Starting a Business in California: Your Simple 10-Step Guide

Whether you’re launching a retail startup or opening a restaurant in California, launching a business here takes planning, patience, and the right paperwork. There is incredible opportunity — but also some of the most detailed requirements in the country.

This guide walks you through the key steps of starting a business in California, from choosing your structure and registering with the state to getting the proper licenses. Follow along to build a solid foundation and start your business off right.

Key takeaways

• Choose the right business structure before registering to set the foundation for taxes, liability, and growth.

• Register your business and secure all required local and state permits before opening.

• Understand and comply with California’s detailed labor and wage laws when hiring employees.

• Keep business finances separate and maintain insurance coverage to protect your assets.

• Build visibility through local marketing, a professional website, and active community engagement.

1. Choose your business structure

Before you register your business in California, decide which structure fits your goals best. The business structure you choose affects your taxes, liability, and how much paperwork you’ll need to file each year.

• Sole proprietorship: The simplest setup — great for freelancers or single-owner businesses, but you’re personally liable for debts and obligations.

• Partnership: Similar to a sole proprietorship but with two or more owners sharing profits, responsibilities, and liability.

• Limited Liability Company (LLC): Offers personal liability protection with flexible management and tax options.

• Corporation: A more formal structure suited for larger operations or those seeking investors. Provides strong liability protection but requires more record-keeping.

All official business registrations in California are handled by the California Secretary of State. You can compare business entity types using the state’s Business Entity Comparison Chart.

2. Register your business name

Once you’ve chosen a structure, it’s time to pick and secure your business name. A consistent, memorable name strengthens your brand and makes it easier for customers to find you online and in person.

• Check availability: Use the California Secretary of State’s Business Search Tool to confirm your desired name isn’t already taken.

• File a Fictitious Business Name (DBA): If you operate under a name different from your legal name (for example, “Sunny Side Café” instead of “John Smith”), file a DBA with your county clerk’s office.

• Be consistent: Use your business name across signage, marketing materials, your website, and social media to build recognition and trust.

3. Get a federal EIN and state tax IDs

Most California businesses need an Employer Identification Number (EIN) — a federal tax ID used for filing taxes, hiring employees, and opening business bank accounts. You can apply for one quickly and for free on the IRS website.

If you plan to hire employees in California, you’ll also need a California State Employer Account Number through the Employment Development Department (EDD). This ID allows you to handle payroll taxes, unemployment insurance, and employee wage reporting.

Restaurants and retailers that sell food, drinks, or merchandise must also register for a seller’s permit with the California Department of Tax and Fee Administration (CDTFA). This permit allows you to collect and remit sales tax on taxable goods and services — an essential step for most brick-and-mortar and online businesses.

4. Register with the California Secretary of State

If you’re forming an LLC, corporation, or limited partnership, you’ll need to register your business with the California Secretary of State. This process makes your business official and protects your name at the state level.

You can file the appropriate documents — such as Articles of Organization (for LLCs) or Articles of Incorporation (for corporations) — directly through the bizfile online portal.

Within 90 days of formation, you must also submit an initial Statement of Information, which lists your company’s address, management, and registered agent. Filing this on time keeps your business in good standing and avoids late fees or suspension.

5. Obtain required licenses and permits

In California, every city and industry has its own licensing requirements — so it’s important to confirm what applies to your business before opening your doors.

• Seller’s Permit (CDTFA): Required for any business selling goods, food, or drinks.

• Health Permit: Issued by your county health department, this is mandatory for restaurants, food trucks, and catering operations.

• Alcoholic Beverage License (ABC): Needed if you plan to sell or serve beer, wine, or spirits.

• Local Business License: Most California cities or counties require a general business license to operate legally.

To find a full list of permits specific to your location and business type, visit the CalGold website. It’s a state-run tool that provides customized guidance on licensing and regulatory requirements.

6. Set up business banking and accounting

Once your paperwork is in order, keep your finances organized by separating business and personal funds. This makes tax season easier and helps you track performance more accurately.

• Open a business bank account: Choose a California-based bank or credit union familiar with local compliance rules.

• Set up accounting systems: Use software or a POS platform to manage sales, payroll, and taxes in one place.

• Stay compliant: Keep detailed records of income, expenses, and tax filings to stay on top of California’s reporting requirements.

7. Understand California employment laws

If you’re hiring employees, it’s essential to understand California’s labor laws — which tend to be more detailed than in many other states. Staying compliant protects your business and ensures fair treatment for your team.

• Minimum wage: As of 2025, California’s statewide minimum wage is $16.50 per hour, though some cities (like San Francisco and Los Angeles) set higher local rates.

• Workers’ compensation insurance: Required for all employers, even if you have just one employee. This insurance covers medical expenses and lost wages for on-the-job injuries.

• Paid sick leave and meal break laws: California mandates paid sick leave and regulated meal and rest breaks. Employers must track hours and ensure compliance.

• Payroll taxes and registration: Register with the Employment Development Department (EDD) to manage state income tax withholding, unemployment insurance, and disability insurance.

Visit the California Department of Industrial Relations (DIR) website for current wage rates and employment law updates.

8. Register for state and local Taxes

California businesses are subject to several layers of taxes, depending on their type and location. Registering correctly helps you stay compliant and avoid penalties down the road.

• Franchise and income taxes: Most businesses must file with the California Franchise Tax Board (FTB). LLCs, corporations, and certain partnerships owe an annual franchise tax — typically a flat $800 minimum.

• Sales and use tax: Retailers, restaurants, and service-based businesses that sell taxable goods must collect and remit sales tax through the California Department of Tax and Fee Administration (CDTFA).

• Local city or county taxes: Many municipalities impose local business taxes or fees. Check your city’s finance or business office for specific requirements.

9. Secure business insurance

Business insurance helps protect you from unexpected losses — and in California, some types are required by law. The right coverage keeps your operations running smoothly, no matter what challenges arise.

• General liability insurance: Covers accidents, injuries, or property damage that occur during business operations.

• Property insurance: Protects your physical assets like equipment, inventory, and buildings.

• Workers’ compensation insurance: Required for all employers in California, even if you have only one employee.

• Commercial auto insurance: Needed if you or your team use vehicles for business purposes, such as deliveries or catering.

For the best protection, consult a California-licensed insurance agent familiar with local laws and industry-specific risks.

10. Launch and market your business

Once your paperwork and permits are in place, it’s time to introduce your business to California’s market. Strong branding and consistent outreach will help you attract customers and stand out from the competition.

• Finalize your branding and website: Create a professional online presence that reflects your business personality and services.

• Claim your Google Business Profile: Improve local visibility and make it easier for nearby customers to find you.

• Leverage local marketing: Host community events, collaborate with nearby businesses, and use loyalty tools to engage your audience.

• Stay active on social media: Share updates, photos, and behind-the-scenes content to connect with your community.

Paperwork—the golden road to starting a business in CA

Starting a business in California might seem like a lot of paperwork, but once you break it into steps, it’s much more manageable. From registering with the state to getting the right permits, each part helps you build a strong foundation for success.

With the right preparation and persistence, you’ll be ready to open your doors — and thrive — in one of the most exciting business communities in the country.

FAQ

How much does it cost to start an LLC in California?

Forming an LLC typically requires filing Articles of Organization with the California Secretary of State and paying the associated filing fee (about $90 total), plus the state’s annual franchise tax (minimum $800) once the business is active.

Do I need a business license in California?

Yes, most California cities and counties require a general business license, and additional permits may apply depending on your industry and location.

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

You can usually register your business online within a few days through the Secretary of State’s bizfile portal, though processing times can vary based on workload and structure type.

Can I avoid the $800 franchise tax?

Most registered business entities must pay the annual franchise tax, but new businesses may qualify for temporary exemptions or reduced rates depending on their filing status and income.

What industries are growing in California?

California continues to see strong growth in technology, food and beverage, green energy, healthcare, and tourism.

Do I need a lawyer to start a business in California?

Not necessarily. Many entrepreneurs handle registration and permitting themselves, though consulting a business attorney or accountant can help ensure compliance and protect your interests.