There are several considerations involved if you’re wondering how to start a business in California. The Golden State is one of the most dynamic places in the world to be an entrepreneur. Iconic companies like Apple, Google, Facebook and Tesla are headquartered in California, and the state is often thought of as an open-minded, innovative place where the sky is the limit and people are open to new ideas.
However, before you make plans for your triumphant IPO, make sure you understand the basics of what you need to start a business in California.
Here are some tips on what California entrepreneurs need to keep in mind when starting a business in the Golden State.
Choose Your Business Structure
Just like any other state, starting a business in California requires the owner to “make it official” by registering the business as a legal entity with the state’s regulatory authorities. The California Secretary of State’s office offers a list of business entity types to choose from, including Corporation and Limited Liability Company (LLC). Also be aware of the state filing fees when setting up your California LLC or Corporation; for example, the filing fee is $75 for a California LLC, and $100 for a California Corporation.
Understand Your California Tax Obligations
Along with the usual process of getting an Employer ID Number (EIN) so your business can get a business checking account and file taxes, California has its own particular state-level tax requirements for business owners. Depending on what type of business you own, you might need to collect or pay certain California state taxes, such as sales tax, use tax, or franchise taxes. Contact the California Tax Service Center if you have questions about your California tax obligations as a small business owner. Also, be prepared to consult with a professional tax adviser to help you understand what is required to comply with California business tax laws.
Get Your California Business Permits
Depending on what industry you are in and what type of business you run, you might need to obtain some business permits or licenses. The California Governor’s Office of Business and Economic Development offers a website called CalGold: The Gold Standard for Permit Assistance, which can help you find out which permits or licenses you need for your California business. CalGold does not issue permits and licenses, but it can help you find contact information for the appropriate government agencies or regulatory authorities. For example, if you want to start a restaurant in Sacramento, this site can help you connect with the various state and local authorities to deal with business licenses and permits such as an alcoholic beverage license, health permits, construction permits, business tax certificate, and more.
Apply for Incentives and Financial Assistance
California offers a variety of state-level business incentives, resources and services, such as business loans and financial assistance programs, state and local permit assistance, tax credits and other incentive programs. Depending on what type of business you want to start and where you want to locate it, you might qualify for some help from the state. It doesn’t hurt to apply and see if you can qualify for some added assistance in getting your new California business up and running.
Use the California Business Portal
Another helpful website from the California state government is the California Business Portal, which has a variety of industry-specific guidance and state-level information on how you can launch and grow a business in the Golden State.
Hiring Employees? Make a Plan
California is home to some of the best universities in the world, and the workforce tends to be highly educated. If you’re going to be hiring employees at your California business, make sure you are prepared to comply with state labor laws.
Also, make sure you understand competitive market wages and salaries. For example, California recently passed a $15/hour statewide minimum wage law — for smaller businesses, the minimum wage is rising each year, with a $15 minimum wage due to take effect in 2023. Make sure your business is complying with the law, and make a plan to keep up with the latest updates to California’s labor laws.
Capitalize on California’s Unique Advantages
California is not known as a low-cost state for doing business. Compared to some states in the U.S. that pride themselves on having low taxes for businesses (or no taxes for certain categories of business and economic activity), California tends to have relatively high taxes and complex regulations. For some business owners, this can be a discouraging obstacle.
But if you are wondering how to start a business in California, despite the costs, keep in mind that California also has significant advantages. The state ranked in the top 10 in WalletHub’s 2018 survey of Best States to Start a Business, and ranked #2 in the nation for overall Business Environment. California is home to vast opportunities: Silicon Valley, Hollywood, an ecosystem of importer/exporter firms doing business with international trading partners and much more. Despite its high costs of living and the challenges of doing business there, California is an idea factory, an incubator of America’s future, and one of the most influential places on Earth to be an entrepreneur. There is big potential in this populous, diverse, complicated state. Go out there and get in on the action!
Are you ready to start a business, form an LLC or reorganize your current business structure with business incorporation services? Talk to Incfile today! Our incorporation experts can help you evaluate your options with state-specific advice.