Anyone can learn how to start a business in California. Just follow these 7 simple steps.
Step 1: Make A Plan For Your Business
The first step toward starting any successful California business is planning. Launching a business without a business plan is like shooting a major Hollywood production without a screenplay — it’s bound to go haywire. Among the things you’ll cover in your business plan are:
- Your target market. Who are you selling to? Don’t be afraid to get mega-specific here. Age, gender, location, income level — all of it’s relevant, and the more specifically you can define your market, the more effectively you’ll be able to sell to them.
- Your competition. Who will pose the greatest threat to your business? What sets you apart from them?
- The market need. What problem are you solving that no one else has? If you can’t describe what you’re going to do better than any other business in your area, you’ve got some serious thinking to do.
- Your milestones. What have you achieved so far? What do you plan to accomplish within the next 3 months, 6 months, 2 years? These are subject to change, of course, but it’s important to set goals for your business regardless.
- Your marketing plan. What’s your marketing budget? Where will you focus your efforts? Social media, email campaigns, online ads? If you’ve done enough research on your target market, you’ll know where to find them. Just like your milestones, your marketing efforts are bound to evolve — but you still need to establish an initial strategy.
This is also when you’ll create your mini-pitch and USP (unique selling proposition). Both of these are intended to concisely describe the mission of your business — the mini-pitch in 1-2 sentences and the USP in just a few words.
Writing a business plan involves much more than the few bullet points we listed above. For a more detailed discussion of business planning, check out our definitive guide.
Once you’ve gotten a better idea of what business planning entails, we highly recommend checking out some software solutions. Taking advantage of business planning software is the most efficient way to create a beautiful, thorough business plan.
Don’t know what kind of business to start?
Our friends over at howtostartanllc.com have compiled a massive list of business ideas, ranging from personal styling to axe-throwing businesses.
If you’re having trouble finding the perfect business idea for you, we encourage you to check them out!
Step 2: Register Your California Business
Your next major task is going to be registering your business with the state of California. Before you can do that, though, you have to figure out what type of business structure you want to form: an LLC, S Corp, C Corp, or Sole Proprietorship. Then, you can read our detailed guide on naming your business. Let’s take a quick look at each of the business structures:
- LLC: LLCs are the most popular business structure because they offer the protection of a corporation without the double taxation or extra paperwork. California allows SMLLCs (single-member LLCs), so you can form one even if you’re the only member of your company. Read our guide to more about how to form an LLC in California.
- S Corp: S Corps require a much more formal structure than LLCs. They’re made up of a board of directors, corporate officers, and up to 100 U.S. shareholders. However, like LLCs, S Corps aren’t subject to double taxation — all of the profits are claimed on the shareholders’ personal taxes.
- C Corp: The main difference here is that C Corps may have an unlimited number of shareholders from all over the world, and the corporation itself is required to pay taxes. Learn more about how to form a Corporation in California.
- Sole Proprietorship: The least formal structure of all — if you’re doing business on your own, you’re automatically seen as a sole proprietorship. There’s no need to file anything with the state, except perhaps a DBA (if you want to operate under a name aside from your own legal name). The main problem with this structure is that there’s nothing shielding you from business liability.
Read through our comparison guide to learn more about each business structure. Make sure you fully understand the taxes, management, and level of liability tied up with your chosen structure before registering it with the state.
When it comes time to officially form your business, we highly recommend seeking professional help. Using an online filing service is an inexpensive alternative to consulting with a lawyer, and many of them offer other necessary services at low rates when you form your business with them.
Step 3: Determine Business Licensing and Tax Obligations
Now that you’ve officially formed your business, it’s time to take all the necessary precautions to make sure you’re fully compliant with the federal, state and local government. Here are the best places to find out about each:
- Federal: The federal licenses and permits page on the Small Business Association’s website outlines all the business activities that call for special permission from the federal government, and directs you to the proper agencies. They also have a decent article on business taxes, but the best place to learn about this is on the IRS website.
- State: The California Department of Tax and Fee Administration website offers all the information you need to know about state business taxes and special permits and licenses. The Governer’s Office CalGold Permit Assistance Tool is also a great way to find out what taxes and licenses apply to your business.
- Local: California issues general business licenses by city, so you’ll need to check in with your local Chamber of Commerce to find out the application process. They’ll also be able to let you know about any other local requirements you may be missing!
No matter what type of business you’re starting, it’s simply not worth the risk of getting a hefty fine — or worse. Put in the effort now to save yourself a whole load of headaches later on!
These companies will do the rest of the digging for you (federal, state and local) and send you all the necessary applications in a tidy bundle, along with helpful instructions on how to fill them out.
Step 4: Separate Your Personal and Business Assets
Using dedicated business banking and credit accounts is essential for personal asset protection.
Now that you’ve made it through registering and setting up taxes and licensing for your business, you’ll need to take steps to protect your personal assets and establish your business as an independent entity.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
You can go a long way in protecting your assets with these three steps:
- Open a business bank account.
A business bank account separates your personal assets from your company's assets, which is necessary for personal asset protection. A designated business bank account also makes accounting and tax filing easier.
To open up a bank account for your business, you’ll need to obtain an EIN (Employer Identification Number). You’ll use your EIN in place of your social security number so that this account is completely separate from your personal finances. After this, start doing your research on various business bank accounts. Local options, like Banc of California, and national banks, like Chase, both have their perks.
Recommended: Find the right bank for you. Read our review of The 5 Best Banks for Startups and Entrepreneurs
- Get a business credit card.
A business credit card helps you separate personal and business expenses. A business credit card will also build your company's credit history, which can be useful to raise capital later on.
- Designate an authorized representative.
Make sure all documents are signed by a representative of your LLC and not by you (or other LLC members) directly. This will help separate you from liability incurred by the LLC.
- Keep your accounting and bookkeeping up to date
Make sure to sync up your banking and credit card accounts with an accounting software like QuickBooks as soon as you get the chance. It’s never too soon to start organizing your business’ finances!
Step 5: Fund Your Business
Now that you’ve got the financial foundation laid, it’s time to start building on it. There are tons of funding opportunities out there — especially in California — but not every approach is right for every business. When choosing a primary funding method, consider:
- The ownership structure of your business
- The nature of your product (if it could attract crowdfunding, angel investing, etc.)
- Your sales forecast
- Your current level of financial security
- Your personal credit
If you want to maintain full control over your business, seeking an angel investor may not be the right route, since oftentimes they’ll want partial control of the company. If you don’t have any high-value assets you can part with, selling assets to fund your business wouldn’t be the right fit for you.
We go over 10 major funding options and the situations they’re best suited for in our definitive guide to financing a business.
The California Small Business Development Center is a great resource if you need a little assistance coming up with funding opportunities. They’ve got dozens of locations across the state where you can go to discuss potential funding approaches for your business based on all the criteria above (and more).
Step 6: Build Your Business’s Brand
You’ve gotten the logistical stuff out of the way — now it’s time to start building your brand. There are tons of places where you can assert your brand image, but a couple major ones are your business logo and website.
When you’re crafting your logo, keep the following principles in mind:
- Color matters. The colors you choose to represent your business will have a major impact on customers’ initial impressions. Yellow feels joyful, blue feels serene — what colors capture the essence of your company?
- Be different. Don’t design your logo to look just like that of your leading competitor. This is a great opportunity to set yourself apart. How are people supposed to get excited about your business if they can’t tell you apart from the competition?
- Keep it professional. It’s well-worth a small monetary investment to make sure your logo looks legit. People are much more trusting of businesses that have a professional aesthetic. It doesn’t have to cost hundreds of dollars, though — there are plenty of talented designers on Fiverr who’ll create your logo for as little as $5.
For a more in-depth discussion of business logo design, head over to our definitive guide.
Launching a business website is another huge step for your brand, and we think the best way to go about it is by using a website builder. Working on an existing platform like Wix or StudioPress is a much easier and cheaper way to create a professional-looking website than hiring an expert to build one from scratch.
Step 7: Market Your Business
It’s time to market, market, market! This step truly never ends, so it’s in your best interest to get a basic handle on it ASAP.
Whether you’re planning on delegating all of your marketing efforts to a professional or leading the expedition on your own, it’s important to keep a few fundamentals in mind so you can gauge the success of your marketing strategy.
- Know your target market. We already discussed this briefly in Step 1, but it’s worth drilling in. If you don’t know who you’re selling to — specifically — there’s no way you’ll be able to market to them successfully.
- Do one thing well. Don’t try to master SEO, social media, online advertising and email campaigning all at once. Make an educated decision about where to focus your efforts based on your knowledge of your target market, and stay there.
- Make sure your strategy is measurable. You need to have a method in place for measuring the tangible results of your marketing efforts. We’re not just talking about the number of clicks, views or likes you’re getting — if your strategy isn’t generating sales, it’s all for nothing.
- Be willing to evolve. If you come to find that your initial marketing plan just isn’t working, it’s time to do some more research and reevaluate your approach. Don’t just keep pouring time and money into a strategy that isn’t getting results.
There’s much more to be said about marketing a new business, but these four points are bound to set you on the right track!
It’s clear by now that we’re major proponents of leveraging modern software when starting a business, and marketing is no exception. There are hundreds of programs out there designed to help entrepreneurs like you market their budding businesses, from ROI calculators to social media management tools.
We outline some of our favorites, and discuss small-business marketing in much more depth, in our definitive guide.