12 Steps on How to Start a Business in California

Step 3: Obtain Funding

Funding is another vital aspect of forming a new business. Many entrepreneurs seek to raise money for their startup costs immediately, but there is some planning that should take place first. First, new business owners should calculate the costs of running the business. When the business owner knows the amount they need, they will better be able to find the correct source to fund the business. Second, new company owners should be smart with spending habits, stay organized, and create a comprehensive financial plan. Here are a few funding ideas:

• Bootstrapping. The DIY approach to funding means the entrepreneur uses his savings and current income to fund the business. The profits, when they arrive, are invested back into the business, creating growth.
  
  
• Family and Friends. New business owners can reach out to friends and family for capital if they are up to it. However, combining family with business can be risky, so providing everyone who contributes with a written agreement and a repayment plan makes sense.
  
  
• Small Business Grants. Small business grants are a popular option because they provide funding that does not need to be repaid. However, there are many small business grant opportunities in California, and entrepreneurs will need to complete the application process through a grantor.
  
  
• Small Business Loans. Small businesses can apply for loans through banks and other lenders. Of course, they need to pay the small business loans back, but the capital provided should be calculated to cover startup costs and possibly more.

Step 4: Select a Business Structure

New business owners in California will register their companies as legal entities, choosing from options such as an LLC, a corporation, a nonprofit, and more. Registering the business increases credibility and, even more importantly, protects from personal liability if legal action is taken against the business. Here are the business structure options for starting a business in California.

Sole Proprietorship

This informal structure is for an individual owner. It is not incorporated and is also not separated from the owner, meaning that the total amount of profits go to the owner. However, entrepreneurs should be aware that if the company goes into debt or is sued, the total financial liability also falls on the owner.

Partnership

Similar to sole proprietorships, partnerships are informal and unincorporated. Yet, this structure features multiple owners. In addition, partnerships do not offer liability protection for their owners.

LLC

This popular structure features personal asset protection for owners and the flexibility of a sole proprietorship or partnership. Many small businesses favor LLCs because they are easy to maintain and have a helpful tax scheme.

Corporations

Corporations are legal entities that are separate and owned by the shareholders. This structure is attractive for investors and has more formal regulations than LLCs. Large companies such as Microsoft and Apple are firmly in the corporate category.

Nonprofit Organizations

Investors do not fund nonprofits. Instead, they are based on donations and created to help further social causes. This means nonprofits like the Red Cross do not need to pay taxes.

When new business owners choose not to register the company as a business entity, they are held personally responsible for any liabilities and debts that come with the business. Sole proprietorship and partnership owners might also need to file a fictitious name or DBA before conducting business. DBAs are not to be confused with business structures and do not protect individuals and personal belongings that LLCs take care of.

Step 5: Register Your California Business

The next step in the process is to form the company. These steps consist of:

• Naming the business
• Identifying an agent for service of process or a person or business entity to accept legal and tax documents on the company’s behalf
• Obtaining an EIN or employer ID number that is assigned by the IRS and will identify the company for tax purposes
• Filing documents of formation

In addition to this general list, the business structure you have chosen will require other unique actions. Here are the steps that accompany each structure.

LLC

• Name company
• Choose a Service of Process Agent
• File the LLC with California
• File the initial Statement of Information
• Draw up an Operating Agreement
• Procure an EIN

Filing Articles of Organization for California LLCs requires the business to submit its formation documents online to the CA Secretary of State’s office. This can also be done by mail for a $70 fee or in person for an additional $15 fee.

Corporations

• Name the Corporation
• Choose a Registered Agent
• Have an Organizational Meeting
• File Documents of Formation
• File a Statement of Information
• Procure an EIN

To file an Article of Incorporation for a California corporation, formation documents must be submitted to the CA Secretary of State via the web or mail for a $100 fee to file an Article of Incorporation for a California corporation. In-person, the fee is an additional $15.

Nonprofits

Creating a nonprofit involves filing for tax-exempt status, known as 501(c)(3) status, through the Internal Revenue Service. Many of the other steps are similar.

• Name the Nonprofit and File a Name Reservation
• Select a Registered Agent
• Select Officers and Board Members
• Adopt Conflict of Interest Policy
• Adopt Bylaws
• File Articles of Incorporation
• Procure an EIN
• Apply for Tax Exempt (501(c)(3) Status

Articles of Incorporation for Nonprofits can be submitted to the Secretary of State in CA via the web, through the mail for a $30 fee, or in person for a $15 fee.

Step 6: Set up Accounting, Credit Cards, and Banking for the Business

Personal asset protection is important for new businesses, and assets can be protected through business banking and dedicated credit accounts. However, it is essential not to mix business accounts with personal funds because this places personal assets at risk if legal action is taken against the business. This issue is referred to as “piercing the corporate veil” in business law.

Protecting the business can be achieved through three steps:

1) Opening a Bank Account for the Business

• • Separates personal assets from the assets of the business, which is required for the protection of personal assets
  • Makes filing for taxes and accounting easier

2) Credit Card for the Business

• • Also helps separate business expenses from personal expenses
  • Builds strong credit, helpful in raising capital

3) Business Accounting System

Accounting software helps companies monitor their performance and makes yearly tax filings easier. In addition, overall, business accounting becomes easier when businesses can readily download bank and credit card transactions.

Step 7: Obtain Insurance

For businesses, insurance is a necessity. However, there are various types of business insurance available in California. These include Professional Liability Insurance, General Liability Insurance, and Workers’ Compensation Insurance.

Small businesses should procure a general liability policy, while companies providing consulting services and professional advice should obtain a professional liability policy.

In California, companies with one or more employees must have workers’ compensation insurance.

Step 8: Obtain Permits and Licenses

For the company to comply with federal, state, and local regulations, obtaining the correct licenses and permits is vital. The proper licensing and permits will ensure that the business is operating legally. The licenses and permits are contingent on the business type, and business owners can find out what is needed by running a business license search online. These resources may also help:

• Federal Licenses / Permits: United States Small Business Administration Guide
• State Licenses / Permits: California’s CalGold site
• Local Licenses / Permits: Contact the county clerk of the local vicinity

Step 9: Hire New Employees

A capable team is at the heart of every successful business. Finding motivated employees who are the right fit for a particular business venture is vital, and so is staying compliant with legal hiring regulations. In California, hiring requirements exist to ensure that the business is registered with the IRS for staff taxes and reporting all new employee hires to the state.

Registering for Employee Taxes

Once you have built the new California team, using a payroll service to track work time, issue paychecks, and help deal with tax season is essential.

Step 10: Build a Brand

The most formidable companies are the most memorable companies, and usually, the brand is what resonates with people. So when figuring out how to define the new brand, ask these questions:

• What does the company stand for overall?
• What are the company’s core values?
• What will earn the trust of consumers?

Then, devise a name that is simple, intriguing, and synonymous with the brand. An excellent business name should accomplish the same things as an excellent brand. The title should bring customers in a while, explaining what the business will do for its customers.

Step 11: Create a Website

Many entrepreneurs and new business owners assume that they need a specific web-based experience to build a quality website. However, small business owners all over the country are learning that designing a website has never been easier, thanks to web-hosting and content management systems such as WordPress, Weebly, and GoDaddy. As a result, websites have become both ubiquitous in the business world and synonymous with legitimate, successful businesses. While social media platforms are also vital to business success, sharing content on Facebook, LinkedIn, Instagram, and other sites does not replace an effective, easy-to-manage company website.

Step 12: Market the Business

The most popular and effective methods for marketing the new California business are:

• Press Releases
• Facebook Content
• YouTube Content
• Google My Business

Press Releases

Press releases are an excellent way to get the word out about the new business. Press releases are usually counted as a one-time cost and can:

• • Improve Search Engine Optimization
  • Provide valuable publicity
  • Establish the Brand across the web
  • Provide other long-term benefits

Facebook

A Facebook page is an easy way to influence and interact with customers. Social media outreach requires constant updating, and some companies hire a social media manager to keep all accounts uniform and enter into valuable dialogue with customers. A well-planned Facebook page can also:

• • Extend the company’s reach through paid ads
  • Establish a local presence
  • Display high-res pictures and videos of products or services
  • Communicate directly with consumers
  • Receive and share customer reviews

YouTube

YouTube has quickly become not only an entertaining video-sharing service but a platform through which to grow a new business. Every day, millions of people search out content on YouTube, creating an enormous opportunity. Among other things, YouTube can offer new companies a chance to:

• • Increase engagement with social media and create firmer bonds with customers
  • Raise SEO numbers, boost Google rankings, improve conversion rates
  • Display videos about exclusive content and new services

Google My Business

This beneficial tool allows companies complete control over their business appearing on Google’s search engine results page and Google maps.

Google My Business also helps companies:

• • Engage with customers on a different level, therefore increasing visibility
  • Establish brand credibility
  • Inform customers about location, contact information, and more pertinent information, and share reviews

What is Next for the New California Business?

Starting a new business in California is an exciting, inspiring prospect. However, the task can be daunting as well. New business owners should not hesitate to contact the skilled, experienced attorneys at Nakase Wade with additional questions. Good luck.