Start Your Own Business in California: Seven Steps You Need to Take

From licenses and permits to taxes and insurance, learn what you need to do to start a business in California.

Here’s an overview of the key steps you’ll need to take to start your own business in California.

Step 1. Decide on a Legal Structure

The most common legal structures for a small business are:

  • sole proprietorship
  • partnership
  • limited liability company (LLC), and
  • corporation.

There also are special versions of some of these structures, such as limited partnerships and S corporations. You’ll want to consider which business entity structure offers the type of liability protection you want and the best tax, financing, and financial benefits for you and your business. Check Choose Your Business Structure on Nolo’s website for more information on how to choose the best ownership structure for your business.

Step 2. Choose a Name

For LLCs and corporations, you will need to check that your name is distinguishable from the names of other business entities already on file with the California Secretary of State (SOS). You can check for available names by doing a business entity name search on the SOS website. You can reserve an available name for 60 days by filing a Name Reservation Request Form. There are certain name requirements for LLCs and corporations (like including a word such as “LLC” for LLCs or “Corporation” for closely-held corporations). See How to Form an LLC in California and How to Form a Corporation in California for more information.

Is your business a sole proprietorship or partnership that uses a business name that is different from the legal name of the business owner (for a sole proprietorship) or surnames of the individual partners (for a partnership)? If so, you must file a Fictitious Business Name Statement in the county clerk’s office for the county where your business is located. Check county websites for more information.

If you plan on doing business online, you may want to register your business name as a domain name. See Choose and Register a Domain Name for more information. In addition, to avoid trademark infringement issues, you should do a federal and state trademark check to make sure the name you want to use is not the same as or too similar to a name already in use. See How to Do a Trademark Search for more information.

Step 3. Create Your Business Entity

Step 4. Licenses and Permits

Tax Registration. If you will be selling goods in California, you must register with the Board of Equalization (BOE) to obtain a seller’s permit. You can register online at the BOE website. If your business will have employees, you must register with the California Employment Development Department (EDD) for employer withholding taxes. You can register online using the EDD’s e-Services for Business.

EIN. If your business has employees or is taxed separately from you, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if you are not required to obtain an EIN, there are often business reasons for doing so. Banks often require an EIN to open an account in the business’s name and other companies you do business with may require an EIN to process payments. You can get an EIN by completing an online application on the IRS website. There is no filing fee.

General Business License. Every California business must obtain a general business license from the city where the business is located. In the case of unincorporated sections of the state, the license is issued by the county where the business is located.

Regulatory licenses and permits. These cover areas such as health and safety, the environment, building and construction; and specific industries or services. Regulatory licenses and permits frequently are issued by state agencies. For step-by-step guidance about state licenses or permits you may need, check the state’s CalGold website. For information about local regulatory licenses and permits, check the websites for any cities or counties where you will do business.

Professional and occupational licenses. These cover people who work in various fields. The state’s CalGold website provides information on professional and occupational licensing.

Step 5. Business Location and Zoning

You’ll need to pick a location for your business and check local zoning regulations. That includes if you work from home. You may be able to find zoning regulations for your town or city by checking

Step 6. Taxes and Reporting

California taxes every kind of business. This includes imposing a corporate income tax that applies to corporations and other entities that are taxed as corporations, and a franchise tax that applies to corporations, LLCs, and many partnerships. See California State Business Income Tax for more information on state business taxes in California.

Sole proprietorships. Pay state taxes on business income as part of their personal state income tax returns (Form 540).

Partnerships. Partners pay state taxes on partnership income on personal tax returns. In addition, California partnerships also must file Form 565, Partnership Return of Income.

LLCs. Members pay state taxes on their share of LLC income on personal tax returns. In addition, LLCs themselves have to file an additional state tax form. The specific form used will depend on how the LLC is classified for federal tax purposes. California LLCs also are required to file a biennial statement of information. See California LLC Annual Filing Requirements for more information.

Corporations. Shareholders must pay states taxes on their dividends from the corporation. A shareholder-employee with a salary also must pay state income tax on his or her personal state tax return. Moreover, the corporation itself is subject to California corporation taxes. And, finally, corporations must file an annual statement of information 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. Check IRS Publications 334,Tax Guide for Small Business, and 583, Taxpayers Starting a Business, available at

Step 7. Insurance

Insurance is a good idea for most kinds of business. While insurance often is regulated at the state level, the types of business insurance available are usually similar across the fifty states. Check Obtaining Business Insurance for more information.

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