Start a Business in California: New Owner Guide

To start a business in California, choose your business structure, register with the California Secretary of State if needed, get tax accounts, check local licenses and permits, set up insurance and banking, then stay current with state and city filings. California has more moving parts than many states, but you can handle them one step at a time.

Below is the practical roadmap for a first-time founder who wants to start a business in California and avoid the common missed steps.

Registration

Your first decision is your legal structure. In California, the most common options are:

• Sole proprietorship: Easiest to start. You do not file formation paperwork with the California Secretary of State, but you may need a fictitious business name, local business license, seller’s permit, and tax registrations.
• General partnership: Similar to a sole proprietorship, but with two or more owners. A written partnership agreement is strongly recommended.
• Limited liability company, or LLC: Popular for small businesses because it separates business liabilities from personal assets and has flexible tax treatment.
• Corporation: Often used by startups planning to raise outside investment or issue stock. You can form a C corporation or elect S corporation tax treatment if eligible.
• Nonprofit corporation: Used for charitable, educational, religious, or public-benefit missions. State formation is separate from federal tax-exempt status.

The state filing agency is the California Secretary of State. Most founders file online through the state’s business filing system, though mail and in-person options may also exist.

For an LLC, the formation filing is called Articles of Organization. For a corporation, it is usually called Articles of Incorporation. Typical state filing costs are around $70 for a California LLC and around $100 for a California stock corporation, but always confirm the current amount before filing. In-person filings can involve additional handling fees.

California also requires a Statement of Information after formation. LLCs generally file their first Statement of Information within 90 days of formation and then every two years. Corporations generally file within 90 days and then annually. The fee is typically around $20 to $25, depending on entity type.

California requires every LLC and corporation to have a registered agent for service of process. The agent must have a physical street address in California. A P.O. box alone is not enough. You can serve as your own agent if you are comfortable listing a California address publicly and being available during business hours, or you can hire a commercial registered agent.

You may reserve a business name with the California Secretary of State before filing. Name reservation is optional, typically lasts 60 days, and usually costs around $10. Many founders skip this step and check name availability immediately before filing instead.

Typical timing depends on filing method and state workload:

If you use a name that is different from your legal name or registered entity name, you may also need a Fictitious Business Name, often called a DBA. In California, DBAs are usually filed with the county clerk where your main business is located. Many counties also require publication of the DBA in an approved newspaper for a set period.

Taxes

California tax setup usually involves four separate layers: federal tax, state income or franchise tax, sales tax, and employer payroll tax if you hire workers.

First, get a federal Employer Identification Number, or EIN, from the Internal Revenue Service. An EIN is free from the IRS. Most LLCs, corporations, partnerships, and employers need one. Even if you are a single-member LLC with no employees, banks and payment processors often ask for it.

For state income and franchise tax, the main agency is the California Franchise Tax Board, often called the FTB.

California LLCs generally owe an annual LLC tax of $800 and may owe an additional LLC fee if total California income is above certain thresholds. The additional LLC fee begins at higher gross income levels, commonly starting above $250,000 in California-source income. These rules can change, and due dates depend on tax year, so confirm with the FTB or your tax professional.

California corporations generally pay state corporation taxes through the FTB. C corporations are subject to California corporate income tax, and S corporations pay California’s S corporation tax. Minimum franchise tax rules can apply after the initial year, and the minimum is commonly $800. Because entity choice affects taxes heavily in California, it is worth getting advice before choosing between an LLC, S corporation, and C corporation.

If you sell taxable goods or certain taxable services, register with the California Department of Tax and Fee Administration, or CDTFA, for a seller’s permit. California’s statewide base sales and use tax rate is 7.25%, but local district taxes often make the total rate higher depending on the buyer’s location. Seller’s permits are generally free, though CDTFA may require a security deposit in some situations.

Sales tax filing cadence can be monthly, quarterly, or annual depending on your sales volume and CDTFA assignment. Do not collect sales tax until your seller’s permit is active, and do not treat sales tax as business income. It is money you hold for the state.

If you hire employees in California, register with the California Employment Development Department, or EDD. Employers typically handle payroll tax withholding, unemployment insurance, employment training tax, state disability insurance, and personal income tax withholding. Payroll deposits and filings can be frequent, so most employers use payroll software or a payroll provider.

You should also plan for federal tax filings with the IRS, including income tax, payroll tax if you hire, and information filings such as 1099s when required.

Licenses

California does not have one general statewide business license that every business must obtain. Instead, licensing depends on your location and industry.

Most businesses need a local business license, business tax certificate, or similar registration from the city where they operate. If your business is outside city limits, check with the county. For example, a consultant working from home, a retail shop, and a mobile food vendor may each need different local approvals.

California also has many profession-specific licenses. Common examples include:

• Contractors: Licensed by the Contractors State License Board, or CSLB.
• Real estate brokers and salespersons: Licensed by the California Department of Real Estate.
• Barbers, cosmetologists, estheticians, and related services: Regulated by the California Board of Barbering and Cosmetology.
• Restaurants, food facilities, and cottage food operations: Often regulated by county environmental health departments, with state food rules also applying.
• Alcohol sales: Licensed by the California Department of Alcoholic Beverage Control, or ABC.
• Cannabis businesses: Licensed by the California Department of Cannabis Control, with local approval also required.
• Child care: Licensed through the California Department of Social Services, Community Care Licensing Division.
• Healthcare and licensed professions: Many boards sit under the California Department of Consumer Affairs.
• Agriculture, weights and measures, and certain food products: May involve the California Department of Food and Agriculture.

Before you spend money on a lease, equipment, or inventory, confirm whether your industry needs a state license. In California, some licenses require exams, background checks, bonds, proof of experience, facility inspections, or local signoff.

Permits

Permits are usually more local and location-specific than licenses. In California, this is where many founders get surprised.

Start with your city or county business license office. Ask whether you need a business tax certificate, zoning clearance, home occupation permit, or police permit. Some cities require approval before you advertise, open, or even work from a home office.

If you are operating from a physical location, confirm zoning before signing a lease. A space that looks perfect may not be approved for retail, food service, manufacturing, childcare, fitness, auto repair, or customer visits. Ask the local planning or zoning department whether your exact use is allowed.

Home-based businesses may need a home occupation permit. These permits often limit signage, employees, deliveries, customer visits, noise, storage, and parking. Rules vary widely by city.

Food businesses usually need county environmental health permits. Restaurants, bakeries, food trucks, caterers, commissary kitchens, and some packaged food businesses may need plan review, inspections, food handler cards, and operational permits.

If you remodel, install equipment, change occupancy, add plumbing, put up a sign, or build a patio, you may need building, fire, electrical, plumbing, mechanical, or sign permits. Fire departments may inspect businesses with public assembly, hazardous materials, kitchens, sprinklers, alarms, or certain storage.

Some businesses need environmental approvals from regional or state agencies. Depending on the activity, this can involve an air district, regional water quality control board, local sanitation district, hazardous materials program, or the California Department of Toxic Substances Control.

Coastal communities, cannabis businesses, alcohol establishments, sidewalk vendors, massage businesses, and short-term rentals can face additional local rules. Always check city and county requirements early.

Insurance

California requires workers’ compensation insurance for employers with one or more employees, even if the employee is part-time. Corporate officers and LLC members may have special exemption rules, but do not assume you are exempt. Contractors licensed by the CSLB can have additional workers’ compensation requirements, even in some situations without employees.

If your business owns or uses vehicles, you need appropriate commercial auto insurance. Personal auto policies often do not cover business use, especially deliveries, transporting goods, or employee drivers.

California employers also participate in state payroll programs such as disability insurance and paid family leave through EDD payroll withholding. These are not a substitute for workers’ compensation or liability coverage.

Common policies California businesses carry include:

• General liability insurance for customer injury, property damage, and basic business risk.
• Professional liability or errors and omissions insurance for consultants, agencies, accountants, designers, and other advice-based businesses.
• Product liability insurance if you make, import, distribute, or sell physical products.
• Commercial property insurance for equipment, inventory, furniture, and tenant improvements.
• Cyber liability insurance if you store customer data, take online payments, or run a digital business.
• Employment practices liability insurance if you hire employees.

Landlords, lenders, marketplaces, and enterprise clients may require insurance before they work with you. Get quotes before signing contracts so you know the real cost of operating.

Banking

Open a dedicated business bank account before you accept customer payments. This keeps your finances clean, protects your liability separation, and makes tax time easier.

California banks and credit unions commonly ask for:

• Your EIN from the IRS.
• Your Articles of Organization or Articles of Incorporation.
• Your Statement of Information if available.
• Your operating agreement, bylaws, or partnership agreement.
• Government ID for owners and authorized signers.
• Ownership information for beneficial owners.
• DBA or fictitious business name filing if you operate under a trade name.
• Local business license if the bank requires it for your industry.

Look for a bank or credit union that fits how you actually get paid. If you accept card payments, ask about merchant services and deposit timing. If you handle cash, check branch access and cash deposit fees. If you sell online, look for strong integrations with bookkeeping tools, payroll, and payment processors.

For California founders, a local bank or credit union can be helpful if you need SBA lending, relationship banking, or knowledge of city permitting norms. Online banks can be useful for lower fees and fast setup. Either way, keep personal and business money separate from day one.

State Resources

Use real state and local agencies as your source of truth. California rules change, and city requirements vary.

• California Secretary of State: Handles LLCs, corporations, limited partnerships, name reservations, Statements of Information, and registered agent records.
• California Franchise Tax Board: Handles state income tax, franchise tax, LLC annual tax, entity tax accounts, and California tax guidance.
• California Department of Tax and Fee Administration: Handles seller’s permits, sales and use tax, and many special tax and fee programs.
• California Employment Development Department: Handles employer payroll tax registration, unemployment insurance, state disability insurance, and payroll withholding accounts.
• Governor’s Office of Business and Economic Development, often called GO-Biz: Provides business support, permit assistance resources, and information on incentives and economic development programs.
• California Office of the Small Business Advocate, or CalOSBA: Supports small business programs, grants when available, technical assistance, and small business resource navigation.
• California Small Business Development Center Network: Offers no-cost or low-cost advising on business planning, funding, marketing, operations, and startup steps.
• SCORE California chapters: Provide volunteer mentoring, workshops, and business education for new and growing businesses.
• California Department of Consumer Affairs: Oversees many professional licensing boards and helps you find the right board for regulated occupations.
• Contractors State License Board: Licenses and regulates California contractors.
• City and county clerk, finance, planning, and environmental health departments: Handle local business licenses, DBAs, zoning, home occupation permits, health permits, and inspections.

FAQs

Do I need an LLC to start a business in California?

No. You can start as a sole proprietor if your business does not require entity formation. Many founders choose an LLC for liability separation and credibility, but it adds state filings, annual tax obligations, and compliance tasks.

How much does it cost to start a California LLC?

The formation filing is typically around $70, and the Statement of Information is typically around $20. California LLCs also generally owe an annual $800 tax to the Franchise Tax Board, plus possible income-based LLC fees at higher revenue levels.

Does California require a statewide business license?

California does not have one general statewide business license for every company. Most businesses need a city or county business license or business tax certificate, and regulated industries may need state licenses.

When do I need a seller’s permit in California?

You usually need a seller’s permit from the California Department of Tax and Fee Administration if you sell taxable goods or other taxable items in California. The permit is generally free, but sales tax rates and filing frequency depend on your location and sales volume.

Can I run a California business from home?

Often yes, but your city or county may require a home occupation permit. Local rules may limit signs, employees, customer visits, deliveries, noise, and storage.

Business Launch Steps

• Choose your business idea and business model. Decide what you sell, who you serve, and how you will get paid. Typical timing: 1 to 7 days.
• Check California licensing risk early. Search your industry through the California Department of Consumer Affairs, CSLB, ABC, Department of Cannabis Control, county health department, or other relevant agency. Typical timing: 1 to 3 days.
• Choose your entity type. Compare sole proprietorship, LLC, corporation, and partnership with taxes, liability, investors, and administration in mind. Typical timing: 1 to 3 days.
• Check your business name. Search California Secretary of State records, county DBA records if needed, trademarks, domain names, and social handles. Typical timing: same day.
• File formation paperwork if forming an LLC or corporation. File Articles of Organization or Articles of Incorporation with the California Secretary of State. Typical timing: online can be faster; mail can take longer depending on workload.
• Appoint a California registered agent. Use a California street address and keep the agent current. Typical timing: same day.
• Create internal documents. Prepare an LLC operating agreement, corporate bylaws, initial resolutions, ownership records, and founder agreements. Typical timing: 1 to 7 days.
• Get your EIN from the IRS. Use it for banking, payroll, tax accounts, and vendor paperwork. Typical timing: often same day when obtained directly from the IRS.
• File your Statement of Information. Submit it to the California Secretary of State within the required first 90 days. Typical timing: same day to a few days.
• Register for California taxes. Set up FTB obligations, get a CDTFA seller’s permit if you sell taxable goods, and register with EDD before hiring employees. Typical timing: 1 to 10 days.
• Apply for local licenses and permits. Contact your city or county for a business license, zoning approval, home occupation permit, health permit, sign permit, or building permit. Typical timing: a few days to several weeks, depending on inspections.
• Get required insurance. Put workers’ compensation in place before employees start, and consider general liability, professional liability, property, cyber, or product coverage. Typical timing: 1 to 7 days.
• Open a business bank account. Bring your EIN, formation documents, ownership information, ID, and DBA or local license if applicable. Typical timing: same day to a few days.
• Set up bookkeeping and payment systems. Track income, expenses, sales tax collected, payroll, owner draws, and estimated taxes from the beginning. Typical timing: 1 to 3 days.
• Prepare to sell. Finalize pricing, contracts, invoices, website, checkout flow, receipts, refund policy, and customer support process. Typical timing: 3 to 14 days.
• Make your first compliant sale. Confirm your seller’s permit, local license, insurance, and payment setup are ready before taking payment. Typical timing: depends on your permit path and sales process.

California can feel like a lot at first, but each step has a clear owner: state formation, state taxes, local licenses, permits, insurance, banking, then launch. If you want a personalized California roadmap for your exact business, Stratify can help you map the next steps in order.