How to Start a Business in California In 2024 (5 Practical Steps)

How to Start A Business in California

Starting a business in CA is an exciting and rewarding experience. You can be your own boss, set your own schedule, and make a living doing what you love. However, entrepreneurship also comes with many challenges if you don’t know how to file a California business.

You may be wondering, “How do I file my California LLC?” or “What is the cost to start a California LLC?” While starting a California business, many entrepreneurs fail before launching their business by not knowing how to file their business correctly.

Combining the most common challenges faced by entrepreneurs with the best practical advice from a business lawyer’s perspective, here are five easy, helpful checklists or steps to start a California business:

  1. Choose the Correct Business Type
  2. Have a Business Lawyer Register Your Business with the Secretary of State
  3. Have a Business Lawyer Draft Your Operating Agreement or Bylaw
  4. Apply for an EIN from the IRS
  5. Apply for Business Licenses & Permits

Let’s get started…


1. The First Step in Knowing How to Start a Business in California: Choose the Correct Business Type

Choose the Correct Business Type
How to Choose the Correct Business Type?

The most important step required in starting a business in CA off the ground is choosing the right business type. By carefully selecting the right business type, you can reduce your liability, minimize taxes, and ensure that your business is financed and conducted efficiently.

So it’s essential to determine which business structure is best suited for your specific situation before starting a California business.

A business lawyer can help you choose the proper business structure by raising all the necessary considerations and relieving the burden of organizing, drafting, and filing the appropriate documents with the state. He will also give you legal guidelines on starting a California business.
There are generally five main business types to choose from:


Sole Proprietorship

A sole proprietorship is the simplest business structure and not a legal entity.
It’s the most accessible type of business to form – no state filing is required to develop a sole proprietorship. So, if you are starting a small California business, you may choose this business structure. However, this structure does not offer any personal liability protection.

In California, the first thing you’ll need to do (after coming up with your business idea) is choose a name for your business and decide on a business structure. A business can fall into one of several business entity structures. Some standard options are forming an LLC in California, and starting a sole proprietorship, or a C corporation.
A California Partnership is the same as a Sole Proprietorship, but just with one or more employees. There’s no “best” type of business entity; this will depend on what kind of company you’re starting, how you want your company taxed, and how much risk you want to be exposed to if someone sues your company.
Read this: Disadvantages of Sole Proprietorships



A partnership is when two or more persons engage in business. A formal, written Partnership Agreement that lays out all the partners’ rights and responsibilities are essential for partnerships. In addition, comprise the partners’ responsibilities and how the profits and losses are allocated, along with many other crucial clauses while starting a California business.

Check this: Advantages of Partnerships


LLC (Most Recommended – Most Ideal for Non-U.S. Citizens)

Limited Liability Company (LLC) is the most common and best business structure for most small businesses because LLCs offers personal liability security. So, if you are confused about how to start a small business in CA, you may start with this business structure.

Having an LLC establishes your small business as a separate legal entity — meaning members are not personally responsible for business debts and liabilities. In other words, if someone sues your business or if your company is liable to debtors, then your possessions, such as your car or home, can’t be touched by creditors.

Also, unlike Corporations, LLCs enjoy pass-through taxation — meaning all the profits and losses are “passed through” the business to each member of the LLC. Once they know the process to start a California business, members report their share of the LLC’s profits and losses on their tax returns, and any tax due is paid at the individual level.

Take note: Members of an LLC have to pay income tax on that money, and the LLC has to pay a state tax as well. Shareholders in corporations have to pay taxes on the dividends they get, and the corporation is also responsible for its own California corporation business taxes.

Moreover, the corporation itself is subject to California corporation taxes. And finally, corporations must file an annual statement of information in the California department with the California SOS. If you have employees, you must also deal with state employer taxes. And, apart from California taxes, there are always federal income and employer taxes.

When it’s time to start a business in CA, most companies first form an LLC. As a business lawyer, I highly recommend having a registered LLC before starting your small business.



The corporation is also an independent legal entity, separate from the people who own, control, and manage it. Corporations can enter into contracts, incur debts, and pay taxes apart from their owners. In other words, the Corporation itself, not the shareholders who own it, is held legally liable for the actions and debts the business incurs.

However, Corporations are more complex than other small business structures because they tend to have costly administrative fees and complex tax and legal requirements. Because of these issues, Corporations are generally suggested for more severe company owners who are aware of the challenges related to starting a California business.

C-Corporation is typically not suggested for most businesses to avoid double taxation. Ask me if you want to start a business in California but have any questions about this.


 S-Corporation (Recommended for U.S. Citizens, Most Tax-Friendly)

S-Corporation is a particular type of corporation created through an IRS tax election. An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by being treated as an S-Corporation. What makes the S-Corporation different from a traditional corporation (C-Corporation) is that profits and losses can pass through to your tax return.

Consequently, the business is not taxed itself. Only the shareholders are taxed after you start a California business. S-Corporation offers the best of both worlds: personal, limited liability protection along with the tax benefits of an LLC.

S-Corporation is recommended for most businesses as well. Can’t decide which business structure is proper for you before starting a California business?

A business lawyer can help you choose the proper business structure and relieve the administrative burden of registering, organizing, and forming your formal business structure with state and federal authorities, even if you want to know how to start a small California business.

For more details on deciding which business structure is right for your business and how to start a California business, please scroll down and review the bottom half of this page…


2. Register Your Business with the Secretary of State

Steps to follow for Start a Business in California
Steps to follow for Start a Business in California

Once you decide which business type is right for you, you must register your LLC or S-Corporation with the California secretary while starting your business in CA.

But first, you need to determine which state you should form your business in. Unless you have a compelling reason otherwise, it’s generally best for companies to incorporate in the state where they will principally be doing business.

However, there are some tax and organizational advantages to registering in certain states. Delaware, Nevada, and Wyoming are the most popular for out-of-state corporate registration. In most cases, I suggest forming your business in your home state. For example, if you start a business, you should create your own business in CA. However, if you are a non-U.S. resident, I suggest forming your business in Delaware.

If you need a California Registered Agent before starting a California business, click HERE. If you need a Delaware Registered Agent, click HERE. Once you have a Registered Agent in your desired state, you will need a business lawyer to form your LLC or Corporation.

A business lawyer can help you choose the proper business structure and relieve the stress of correctly forming your LLC or S-Corporation by drafting, organizing, and creating your formal business structure with the California secretary of state.


3. Have a Business Lawyer Draft Your Operating Agreement or Bylaw

An operating agreement is necessary for LLCs, which is an agreement between the members who establish the management and operations of the LLC. This is an essential legal document for your LLC to protect personal liability.

Bylaws are necessary for Corporations. This corporate document sets out the basic rules for operating your corporation. Bylaws are not filed with the state, and your corporation is not legally required to have corporate bylaws. Still, you should have Bylaws because it establishes your corporation’s operating rules and helps show banks, creditors, IRS, and others that your corporation is legitimate while starting a California business.

LLCs are very flexible, and the Operating Agreement defines each member’s rights, powers, and entitlements. The operating agreement includes capital accounts, membership interest, distributions of profit, allocated tax responsibility, etc. This internal document is an agreement set by the members that contain provisions for essential items and rules that run the company. This may also help in knowing how to start a business in CA.

Suppose you’re starting a business in California. In that case, I’ll draft Operating Agreements and make sure that they are customized to precisely what you need, and I’ll also ensure that you understand this agreement. Contact me.


4. Get an EIN

Employer Identification Number (EIN), also known as a Tax ID, is a number assigned by the IRS to identify a business. Not sure what an EIN is and why this extra information is needed while knowing how to start a business in California?

The EIN is used for several business needs, including starting a business, opening a bank account, complying with the IRS, applying for business permits, and filing taxes.

The first step on your path to incorporation is registering for an EIN with the Internal Revenue Service (IRS), making it easy to apply using an interview-style application process.

If you have a U.S. Social Security Number (SSN), you can apply online for your EIN online here. However, if you do not have a U.S. Social Security Number (SSN), you can have a business lawyer act as a third-party designee to apply for your EIN on your behalf.

The business lawyer will complete the Application for EIN and receive your EIN on your behalf. This will help you in starting a small business in California.

See here for more information about how to apply for EIN without SSN.


5. Apply for Business Licenses & Permits

Apply for Business Licenses & Permits
How to Get Business Licenses & Permits

As you learn how to start a business in California and begin to take the first step of launching your business, you also need to apply and get the necessary licenses and permits for operating your business. Virtually every business requires some form of support or license to function legally.

These may include business licenses, a seller’s permit, or a zoning permit, among many others. Licenses and permits vary by the type of business you operate and where your business is located. Every business needs a basic operating license or permit – even if you’re home-based.

The best source for finding what licenses and permits you need for your business is SBA’s Business Licenses & Permits. On this website, you will be asked for two pieces of information:

1. Your city or county, and

2. Your business type (i.e., restaurant, lawyer, doctor, marketing agency, etc.)

The keys and licenses section may include the following business permits and licenses:

  • A business Tax Certificate is required for all entities doing business within the jurisdiction. Contact Office of Business Licensing for more information.
  • Land Use Permit / Zoning Clearance – Permits are required for zone changes, variance, and conditional use permits. San Fernando Planning & Zoning Department may be contacted for such a permit.
  • Fictitious Business Name – Making Business As (DBA) statement is required when the business name does not include the name of the individual owners. City of Los Angeles Business Name Filing and Registration handles DBAs.
  • Corporation, Company, or Partnership Filings – If your business is considering to become a corporation or an LLC or a Partnership, you must file with the California Secretary of State’s Office.
  • Professional License – Certain professions require professional licenses, including attorneys, physicians, osteopathic physicians, dentists, pharmacists, veterinarians, architects, court reports, speech-language pathologists, audiologists, registered nurses, and optometrists.
  • Occupational Safety and Health Information – Businesses with employees may need to prepare an injury and illness prevention plan. Cal/OSHA Consultation Services handles such affairs.
  • Registration Form for Employers – If you want to start a business in California and pay wages to employees, you may be required to file a registration form with the Employment Development Department.
  • Sales & Use Permit – Also known as Seller’s Permit, all businesses selling or leasing tangible property must get a seller’s permit from the State Board of Equalization.
  • State Income Tax Information – Businesses should get the proper state income tax forms from the Franchise Tax Board.
  • Federal Employer Identification Number – Businesses with employees must get an EIN from the IRS. U.S. Department of Treasury Internal Revenue Service handles such services.

Before starting a business in California, you need to search and apply for federal, state, and local licenses and permits to make sure you’re operating legally.

You also need to register for state and local tax purposes if you decide to pursue a California business. State taxes include income tax, sales tax, and unemployment insurance tax (for employers only), while local authorities such as your city or county government oversee business property tax, permits, and licenses.

For full details, please contact us at


6. File a DBA (if necessary)

You need to file a “Doing Business As” (DBA), also known as a Fictitious Business Name, if you’re starting a business in California that is different from the officially registered name of your LLC or Corporation or your name.

When you form a business, the legal business name defaults to the name of the LLC or Corporation or person or entity that owns the company unless you choose to rename it and register it as a DBA name.

For example, Bob Smith sets up a dry cleaning business. Rather than operating under his name, Bob chooses to name his company: “Bob Smith Dry Cleaning.” This name is considered an assumed name, and Bob will need to register a DBA.

Suppose you want to know how to open a business in California. In that case, you should also know that the legal business name is required on all government forms and applications, including your application for employer tax IDs, licenses, and permits. If you’re operating under your name or the legal name of your LLC or corporation, you can skip this step.


Business Bank Account

A business bank account separates your personal assets from your company’s assets, necessary for personal assets protection. A designated business bank account also makes accounting and tax filing easier. To open up a bank account for your business in California, you’ll need to obtain an EIN.

You’ll use your EIN in place of your social security number so that this account is entirely separate from your finances. Keeping the assets of your California company different from your personal assets also helps keep your records and paperwork more organized.

Every startup can benefit from hiring a business accounting service, from preparing and filing taxes to issuing payroll and even managing business expenses.

Having a business bank account and credit card — and managing them responsibly — can help boost or establish your business credit score and help you separate personal and business expenses. Building your business credit score can also help eligibility for certain small business credits without affecting your personal assets.


Business Website

Today, a business website is an essential part of communicating with customers. Fortunately, platforms like Shopify make building a website more accessible, and there is some guidance available to help you through the process.

Your startup’s website serves not only as a resource for customers to learn important information about your business in California — it is a visual representation of your brand. Depending on your experience level, you can build your business website yourself or use a website builder such as GoDaddy.


Hiring Employees

You’ll also want to look into getting small business insurance, hiring employees, creating a marketing plan to get the word out about your new business, finding a location if you’re going to need a physical store or office, and more.

For any business (unless you plan to be your business’s sole employee), building a solid team is a crucial next step in starting a successful business. But it isn’t just about finding the right people; you need to ensure you stay compliant with requirements for hiring employees legally. This includes ensuring that you are registered with the IRS for employee taxes and reporting new hires to the State of California.

Do you know where your business will be located? Whether you’re opening a brick-and-mortar establishment or starting a business from home — your business location informs the type of licensing and permits you’ll need as well as your business’s growth potential.

Whether you’re opening a brick-and-mortar establishment or starting a business from home — your business location informs the type of licensing and permits you’ll need as well as your business’s growth potential.


Business Structure

At this stage, consider your interests, skills, resources, availability, and the reasons you want to form a business. You should also evaluate the likelihood of success based on the interests of your community and whether your business idea will meet an unmet need.

After selecting competition, and the business idea you have, consider drafting a business plan to determine your chances of making a profit. When you create a plan, you will have a better business idea of the competition and your community.

It is helpful, to begin with, a business plan. A business plan is a blueprint of every aspect of your business. Sales, Marketing, Advertising, Promotion, and Location are just some categories to consider when creating a plan. The business plan you create can be a roadmap to follow as you develop your business.

It can also be important in your efforts to get funding for your business. Whether you’re looking for a small-business loan or an investor, you’ll need to provide your business plan during the application process.

Refer back to your business plan to evaluate whether you can afford your desired location during your company’s early months. 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 credit.

Our recommendation: Rather than trying to figure everything out yourself, we recommend you contact us at to give you accurate and complete details.


California Business

Starting an enterprise in California is not inexpensive, mainly depending on the type of business you want to open. First, you’ll want to open a business bank account and potentially get a business credit card, as well. You can start your search with the best banks for small enterprises in California to acquire a business credit card. Click HERE.

Keeping your business finances separate from your finances is incredibly important. You don’t want your personal financial decisions impacting your business or credit score (you can check your free business credit report online).

Therefore, be sure to check specific rules and regulations within the county and city you want to conduct business, and any other agency’s requirements regarding zoning, licensing, employment, permits, and taxes.

In addition, you might want to obtain business insurance that can protect your business and personal finances and assets from the fallout of unexpected disasters, such as personal injury lawsuits and natural catastrophes. Business insurance helps you manage risks and focus on growing your business in California. The most common types of business insurance you should consider are:

  • General Liability Insurance Workers’ Compensation Insurance
  • Professional Liability Insurance

A small business accountant is critical for all businesses that want to manage their finances and stay in business properly. 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.

A well-written business plan serves a triple purpose: It helps you—as the business owner—have a clear idea of the direction you want to give the company, It explains your business in and out to potential investors (including venture capitalists), and it makes your business look serious, professional and appealing to a lender.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk if your business is sued. Contact us at to follow the correct process.


How to File a DBA in Los Angeles

If you are opening up a business in Los Angeles, you need to visit the Los Angeles County Registrar-Recorder website and click on “Online Business Filing & Registration System.” On this page, choose that you will be filing “In-Person.”

Through a series of steps, you will be choosing your business name and making sure that your company name is available. If you want to start a business in California, you do not include the suffix Corporation, Corp., or Incorporated after your business name.

To check the availability of your business name, you will need to mail a name availability inquiry letter to the California secretary of state’s office in Sacramento.

Once the online application for a Fictitious Business Name is completed and submitted online, you will be issued a confirmation number to take to any Los Angeles County Registrar-Recorder County Clerk’s Office to pay $26 and complete the business filing process and file FBN Statement in the county clerk’s office for the county where your business is located.

After you make your payment for the application of a Fictitious Business Name statement, you will be required to publish a copy of the statement of your new business in a newspaper of general circulation in the county in which the principal place of business is located within 30 days.

Most Registrar offices will have representatives standing outside the office who can help you file your Fictitious Business Name statement for approximately $40. You can always shop around to find more cost-efficient services for legal publication.


Business Types (Explained Thoroughly)

Business Types to Start in California
Business Types to Start in California

By carefully choosing the correct business entity, you can reduce exposures to liabilities, minimize taxes, and ensure that your business is being financed and conducted efficiently.

Whether you’re looking for a small-business loan or an investor, you’ll need to provide your business plan during the application process. Suppose you’re unsure how to get started on your business plan. In that case, there are several business plan software options to make the process as easy as possible, and the Small Business Administration also features its business plan builder.

The most critical considerations in the choice of business entity will depend on the degree to which the business person’s assets are protected from liabilities of the business, maximizing tax benefits, avoiding double taxation, and start-up costs, among others.

Mollaei Law can help set up your business based on your needs and interests by creating a Sole Proprietorship, Partnership, Limited Liability Company (LLC), C-Corporation, S-Corporation, Professional Corporation, Limited Liability Partnership, and Non-Profit Organization.

By forming an LLC or Corporation, you may be able to protect yourself from debt or liability.

Learn more in-depth about your business options below:


Sole Proprietorship

A sole proprietorship is a business owned and run by one person. It is the simplest and most common structure to start a business.

Even if you want to find out how to start an online business in California, you should know that you are entitled to all profits and are responsible for all your business’s debts, losses, and liabilities. The owner has unlimited liability for the company’s losses, thereby putting all of the owner’s assets at risk.

A sole proprietorship requires no governmental filing except a fictitious business name statement. The owner reports the income and expenses on a schedule to their income tax return.



A partnership is a business carried on by at least two persons. A partnership is generally treated as a distinct legal entity separate from its partners.

A key attraction of a partnership is that it pays no income tax as income or losses flow through to each partner and are reported on the partner’s tax return. Each partner contributes to all aspects of the business, including money, property, labor, or skill. In return, each partner shares in the profits and losses of the company.

Thus, there’s no liability protection for any partners as each partner is jointly and severally liable for any liabilities. A partnership requires a written partnership agreement. The partners may dictate both the terms of how a partnership is managed and how profits and losses are allocated and distributed.


Please email us at to get the best business advice to get more detailed to get the best business advice.


Limited Liability Partnership (LLP)

Limited Liability Partnerships is a business with more than one owner. Still, unlike general partnerships, Limited Liability Partnerships offer some of their owner’s limited personal asset protection or liability for business debts.

So, while starting a company in California, you should know that all small business owners of an LLP have limited personal asset protection liability for business debts. Limited Liability Partnerships may only be formed by licensed persons for the practices of public accountancy, law, architecture, or engineering.

Professionals often prefer LLPs to general partnerships, corporations, or LLCs because they don’t want to be personally liable for another partner’s liabilities, especially those involving malpractice. An LLP protects each partner from debts against the partnership arising from malpractice lawsuits against another partner.


So, if you are interested in starting a small business in California, this could be an option. Email us at to get the best business advice.


Limited Liability Company (LLC)

Slowly becoming more a standard for companies and more popular, a Limited Liability Company (LLC) is a hybrid legal structure that provides the limited liability features of a corporation and the tax efficiencies (simple taxes) and operational flexibility of a partnership.

The members or owners of an LLC have no personal liability for the obligations of the LLC. An LLC is the entity of choice for a start-up seeking to flow through losses to its investors because an LLC offers complete liability protection to all its members.

Unlike Corporations, LLCs are not taxed as separate business entities. Instead, all profits and losses are “passed through” the business to each member of the LLC. LLC is a standard structure for real estate investments.

You may be wondering, “what is the cost of a California LLC?”. Here is your answer:

Income from California LLC is subject to self-employment taxes, which is 15.3% (subject to change). Also, suppose you want to know more about starting an enterprise in California. In that case, you should note that the California Franchise Tax Board imposes a minimum tax of $800/year for California LLC.

An LLC requires two principal documents:

  • Articles of Organization (California) or Certificate of Formation (Delaware) – A document is filed in the California department with the California secretary of state, which sets forth the name of the LLC, its address, its agent for service of process, the term, and whether the LLC will be governed by the members or by managers appointed by the members.
  • Operating Agreement – This document specifies how the LLC will be governed, the financial obligations of the members, and how profits, losses, and distributions will be shared. The Operating Agreement needs to be tailored to suit the needs of each individual LLC.

Three common business structures are sole proprietorships, limited liability companies (LLC), and corporations.

LLC “Limited Liability Company” is a separate entity that provides liability protection to its owners and is easier to manage and taxed less than a Corporation. Because of these features, the LLC has taken first place in popularity over both DBA and Corporation business structures.

Regardless of your business structure, you may need to obtain a business license, permits, or both to operate in the state of California. For example, if your business sells alcohol, you’ll need a permit. 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.



A C-Corporation is also referred to as a General, for-profit corporation. It refers to a corporation that is taxed separately from its owners.

A corporation is an independent legal entity owned by shareholders. This means that the corporation itself, not the shareholders that own it, is held legally liable for the actions and debts the business incurs and is taxed at a lower federal income tax rate than sole proprietors. Thus, business owners who plan on investing back into their business prefer the C-Corporation as a way of reducing their income tax.

Corporations are generally suggested for established, larger companies with multiple employees. Corporations have more formalities that must be observed to obtain the liability protection desired.

C-Corporations are subject to double-taxation, which means that the corporation’s income is taxed, and salaries paid to its employees are also taxed.



All corporations are initially formed as a C-Corporation. You can elect to be taxed as a pass-through entity and form an S-Corporation by filing IRS form 2553.

The income of an S-Corporation is generally taxed to the corporation’s shareholders rather than the corporation itself — avoiding double taxation. However, there are a few requirements that must be met to start a business in California in the form of an S-Corporation:

  • Must be filed as a domestic corporation
  • No more than 100 shareholders
  • Shareholders can only be individuals, estates, exempt organizations, or certain trusts.
  • No nonresident alien shareholders
  • Must end its tax year on December 31
  • Can only have one class stock


Professional Corporation

According to California Corporation Code 13400, certain professionals are NOT allowed to form an LLC. Instead, they must form a Professional Corporation, including attorneys, physicians, osteopathic physicians, dentists, pharmacists, veterinarians, architects, court reports, speech-language pathologists, audiologists, registered nurses, or optometrists.

Please note that a California Professional Corporation does not limit your liability arising from the performance of your service, exposing you to possible malpractice suits.

When you are the sole owner in one of these professions, this may be the only option you have.


Non-Profit Organization

This organization uses surplus revenues to achieve its goals rather than distributing them as profit or dividends. If your passion is to inspire, make a difference, and give back to the world, starting a non-profit is an exciting entrepreneurial proposition.

Mollaei Law provides business legal services, including forming LLCs and Corporations (the best way to protect yourself and save on taxes), applying for EIN and ITIN, drafting and reviewing business contracts, registering trademarks, and answering your business questions.


If you’re ready to start your business, I am in the best position to help you. I help entrepreneurs start their business by forming LLC or S-Corporations, drafting Operating Agreements, helping to apply for an EIN, and answering your business advice delivered straight to your mailbox.

Just send us an email if you want to conduct market research, informal business structure knowledge, marketing plan, and other related stuff to set up your own business.

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