California is a great state to settle down and start a business. Beautiful cities like San Diego and San Francisco offer prime real estate for people looking to live in the city but also opportunities for suburban lifestyles.
Regardless of where you want to settle down, California also makes it easy to start an online business. In fact, all you need to get started is a computer and a place to call home.
When starting an online business in California, you'll need to form a legal entity, fill out a business license application for the city you operate in, and get approval for a home occupancy business. While these steps may seem straightforward, there are a lot of steps you need to take in between to be successful with an online venture.
The good news is that we’re here to help. Read on to learn more about how to start an online business in California.
How to Start an Online Business in California
Step 1: Make a Business Plan
Step 2: Register Your Business Name and Domain
Step 3: Register Your Legal Entity
Step 4: Choose a Registered Agent in California
Step 5: Acquire All the Necessary Permits and Business Licenses
Step 6: Remain Compliant and Pay Your Taxes
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Thinking about starting an LLC in California? We’ve got all the details you need.
Begin by selecting a unique business name, appointing a registered agent, and filing your Articles of Organization with the California State Corporation Commission, which includes a $100 processing fee.
You can do this independently, consult with a business attorney for specialized legal guidance, or join the other 75% of our readers and hire a specialized California LLC formation service (recommended).
Zenbusiness (Starting at $0 Plus State Fees)
What Exactly Is an Online Business?
It’s important to understand what an online business is before you panic and rush to get yourself an e-commerce business license or before you register your company name. In California, an online business is a type of business that sells a good or service over the Internet. This can be software as a service, products from a store, or selling something from your home.
According to California law, an online business is referred to as an electronic business (e-business). These businesses can range from a YouTube channel to selling products on a platform like Etsy. In fact, you can also make your website and sell products or services.
What Are the Types of Online Businesses in California?
Several types of online businesses are ripe for the taking in California, even if you plan on providing software or something digital. In fact, you can start an online business in California with no money if you start offering your skills as a consultant for search engine optimization (SEO) or writing.
Plus, even online businesses that do have start-up costs are affordable and won’t usually cost you more than a few hundred dollars unless you plan on starting a big operation.
Some more types of online businesses include:
- Blogs
- YouTube channels
- Dropshipping
- Consulting
- Sales
- Affiliate marketing
- Website development and hosting
- App developers
- Google and Facebook ad specialist
These are only a few examples of online businesses in California. Plus, you can start any type of small home-based business you want in California online if you have a good idea.
Do You Need a Business License to Open an Online Business in California?
Yes, most people who want to do business in California will need a license. A business license in California is what allows a county or town to collect tax revenue, understand your business, and keep track of your operations. Luckily, whether you’re looking for an e-commerce business license in California, or another type of license, the process is pretty straightforward.
Depending on where you plan on doing business, the type of licenses you need will vary. You’ll likely also need permits to sell goods from your home. For example, you may need a cottage food permit to sell food from your home.
There are also unique licenses for other services, like an accountant or therapist working out of their home. You’ll have to follow the appropriate zoning laws and regulations to avoid problems.
How Much Does It Cost to Start an Online Business in California?
You may be wondering how to start an online business in California with no money. Luckily, it doesn’t cost a lot of money to start an online business. In fact, you can get started for free if you plan on offering an online consulting service or freelance operation.
On the other hand, an e-commerce business in California that’s bringing in several hundred thousand dollars might have to pay thousands. Expenses include a good website, hosting, and state and federal taxes. Don’t be intimidated just yet though – these high costs are mostly for established businesses that are bringing in lots of income.
You have to cover the cost of business licenses in places where you want to sell products online, which is typically $50 to $200. Some other costs may include a computer for a few hundred dollars and internet access.
What Are the Benefits of Doing Business Online in California?
The digital age is here, and more people than ever can start an online business in California. Plus, you’ll be happy to hear that there are some advantages to starting an online business compared to one that’s more brick-and-mortar or service-based. Learn more about some of the benefits of online business in California below.
Less Overhead and Lower Costs
When it comes to starting a business online, there isn’t a lot to worry about when it comes to costs.
Aside from filling out paperwork and creating a legal entity, there doesn’t have to be anything else. For example, you can get your California business license and then start writing blogs for people or act as a consultant. This can make the process seem free compared to other types of businesses.
Furthermore, you don’t have to worry about paying rent for a building space, hiring people to watch your location, or stock inventory in a store. Ultimately, you have more time, money, and flexibility when you open a small business online.
Easy Internet Access
Another important factor to consider is how much internet access has grown. Most of the world has the internet, and when someone looks for your company, they’ll want to see a website. Without one, they may find the company sketchy or untrustworthy.
The good news is that online businesses avoid this problem completely. Since the whole business is online, you don’t have to worry about maintaining both a brick-and-mortar store and an online company.
Connecting With People Around the World
Whether you sell a good or a service, an online business has the power to transcend borders. People in other countries can view your website, place an order, and have it shipped right to the door.
You can also provide other services like writing, consulting, and editing to people anywhere in the world. Ultimately, going global can help you expand your reach to other countries without the need to set up expensive stores in other countries.
How to Start an Online Business in California
To start an online business in California you have to follow most of the same steps to start any other business. You need to come up with a plan, analyze the market, get approval from the city, and apply for your business license. Learn more about each part of the process below.
Step 1: Make a Business Plan
First and foremost, you need to have a plan. While this plan will help you prepare for the task of starting a business, it’s also there to show the city more about your business. To make a business plan, you’ll need to include the following information:
- An executive summary of your company and what you intend to do
- A general overview of your company
- The products that you sell or any services that you plan to offer
- The management structure of your company, who owns the company, and the type of legal entity it is
- Marketing plan
- Sales plan
- An appendix to help you navigate the plan and any other documents that you want to include
- An analysis of the market and how you plan to make money
- Estimated profits
For an online business, you still need to come up with a business plan. Whether you’re flipping something on eBay or providing content for agencies, it’s important to come up with a plan for your online business in California.
Step 2: Register Your Business Name and Domain
Once you have your plan, it’s time to get into the nitty-gritty. First, come up with a name for the business and check with the Secretary of State database to see if it’s taken or available. Then, register the name and pay any associated fees. Once you have the name that you like, you’ll need to get your online real estate ready – this step is extra important for an online business.
If you want to start an online business from your home you’ll need to register your domain, find a hosting provider, and build your website.
For the domain, we recommend purchasing one that matches your business and then purchasing all other domains with similar names or extra letters. For example, if your company name is brickbuilderguy you’ll want to get brickbuilderguy.com, brickbuilderguy.org, brickbuilderguys.com, and so on.
You won’t need to do this until your business takes off, but once people can find a way to get money from you, they will.
Aside from the domain, hosting is also important. Your host is essentially the server that will display your website. Some great options include Cloudflare, Cloudways, or some website builders like Squarespace or Wix. Ultimately, who you choose as a host depends on your preferences, security tolerance, and how much traffic you have. Plus, this can be changed later.
The last thing to note is that you have to have the website built. You can write the code yourself with HTML or CSS, or you can partner with a firm to have a custom website created. WordPress, Wix, and Squarespace can help you speed up this process.
If you want full control, go with a custom-coded website or WordPress. On the other hand, platforms like SquareSpace or Wix give you less control, but they’re easier to use.
Step 3: Register Your Legal Entity
After you complete the process for registering your name and domain, it’s time to register the entity of your company with the Secretary of State. During this part of the process, you need to register your name, submit your personal information, and begin the process of getting approval for your operations.
The main choice you have to make here is the type of business you want to have. You can form an LLC for liability protection, S-corp for tax benefits, or operate as a sole proprietorship or DBA.
Partnerships and other entity types are also acceptable, so take some time to come up with what works best for you. This should be included in your business plan, so go back to that step before registering your company if you haven’t already.
Depending on the type of legal entity that you choose, starting an online business can cost anywhere from $50 to $200. That said, this also depends on how much you’re projected to make because some small businesses that don’t make $10,000 might get some tax and registration breaks in some California cities.
Additionally, your location will play a role in the cost here, so keep that in mind.
Step 4: Choose a Registered Agent in California
If you’ve chosen to form your business as an LLC or corporation in California, your next key step is to appoint a registered agent. This is a mandatory requirement when preparing your Articles of Organization, the document needed to officially register your LLC or corporation with the California Secretary of State.
So, what is the role of a registered agent? A registered agent is an individual or business entity designated to receive crucial documents on behalf of your business, such as tax forms, legal notices, lawsuits, and official government communications. Essentially, your registered agent functions as the main liaison between your business and the state.
Who can act as a registered agent? The registered agent must be either a California resident or a corporation authorized to operate within the state, like a registered agent service. If you prefer to be your own registered agent, you need to appoint an individual within your company, as California law does not allow business entities to serve as their own registered agents.
For further details on the requirements for registered agents in California, consult the California Corporations Code.
Don’t forget that to run a business, you need to: register a business entity (LLC is the most suitable option, more details here), obtain an EIN (you can apply online here), open a business bank account (more details here), understand accounting and taxes (more details here), and register a domain and create a website (this is optional, you can do it here).
Alternatively, you can delegate all of this to a registered agent starting from $0 + State Fees and get everything done in 1 day. This can save you time and ensure everything is done correctly, leaving you to focus on growing your business.
Step 5: Acquire All the Necessary Permits and Business Licenses
Once you register your online business, you need to make sure it remains in good standing and that you follow any local, state, and federal regulations.
If you plan on starting an online business in any of California’s cities, you’ll usually need a seller’s permit. These permits are required for online and traditional businesses if the company is selling or purchasing things in the state. The California Department of Tax and Fee Administration states that you need this permit, or you can get into legal trouble.
Aside from getting your seller’s permit, you need a business license. Every company that wants to do business in California needs a license, which is typically a general business license.
These licenses are specific to the city where you plan on operating, so if you live in San Francisco and want to sell items from your apartment, you need to apply for a license in San Francisco. Additionally, if you plan on selling in multiple cities, you may need more licenses.
Step 6: Remain Compliant and Pay Your Taxes
California requires you to pay state taxes and follow the rules and regulations of the city that you’re operating out of. Therefore, it’s important to remain compliant if you want to avoid any unnecessary fees, taxes, or other problems. Still, there are some important requirements that you should know. They include:
- Renewing your business license in the city you operate in; you have to do this for each city
- Get an EIN if you need one
- File a Statement of Information form with California
- Update the Secretary of State if you need to change the name of your company
- Appoint a registered agent if you have an LLC or corporation
- Open a business bank account and credit line (if you need credit)
Always remain compliant and ensure that everything is renewed at the appointment time to avoid any problems.
Tips for Marketing an Online Business in California
Online business in California isn’t as simple as marketing a brick-and-mortar store because you don’t have any foot traffic. Moreover, most cities don’t allow you to put signage for your business on your residential property. Therefore, you might have to get creative when it comes to marketing. Learn more about how to form a strategy and how to execute that strategy below.
The Planning Phase
First and foremost, make sure you plan your next move carefully. While an online business is more affordable than most other types of businesses, you can still mess things up and lose money. Therefore, consider the following:
- The best time to enter a new market
- Other online businesses like yours
- Your audience
- Your competition
- Your location
- Catchy website domains, logos, and other marketing materials
Always start with a strong plan for the best results.
Hit the Ground Running
Once you have your plan, it’s time to execute and hit the ground running. Some tips to help you market your online business in California include:
- Having a strong company website
- Buying a domain that has authority attached to it
- Print business cards, pamphlets, and other marketing materials
- Optimize your online websites for mobile use
- Create a digital marketing campaign on social media platforms like Instagram and Facebook
- Download email lists
- Use generative AI to market your materials and scrape data
- Email marketing
These tips will help you but our most important tip of all is to ensure that you take care of your customers. You might not see them face-to-face, but you should still value their experience.
Online Business in California FAQ
Have questions about your next online venture? We have answers to the most commonly asked questions about starting an online business in California below.
Can a Foreigner Start a Business in California?
Yes, foreigners can start businesses in California. The process is similar to the steps that we covered for starting a business as a citizen and resident of California. Additionally, foreigners can start any type of legal entity in California, but they do have to follow some different tax rules. For example, foreigners need to have Individual Taxpayer Identification Numbers to file returns.
The process to register your foreign business in California requires you to file a Statement and Designation by Foreign Corporation attached with a certificate of good standing. From there, a fee also needs to be paid and it’s usually about $100.
Is It Legal to Run a Business From Home in California?
Yes, it’s legal to run a business from your home in California. You need to be compliant with zoning laws, obtain the necessary permits, and follow any local laws to run a business from your home in California.
These rules and laws are different depending on where you’re located. For example, San Francisco and San Diego have different laws for obtaining a business license and how home-based businesses are zoned.
Do I Need a Business License to Work From Home in California?
No, you don’t need a business license to work from home in California. If you’re an employee for a company, you don’t have to worry about registering for a business because you work for someone else.
On the other hand, if you’re a contractor or a 1099 employee working from home, it’s a good idea to get a business license. What’s more, any business that uses a residence to sell goods online has to get approved by zoning agencies and will have to get a license.
Start an Online Business in California Today
California is an awesome place to start an online business because you’re close to Silicon Valley, which is one of the technology powerhouses of the world. You’ll be around plenty of investors, have enough options to get started, and plenty of space to grow and expand across a sprawling California.
Unfortunately, the process isn’t always simple, and you may have to follow several laws and regulations for each city in California and other states and countries. The good news is that we can always help you start a small home-based business.
There are plenty of tools to help you evaluate the market and take your business to the next level. There are also plenty of other services that we can provide for you to streamline the process even further. This includes assistance with registered agents, applying for business licenses, and much more.