How to Start a Business in California: 13-Step Guide (2026)

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Starting a business in California is a great way to be your own boss while bringing new products, services, and ideas to your community, but it requires more than just the right business idea. If you’re looking to start a business in California, it’s important that you follow the proper processes to legitimize your company and protect yourself from liability.

According to the US Small Business Administration of Advocacy, there are 4.3 million small businesses in California as of 2024, each with its own unique characteristics. Looking to start your own? Below, you’ll find a step-by-step process for how to start a business in California, from applying for funding and gaining an EIN to obtaining licensing and permits.

How to start a business in California

Starting a business in California takes a clear idea, a legal structure, and the right registrations. After that, you can handle the financial, legal, and marketing steps needed to launch your business and achieve long-term success. The general process requires you to: 

• Choose a business idea
• Name your business
• Create a business plan
• Choose a business structure
• Find funding
• Register a fictitious name
• Get an EIN
• Choose a registered agent and register your business with the state
• Pay state taxes
• Obtain a business license and permits
• Examine insurance options
• Set up a business bank account
• Market your business

1. Choose a business idea

All successful businesses have to start with a great idea. As you brainstorm ideas, be sure to choose a business category that fits with both your experience and your budget. A business that costs less to launch can make it easier to test demand before you commit to a larger investment.

Low-cost paths start with skills or assets you already have, whether you’re looking to create a service business, a home-based business, or an online store. According to a 2025 survey from the US Small Business Administration of Advocacy, some of the fastest-growing business categories in California include professional and technical services, real estate, retail trade, and healthcare. 

2. Name your business

Choose a business name that fits your brand and can be used on state, tax, banking, and licensing forms. A business name generator can help you develop options, but each name still needs to be checked before you use it.

Once you have a shortlist of viable options, you’ll want to run checks on each, including:

• Searching the US Patent and Trademark Office trademark database to see whether another business has registered under a similar name
• Reviewing the California business entity name rules to confirm your name meets state requirements
• Checking domain availability with Shopify’s domain tools to ensure that your business name can also work as a website address.
• Reserving the business name with the California Secretary of State once you’re ready to move forward.

3. Create a business plan

Make a business plan to stay organized and goal-oriented throughout the startup process. A business plan is also often required as part of the application process for a business loan, so if you know you’re going to need funding, you should have a thoughtful business plan ready to share.

4. Choose a business structure

Before filing state paperwork, you’ll need to choose a business structure, which can impact everything from how you hire to how you’re paid and taxed. Compare each option by liability protection, tax treatment, filing requirements, and the amount of administrative work involved.

5. Find funding 

Some businesses will need an additional financial investment before becoming realized, which is why many prospective business owners turn to funding to get their idea off the ground. To start, estimate your startup costs before seeking funding. Some businesses can launch with a lean budget by starting from home and using free tools. If you need outside capital, consider these funding paths:

• Personal savings and bootstrapping. Use savings or early revenue to cover startup costs and reduce debt, though growth may depend on available cash.
• Small business loans. The Small Business Administration (SBA) offers loan programs, and some California banks, credit unions, and community lenders provide business financing. Approval depends on lender requirements.
• Grants and state programs. Grants are competitive and often limited by business type, location, or industry. California’s Office of the Small Business Advocate cites several funding opportunities for small businesses and nonprofits, including grants and loans from state and federal agencies.
• Angel investors and venture capital. These options may fit tech, innovation, or high-growth businesses that can show market demand.
• Crowdfunding and preorders. Raise money through early customer commitments, then use that demand to guide production or launch plans.

6. Register a fictitious name

As part of the startup process, you may want to register a fictitious name, sometimes also called a DBA (doing business as), assumed name, or trade name.

If you’re a sole proprietor but don’t want to publicly operate under your own name, a DBA allows you to choose a unique name for your business. The same goes for a corporation or an LLC; if you don’t want to include the word “Incorporated” or “LLC” in your public-facing business name, you can use a DBA.

Registering a fictitious business name connects the true identity of a business owner with the name of the business they own. That way, stakeholders can pursue legal action or debt collection as needed. A fictitious name must be registered with the California Board of Accountancy (CBA), and there is no fee for the application.

7. Get an EIN

An employer identification number (EIN) identifies your business for federal tax purposes. The IRS issues EINs for free through its official EIN application page—just make sure to apply directly through the IRS, not a third-party paid filing page.

8. Choose a registered agent and register your business with the state

California businesses must designate an agent for service of process. This person or registered corporate agent receives legal documents for the business.

Check the California Secretary of State’s entity-type guidance to confirm which formation documents apply to your business structure. Filing fees can vary by entity type and form, so review the Secretary of State’s fee details before registering.

Registered agent costs vary, too. You may pay $0 if an eligible California resident serves as the agent, or anywhere from $100 to $300 per year for a commercial registered agent service.

9. Pay state taxes

Businesses in California are required to pay an annual $800 franchise tax, with some exceptions. The state income tax rate for corporations and LLCs taxed as corporations is 8.84%. 

LLCs may also be subject to additional fees, depending on their total income. Sole proprietorships file as individuals using Form 540 for taxes, so state income tax rates may vary.

All employers in California have to collect and pay payroll taxes. There are four main types of California state taxes you’ll be responsible for paying, including:

• Unemployment insurance (UI). This funds unemployment benefits for workers who lose their jobs. It’s paid from employer contributions and has a maximum tax of $434 per employee.
• Employment training tax (ETT). This tax has a flat rate of 0.1% on the first $7,000 of each employee’s wage. It’s also paid from employer contributions. 
• State Disability Insurance (SDI). This tax provides disability benefits to employees who are temporarily unable to work due to health conditions. As of 2025, the SDI withholding rate is 1.2% of an employee’s wages. 
• California personal income tax (PTI). Employers withhold this tax from employees’ wages and remit it to the state.

10. Obtain a business license and permits

Registering your business with the state is separate from getting the licenses and permits needed to operate. Requirements vary by location, industry, and business activity.

Use California’s CalGold permit tool to find agencies that oversee permits, licenses, and registrations for your business type. Keep in mind, CalGold provides permit information, but it does not issue permits or licenses.

If you sell or lease tangible goods in California, you’ll also need a seller’s permit before making sales. The California Department of Tax and Fee Administration (CDTFA) handles seller’s permits and provides an online registration portal.

11. Examine insurance options

Having business insurance is a best practice for any business, even if you have the protections of an LLC or corporation. California employers with one or more employees must provide workers’ compensation benefits.

The California Department of Insurance offers guidance on what types of insurance you might need for your operation, including:

• General liability
• Professional liability
• Workers’ compensation

12. Set up a business bank account

It’s easy for your business and personal finances to get messy as an entrepreneur. You can prepare to start operating your business by opening a dedicated business bank account, applying for a business credit card, and possibly even contracting a business accountant. 

Taking these steps will help keep your business finances organized. While a business bank account can help, if you struggle to keep your business and personal finances separate, consider hiring an accountant. 

13. Market your business

Marketing is the top Year One challenge for 37% of merchants, according to a Shopify Survey of Store Owners in Q4 2025.* Here are the steps to take to market your business successfully:

• Brand your business. Quality branding helps customers recognize the value and personality that your business brings to the marketplace. Branding encompasses a number of visual elements, including a logo and brand colors, as well as brand tone and voice.
• Build a website. Shopify makes it easy to build a website for your business. With website-building tools that don’t require coding or design skills, a variety of educational resources, and quality support, you’ll be debuting and growing your brand online in no time. 
• Promote your business. Promotion is key to effectively selling products or services online. Focus your promotional efforts on creating a marketing plan that will get your product in front of your ideal customer base. This process will keep your marketing strategy on track and ensure that your brand is being leveraged to the fullest. 
• Do your research. Doing a SWOT analysis can help you identify what you’re doing right and what needs refinement. Market research can also help support your understanding of your industry, potential customers, and competitors. Insights from that process help you develop more successful ways to market your products, grow brand awareness, and even attract investors.

California business costs and fees

Starting a small business in California comes with various fees to consider. Some are paid when you register, while others arise each year or once you start hiring and selling. The table below describes some of the potential costs you may incur:

Examples of California businesses 

California’s business landscape includes brands that started small and grew into national names. Among the most well-known are:

• P.F. Candle Co.
• Brightland
• OSEA

P.F. Candle Co.

Los Angeles–based candle brand P.F. Candle Co. not only got its start in California, but many of its products are inspired by its home state. 

What began as founder Kristen Pumphrey’s Etsy shop in 2008 has since grown into a thriving business that sells directly to customers through a Shopify website, as well as wholesale to major retailers like West Elm and Urban Outfitters. Everything from its product operations to its mission is proudly Californian. 

Brightland

Artisanal olive oil brand Brightland began in 2018 as a one-woman quest to learn everything about what makes quality olive oil. Today, it’s a viral brand that’s even been named as one of Oprah’s Favorite Things. 

Brightland’s founder, Aishwarya Iyer, has built a thriving business that sells directly through its Shopify store, as well as through food retailers across the US. The brand is quintessentially Californian, focused on quality local sourcing and production, sustainability, and other values that capture the essence of what Brightland refers to as “living in a golden state.”

OSEA

Founded in 1996, family-owned-and-operated skin care brand OSEA has grown from a Malibu-based business to a beloved worldwide presence. One reason why OSEA has been able to sustain long-term growth is by adapting to the age of ecommerce. 

The brand sells directly to consumers via its Shopify website, as well as through major retailers and spas. The mother-and-daughter-founded business is deeply inspired by California’s coast, which shows up in everything from its seaweed-based products and ocean-focused branding to its commitment toward sustainability and clean beauty standards.

Resources and next steps for starting a business in California

Dr. Pamela S. Williamson, president and CEO of Women’s Business Enterprise Council West, works with women business enterprises and advises new business owners to start with research. In your first week, focus on three areas: your market, your competitors, and your competitors’ products.

Research the market

Write down who is most likely to buy your product or service and include general specs about them, like where they live, what they need, and why they may choose your business. In Shopify’s Q4 2025 Survey of Store Owners,* 36% of merchants said finding customers was one of their top challenges in year one.

If you need help with market research, there are resources available to you. The California Small Business Development Centers (SBDC) provides free or low-cost consulting, market research assistance, and business plan guidance. SCORE also offers free mentoring, workshops, and tools to help entrepreneurs develop effective business strategies.

Research the top competition

Understanding the competitive landscape of your business category is an essential step toward finding success. By identifying businesses that already offer the type of product or service you want to sell, you can analyze their strengths and weaknesses, identify market gaps, and pinpoint areas where you can differentiate your business.

Most California cities also have local chambers of commerce that provide industry insights, networking opportunities, and business directories. Likewise, you can use the California Secretary of State Business Search to find information on registered businesses in California.

Research your competitors’ products

Review competitor websites to see how similar businesses present their products or services. Pay attention to pricing, sales channels, shipping options, retail partnerships, and any offers that appear across multiple competitors.

From there, turn your attention toward customer reviews, which can give you insight into what buyers value and expect from businesses in the category. Customer interviews can add more detail, especially if you ask why people choose a product and what would make them consider another option. 

California GO-Biz, the state’s official business portal, is a great resource to turn to when analyzing your competitors’ products. GO-Biz provides market research tools, funding resources, business expansion assistance, and other valuable resources. 

*Based on a 2025 survey of 500 Shopify merchants conducted in English across Australia, Canada, the United Kingdom, Ireland, New Zealand, and the United States. Respondents were established merchants with two or more years on the platform. Results reflect the experiences of this specific sample and may not be representative of all merchants.