questions
How Much Does It Cost to Register a Business in California?
The cost depends on your business structure. For example, forming an LLC in California requires a $70 Articles of Organization filing fee with the Secretary of State, plus a $20 Statement of Information fee (due within 90 days of formation).
Corporations have similar filing fees. You’ll also need to pay the state’s $800 annual franchise tax for most LLCs and corporations, which is due in the first year of operation for new businesses.
This, along with costs for a registered agent, licenses, and permits, means you should budget anywhere from $1,000 to $2,000 for your initial setup, depending on complexity. It’s important to account for the $800 franchise tax as an immediate expense.
How Long Does It Take?
If you file online, processing can be as quick as a few business days. Mail-in filings may take several weeks. The total time, from choosing your business name to receiving your final documents, usually ranges from one week to a month. California also offers expedited filing services for an additional fee.
What Is the Official Website to Register a Business Entity in California?
The official website for registering a business entity in California is the California Secretary of State. This is where you can find information on different business structures and file the necessary documents.
Do I Need a Lawyer?
You’re not required to hire a lawyer to register a business in California, but professional guidance can be valuable.
An attorney can help you pick the right structure, draft customized operating agreements or bylaws, and ensure compliance with state and local regulations. If you’re forming a simple sole proprietorship or single-member LLC, you can likely handle the process yourself.
Conclusion – How to Register a Business in California
Starting a business in California is an exciting step, but it comes with legal responsibilities. By following the proper registration steps, you’ll protect your personal assets, establish credibility, and set the stage for growth.
Think of it as building a strong foundation. Once it’s in place, your business will be better prepared to weather challenges and seize opportunities. Taking the time to get it right from the start will save you from costly headaches later.
