Setting Up Your Business in California

Whether you’re starting a brand-new business, expanding or relocating, avoid expensive mistakes by making sure your entity is registered and permitted as required by State laws.

Pick Your Business Location

Your operating address determines zoning, taxes, and regulations.

Choose a Business Structure

Choose a business structure that strikes the right balance of legal protections and benefits.

Choose a Business Name

Your name is your brand so it must reflect all the aspects of your business plan.

Get Federal & State Tax ID Numbers

Be prepared to pay your state and federal taxes on time.

Apply for Licenses and Permits

Make sure you know what is required for your location and activities.

Open a Business Bank Account

Your name is your brand so it must reflect all the aspects of your business plan.

Get Business Insurance

Protect yourself from accidents, disasters, and lawsuits.

You are a California business if any of these statements are true:

Your business has a physical presence in the state
You have frequent in-person meetings with clients in the state
A significant portion of your revenue comes from the state
Any of your employees work in the state

Getting coaching from a business advisor in our small business center network is always a good idea for this process.

Find a Business Advisor

Pick Your Business Location

Your business address is a highly strategic decision: it determines the taxes, zoning laws, regulations your business must operate under as well as impacting your cost of doing business.

Do your homework considering these factors:

Your target market and customer
Cost of living and cost of commercial leases
Transportation accessibility for workers and suppliers
Permitting & licensing and other regulatory requirements
State and local taxes
Access to suppliers and business services
Workforce availability
Zoning
Your personal preferences

Using your home or office address as your business address may not always be the best option. A registered agent is a third-party entity that acts as your business address and receives important legal and tax documents on your behalf. A registered agent can provide privacy and anonymity, create a professional image and credibility, simplified mail and document management, and compliance with state regulations. Be sure to do your research and choose a reputable provider.

Whether you will be a home-based business or will occupy commercial space, consult your local planning department to be sure your business activities are permitted. If your business will be located in an unincorporated area, consult the county.

Consult with your local Small Business Center and local economic development teams including economic development corporations, chambers of commerce and workforce development boards.

You can also use these online tools:

Choose a Business Structure

This impacts everything from day-to-day operations, to taxes, to how much of your personal assets are at risk.

A sole proprietorship is the easiest to form and gives you, the owner, complete control. If you don’t register as another kind of entity, then you’re automatically qualified as a sole proprietorship. The risk is that your business and personal assets and liabilities are not separate. This means you can be held personally liable for the debts and obligations of the business. A sole proprietorship can be the right choice for low-risk business activities or as a temporary status while you test your business ideas.

Other business structures include:

General Partnerships (GP)
Limited Partnerships (LP)
Limited Liability Partnerships (LLP)
Limited Liability Companies (LLC)
C corp
S corp
Benefit corporations
Close corporations
Nonprofit corporations
Worker cooperatives and other forms of employee ownership

We recommend consulting with an attorney or tax consultant to fully understand the differences, but here are some good starter references:

Choose a Business Name

If your business name includes your legal last name, then your work is done. Any other name other than the owner’s last name requires filing a Fictitious Business Name statement.

For example, James Smith owns a sole proprietorship, and his business name is James Smith Painting. He does NOT need to file a fictitious business name. But if the business name were James and Sons Painting or House Painting Fast, then he DOES need a fictitious business name.

Let’s say that James Smith instead owns either a Limited Liability Company (LLC) or a corporation, and then wants to open up additional businesses under the LLC or corporation parent. He needs to file a fictitious business name statement for any business name not stated in the original articles of incorporation or articles of organization filed with the state.

How to Register a Fictitious Business Name. A fictitious business name statement (known as Doing Business As or DBA) must be registered with the city and/or county clerk in the county of the registrant’s principal place of business if the business is:

A sole proprietorship doing business under a name not containing the owner’s surname
A partnership
A corporation operating under a name other than its legal name

You must file for your DBA within the first 40 days of operating your business or before your current DBA expires. Fees and documentation requirements are determined by the county or city.

Within 30 days after filing a DBA, you must publish the statement in a newspaper of general circulation in the county of its principal place of business. The notice must appear once a week for four successive weeks. Within 30 days of the last publishing date, you must then file an affidavit of publication with the county clerk’s office.

Use the CalGold Permit Assistance Tool to find the local agency where you must file for a DBA.

Fictitious business names are not filed with the Secretary of State’s Office. There is no provision in California for registration of fictitious business names.

TIP: Even though a proposed corporate name has been checked and/or reserved, don’t buy stationery, signage, or other collateral until you receive notification of filing from your local agency and/or the Secretary of State’s Office.

Register Your Business

After you’ve decided your business structure, you’ll need to register your business with the state, local and federal agencies.

Business Entity Filing. Business entity filing is not necessary for sole proprietors, but if you intend to form a corporation, limited liability company or partnership, you must file with the California Secretary of State (SOS).

Secretary of State: BizFile Online

For Employers:

Employer Registration: An employer is required to file a Registration Form within 15 days after paying more than $100 in wages to one or more employees. Consult the Employment Development Department (EDD).
Workers’ Compensation: Businesses with one or more employees must maintain Workers’ Compensation Insurance coverage. Consult the California Department of Industrial Relations (DIR).
Wages, Hours, & Working Conditions: Businesses with employees must comply with laws establishing minimum standards for wages, hours, and working conditions. Consult the California Department of Industrial Relations (DIR).

State Contracting. If you want to do business with the state, then you need additional certifications as a Small Business (SB) or Disabled Veteran Business Entity (DVBE).

Department of General Services: SB/DVBE Certification
Statewide Supplier Diversity Program

More Resources from CalOSBA:

Doing Business with the State

Beneficial Ownership. As of January 1, 2024, many companies in the United States will have to report information about their beneficial owners: the individuals who own or control the company. Beneficial ownership reporting is a requirement of the Corporate Transparency Act of 2021 that means filing a report to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.

Newly created companies have 90 calendar days to file after receiving actual or public notice that their company’s creation or registration is effective. A report only needs to be submitted once, unless you need to update or correct information.

U.S. Department of Treasury: Financial Crimes Enforcement Network

Get Federal and State Tax ID Numbers

The California Tax Service Center is a partnership of tax agencies, including the California Department of Tax and Fee Administration(Formerly the Board of Equalization), Employment Development Department, Franchise Tax Board, and Internal Revenue Service. It provides information related to payroll, personal and business corporate income, franchise, and sales and use taxes.

California Tax Service Center

State Income Tax (FTB)
All businesses are required to file state income tax with the Franchise Tax Board.

Seller’s Permit (CDTFA)
If you will be selling tangible property, consult the California Department of Tax and Fee Administration.

Internal Revenue Service (IRS)
Employers with employees, business partnerships, and corporations, must obtain a Federal Employer Identification Number (EIN) from the Internal Revenue Service (IRS).

Apply for Licenses and Permits

Business License Filing. Most local governments require a business license. If your business will be located in an incorporated city, you would obtain this from the city. If your business will be located in an unincorporated area, you would obtain this from the county.

Professional Licenses & Permits. A wide variety of activities may require you as the business operator to obtain a license before getting started. You may need both local and state permits depending on where you’re operating and the type of business. The CalGold website assists you in finding appropriate permit information and contact information for the various agencies that administer and issue these permits.

CalGold Permit Assistance Tool

Permits, Licenses & Regulation

Learn More

Open a Business Bank Account

As soon as you start accepting or spending money on behalf of your business, you should open a business bank account. Business-owners skip this step at their peril. Here’s why we recommend keeping your business banking separate from your personal banking.

Protection. Business banking offers limited personal liability protection by keeping your business funds separate from your personal funds. Merchant services also offer purchase protection for your customers and ensures that their personal information is secure.
Credibility. Customers will be able to pay you with credit cards and make checks out to your business instead of directly to you. If you have employees, then they can handle some transactions on your behalf.
Preparedness. Business banking usually comes with the option for a line of credit for the company. This can be used in the event of an emergency, or if your business needs new equipment. It also establishes a credit history for your business that will help you obtain bigger loans when you need them.

Business account types include checking accounts, savings accounts, credit card accounts, and merchant services accounts that allow you to accept credit and debit card transactions.

You’ll need a federal EIN to open a business banking account or a Social Security number if you’re a sole proprietor.

Open a business bank account | U.S. Small Business Administration

Get Business Insurance

Accidents, natural disasters, and lawsuits can put you out of business. If you have business property or employees, you are legally required to carry some of these insurance policies.

Basic types of business insurance policies include:

Property/renters: Provides replacement costs for lost or damaged property
Business vehicle: Provides repair costs for vehicle damage
Liability: Protects from lawsuits arising from bodily injury or property damage
Professional Liability: Protects from lawsuits arising from negligence
Workers’ Compensation: Employees who become injured or ill on the job
Commercial Property: Protects building, inventory, and equipment
Natural Hazard: Protects you from local threats in your community
Business interruption: Replaces business income lost in a disaster.

If you run your business from home, you can also add coverage to your homeowner’s insurance as a rider to protect your business equipment and liability coverage for third-party injuries.

California Department of Insurance: Small Business Guide To Commercial Insurance (ca.gov)

If you’re operating a business in an area at high risk of fire, you may have trouble obtaining coverage through the private market. This is why businesses can also obtain commercial insurance through the California FAIR Plan. It’s costly and that’s why it’s known as the “insurance of last resort”. But consider this option if you’re having trouble getting insured through traditional means.

California FAIR Plan Association: The California FAIR Plan (cfpnet.com)

More Resources from CalOSBA

Learn to evaluate the real-world hazards to your business and create a Business Resiliency Roadmap that mitigates your risks. Training and materials available in Spanish and English.