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 is the world's fifth-largest economy and home to more small businesses than any other state. LLC formation costs just $70 through the Secretary of State's BizFile Online portal — but plan for the $800 annual franchise tax. Despite higher costs than some states, California's massive consumer market and innovation ecosystem make it one of the best places to build a business.
This guide walks you through every step, from choosing your business structure to getting your first customers.
Choosing Your California Business Structure
This is the first decision and it affects everything — taxes, liability, paperwork. If you're 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/yr franchise tax | Most small businesses |
| Corporation | Yes | Double (C-Corp) or pass-through (S-Corp) | $100 | $800/yr franchise tax | Raising investment, stock options |
| Sole Proprietorship | No | Pass-through | $0 | $0 | Freelancers, side hustles |
| Partnership | No | Pass-through | $70 | $800/yr franchise tax | 2+ owners (consider 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 Secretary of State's business database. Reserve for $10 (optional, 60 days).
- 3
Appoint a registered agent
Must have a physical California address. Can be yourself (free) or a service ($100-$300/yr).
- 4
File your formation documents
Articles of Organization (LLC, $70) or Articles of Incorporation (Corp, $100) through BizFile Online.
- 5
Get your EIN from the IRS
Free, online, takes 5 minutes. Do not pay anyone for this.
- 6
Open a business bank account
Keep personal and business finances separate. You'll need your EIN and formation docs.
- 7
Get required licenses and permits
California requires various permits depending on your business type and location. Check CalGold for requirements.
- 8
Register for California taxes
Register with the Franchise Tax Board and CDTFA for sales tax, depending on your business.
How Much Does It Cost to Start a Business in California?
| Item | Cost | Notes |
|---|---|---|
| LLC filing fee (Secretary of State) Required | $70 | — |
| Corporation filing fee Required | $100 | If forming a corporation instead |
| Franchise tax (annual) Required | $800 | Due annually; first year exempt for new LLCs |
| Name reservation | $10 | Optional, 60 days |
| Registered agent service | $0–$300/yr | Free if you serve as your own |
| EIN (IRS) Required | $0 | Always free |
| Business license | Varies | Depends on city/county |
| Operating agreement | $0–$500+ | Free template or attorney-drafted |
| Realistic LLC total (year 1) | $870–$1,370 |
Why Start a Business in California?
- Largest state economy — $3.6T GDP, more than most countries
- 40 million consumers — the biggest domestic market in one state
- Innovation hub — Silicon Valley, Hollywood, and leading biotech clusters
- Diverse workforce — access to talent across every industry
- Low LLC filing fee — $70, one of the lower formation costs in the US
- Strong consumer protections — builds trust with California customers
California Business Resources
Frequently Asked Questions
- How long does it take to start an LLC in California?
- Online filing through BizFile Online typically processes in 1–5 business days. Mail filings can take several weeks.
- What is the $800 franchise tax in California?
- California requires all LLCs, corporations, and LPs to pay an $800 minimum franchise tax annually to the Franchise Tax Board. New LLCs are exempt for their first tax year.
- Can I form a California LLC if I live in another state?
- Yes. You'll need a registered agent with a physical California address. Many formation services include this.
- What's the cheapest way to start a business in California?
- A sole proprietorship costs $0 in state fees. An LLC costs $70 to file, but remember the $800 annual franchise tax. You can file yourself without a lawyer or service.
- Do I need an operating agreement for my California LLC?
- It's not legally required, but strongly recommended. It defines ownership percentages, profit distribution, and operating procedures. Many banks require one.