California Business Guide
How to Start a Business in California
Everything you need to form your California LLC, corporation, or sole proprietorship, with exact fees, timelines, and step-by-step instructions.
California has the largest state economy, about $4.3 trillion in 2025 GDP, and 39,355,309 residents. The LLC filing fee is $70, and every LLC owes the $800 minimum annual franchise tax from its first year if it was organized or registered in 2024 through 2026, plus an LLC fee once California-source total income reaches $250,000.
This guide covers every step of starting a business in California, from choosing a structure to obtaining licenses.
Choosing Your California Business Structure
This is the first decision and it affects everything: taxes, liability, paperwork. If you are unsure, an LLC is the right default for most California small businesses.
| Entity Type | Liability Protection | Taxation | California Filing Fee | Annual Cost | Best For |
|---|---|---|---|---|---|
| LLC | Yes | Pass-through | $70 | $800 minimum franchise tax plus a $20 Statement of Information every two years | Most small businesses |
| Corporation | Yes | Double (C-Corp) or pass-through (S-Corp) | $100 | $25 Statement of Information every year; $800 minimum tax after the first year | Raising investment, stock options |
| Sole Proprietorship | No | Pass-through | $0 | $0 | Freelancers, side hustles |
| Partnership | No | Pass-through | $0 (general partnership) or $70 (LP or LLP) | $800 for an LP or LLP; none for a general partnership | 2+ owners (consider an LLC instead) |
8 Steps to Start Your California Business
- 1
Choose your business structure
LLC, corporation, or sole proprietorship. Each has different costs, tax treatment, and liability protection.
- 2
Pick and reserve your business name
Search the California Secretary of State, Business Programs Division database. Reserve for $10 (60 days, not renewable for consecutive periods).
- 3
Appoint a registered agent
Must have a physical California street address. Can be yourself (free) or a registered agent service (prices vary).
- 4
File your formation documents
Articles of Organization (Form LLC-1) ($70) or Articles of Incorporation ($100) with the California Secretary of State, Business Programs Division.
- 5
Get your EIN from the IRS
Free, online, takes about 5 minutes. Do not pay anyone for this.
- 6
Get a seller's permit if you sell goods
Through the California Department of Tax and Fee Administration (CDTFA); the permit is free. State sales tax rate: 7.25% statewide base; with district taxes city rates run from 7.25% to 11.75%.
- 7
Get required licenses and permits
California has no general statewide business license (the Secretary of State issues no licenses or permits, and the CDTFA seller's permit is not a business license).
- 8
Register for California taxes
Register with the EDD if you will have employees, and file with the Franchise Tax Board, which collects the $800 minimum tax. Personal income tax is graduated up to 12.3%, plus a 1% mental health tax above $1 million.
How Much Does It Cost to Start a Business in California?
| Item | Cost | Notes |
|---|---|---|
| LLC filing fee (California Secretary of State, Business Programs Division) Required | $70 | Online filings are normally processed within about 5 business days or less; |
| Corporation filing fee Required | $100 | If forming a corporation instead |
| Statement of Information (Form LLC-12) Required | $20 | Within 90 days of filing the articles, then every two years during the six-month window ending on the last day of the... |
| Name reservation | $10 | 60 days, not renewable for consecutive periods |
| Registered agent service | $0 to $300/yr | Free if you serve as your own; a service sets its own price |
| EIN (IRS) Required | $0 | Always free |
| Business license | Varies | California has no general statewide business license (the Secretary of State issues no licenses or permits, and the... |
| Operating agreement | $0 to $500+ | Free template or attorney-drafted |
| Realistic LLC total (year 1) | $890 minimum for an LLC formed in 2024 through 2026 |
Start a Specific Business in California
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Starting a Business in Your California City
California Business Guides
Formation & Entity Types
- How to Start an LLC in California (2026 Guide)
- How to Start a Corporation in California (2026)
- Sole Proprietorship in California
- Delaware LLC vs California LLC
- Series LLC in California
- Register an Out-of-State LLC or Corporation in California
- California Professional Corporations
- California Pass-Through Entity Elective Tax
- Anonymous LLC in California
- California LLC vs Corporation
- How to Start an S Corp in California
- LLC vs S Corp in California
- How to Dissolve an LLC in California
- How to Start a 501(c)(3) Nonprofit in California
- California LLC Annual Report (Statement of Information)
- California DBA (Fictitious Business Name)
- California Fictitious Business Name by County
- California LLC Taxes
Licenses, Permits & Registrations
- How to Get a Business License in California (2026)
- How to Get a Seller's Permit and Resale Certificate in California
- California Home-Based Business Laws
- California Contractor License Guide
- California Cottage Food Law 2026
- California MEHKO Home Restaurant Permit
- California Liquor License Guide
- How to Get a Food Handler's Permit in California
- California Cannabis Business License
- Business License in Unincorporated California
- California County Health Permit Fees for Restaurants
- California Sidewalk Vending Permits
Taxes & Compliance
- California Sales Tax Rates by City
- California Business Personal Property Statement
- Register as an Employer With EDD in California
- California Minimum Wage
- California Local Minimum Wage by City 2026
- CalSavers Requirements for California Employers
- SB 553 Workplace Violence Prevention Plan in California
- California Workers Compensation Insurance
- California Independent Contractor Rules
- California Business Insurance Requirements
- Register as an Employer With EDD in California
Costs, Money & Services
Why Start a Business in California?
- California has the largest state economy, about $4.3 trillion in 2025 GDP (BEA), and 39,355,309 residents (July 2025 Census estimate).
- California has no general state business license, but 445 of its 483 cities charge a local business tax or registration with no common formula.
- Every LLC pays an $800 minimum franchise tax from its first year (LLCs formed 2024 through 2026), plus an LLC fee once California income reaches $250,000.
- A fictitious business name is filed with the county clerk and published in a newspaper for four weeks.
California Business Resources
California Secretary of State, Business Programs DivisionEntity filing, name search, online filingwww.sos.ca.gov →California Department of Tax and Fee Administration (CDTFA) and Franchise Tax Board (FTB)Sales tax permits, business tax registrationwww.cdtfa.ca.gov →California Small Business Development Center networkFree business counseling and trainingcaliforniasbdc.org →SBA California District OfficeFederal loans, programs, and mentoringwww.sba.gov →
Frequently Asked Questions
- How long does it take to form an LLC?
- Online filings are normally processed within about 5 business days or less, while paper filings take 10 or more business days. Expedited options are available for $350 (24-hour), $750 (same-day), or $500 (4-hour drop-off, precleared).
- What does an LLC cost in its first year?
- The Articles of Organization (Form LLC-1) have a $70 filing fee, and the Statement of Information (Form LLC-12) has a $20 fee and is due within 90 days of filing the articles. The $800 minimum annual franchise tax also applies from the first year for LLCs organized or registered in 2024 through 2026.
- Can a non-resident form a California LLC?
- The Articles of Organization (Form LLC-1) do not ask where the members live, but the LLC must keep a California agent for service of process, who must be a California resident or a corporation with a Corporations Code 1505 certificate. Forming the LLC elsewhere does not avoid the $800 minimum tax if the business is done in California, so confirm your situation with the Secretary of State or a tax professional.
- What is the cheapest way to start an LLC?
- The lowest-cost start is a standard online filing of Articles of Organization (Form LLC-1) through bizfile Online for $70. A name reservation is optional and costs $10 for 60 days.
- Is an operating agreement required?
- You do not file an operating agreement with the Secretary of State when you form an LLC; the filings are the Articles of Organization (Form LLC-1) and the Statement of Information (Form LLC-12). Most multi-member LLCs sign a written agreement anyway, so ask an attorney how to set one up for your situation.