Starting a Business in California: 7 Easy Steps to Follow

The lure of the Golden State is powerful for some. California has everything it needs to continue as a self-sufficient state and economy.

Tourists flock to it to enjoy the beaches, mountains, and deserts when not sightseeing the major landmarks. Entrepreneurs flocked to Silicon Valley and San Francisco for the technology innovations. Others headed to Hollywood to make their entertainment dreams come true.

Along the way, California became a litigious and bureaucracy-filled place to do business. Nonetheless, four million small business owners who employ 7.1 million individuals have figured out how to navigate the mazes.

Therefore, when you operate a company here, your team requires at least one regulatory legal expert and tax accountant.

For those interested in starting a business in California, we offer seven easy steps to follow.

1. Outline a Business Plan

The first step to starting a business in any state is to outline a business plan. The exercise takes time. However, it’s a great way for entrepreneurs to research their market, understand their mission, and obtain a grip on the costs.

Business plans include an:

  • Executive summary
  • Market analysis
  • Competitive analysis
  • Outline of management
  • Description of products and services
  • Sales and marketing strategy
  • Budget

Potential investors and banks will ask for this document when you search for financing. Therefore, entrepreneurs benefit from preparing it beforehand.

Before you invest too much time into your venture, putting together the plan is a great way to see if your idea is viable. In case it’s not, it’s an opportunity to tweak it or pivot.

2. Pick a Location

California cities have made the news for spikes in crime, namely San Francisco and Los Angeles. Nonetheless, they remain viable places to conduct business. While some business owners have headed to other cities and states, others have decided to stick it out.

If you decide to do business in high crime areas of California, you benefit from the services of security companies such as Special Security Services.

Several security options exist. You can hire the presence of professionals for the lobby, front entrance or in a store. You can also have professionals set up a video surveillance system for your commercial property.

3. Select Your Company’s Tax Structure

The Internal Revenue Service requires that entrepreneurs pick a tax structure for their companies.

Entrepreneurs can pick from:

  • Sole proprietorship
  • Partnership
  • Limited liability company
  • Corporation

Each structure has a set of pros and cons. Some provide asset protection in case a lawsuit is brought against your company. For the IRS, it determines how they will tax your organization.

4. Obtain a Company Tax ID

After you pick your company’s tax structure, register the business with the California Secretary of State. Once they process your application and you pay your fees, they will issue the company’s employer identification number.

The number allows you to open a business bank account. It’s a social security number for your company.

5. Procure Financing

Now that you have a business bank account, you can officially procure financing for your venture.

The most common financing for companies is loans. Entrepreneurs can also apply for grants, business lines of credit, and venture capital.

Most small businesses in the United States focus on services. Thus, it’s possible to start them with little to no investment. Goods-oriented companies do require an infusion of capital from the beginning. Therefore, ensure that you can secure it.

The number one reason why companies fail is lack of financing.

6. Obtain Professional Licenses

Before you sell your first piece of merchandise or sign up your first customer, obtain the professional licenses relevant to your business. In California, most entrepreneurs must obtain a general business license.

Then, obtain licenses according to your niche. For example, hair stylists will obtain a cosmetology license while retailers will obtain licenses to sell goods.

7. Purchase Insurance

In 2022, all companies require insurance. If your company has a fleet, cover it with commercial vehicle insurance.

Then, purchase the following policies:

  • General liability
  • Professional liability
  • Business income protection
  • Worker’s comp
  • Business owner’s policy

Most small companies spend between $500 to $1,000 monthly on insurance. If you can’t afford to purchase all these policies, start with the ones mandated by local authorities. Then, add the rest as your income grows.


Business insiders agree that doing business in California poses major challenges for entrepreneurs in 2022. Navigating the bureaucracy and regulations requires serious legal and financial gymnastics. Nonetheless, the Golden State has a lot to offer entrepreneurs too.


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