Starting a Business in California

Want to start a business in California but not sure how? We’ll help you navigate everything you need to know.
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Essential Steps When Starting a Small Business

Making your small business dreams a reality requires some hard work. But knowing where to start can make all the difference in helping to guide the way. To get your new business up and running, you’ll need to know your way around the following:

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Filing a Business Entity

Before you open your doors, you need to file your business entity to make your business official in the state of California. First, you need to decide which business entity you’ll be filing (if you need help, you can consult this guide). Once you’ve made a decision, you can file with the California Secretary of State.  

Tax Registration


Employer Identification Number (EIN)

All employers who have employees must be assigned an EIN (or Employer Tax ID) from the Internal Revenue Service. 

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California Sales and Use Tax

All sellers of tangible goods are required to register for sales and use tax collection. 

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California Payroll Taxes

Forms, filing instructions, and full information.

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Business Licenses & Permits

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General Business Licenses

To legally operate in California, you will need to secure the appropriate licenses for your industry. You can apply for the required licenses through the Office of Business and Economic Development’s CalGold Database. 

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Local Permits

Your local municipality, city, or county may have additional permitting or licensing requirements. Here are some of the most commonly required permits: 

  • Business License and/or Tax Permit
  • Building Permit
  • Health Permit
  • Occupational Permit
  • Zoning Permit
  • Signage Permit
  • Alarm Permit

Labor Laws in California

Businesses in California must comply with all federal hiring and labor laws. In addition, California has its own labor protections. 

California Labor Laws

Visit the Department of Industrial Relations’ site for full information. 

Learn More

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Employer Requirements

You’re almost there! The final step in setting up your business is to determine the federal and state employer requirements. 

Federal Requirements

  • Tax withholdings: View the IRS Employer’s Tax Guide for full requirements.
  • Tax records: The IRS requires businesses to retain records of employment taxes for at least 4 years. Learn more about the types of records small businesses are required to keep. 
  • Employee Eligibility Verification (Form I-9): Federal law requires employers to verify the employment eligibility for all employees hired after November 6, 1986. You can download Form I-9 and learn more about the process in the Instructions for Completing the I-9; Handbook for Employers. Proof of an employee’s eligibility to work must be obtained within 3 days of hire. This must be completed for citizens and non-citizens. For help navigating the I-9 form for non-citizens, you can consult the Small Business Guide to Immigration Regulations.  
  • Federal Income Tax Withholding (Form W-4): The W-4 form, which outlines tax withholdings, must be completed by every employee prior to or on their start dates. As the employer, you are responsible for submitting the W-4 to the IRS for verification.
  • Federal Wage and Tax Statement (Form W-2): Employers are required to report annual tax withholdings for each employee to the IRS. This is done using the W-2 form, which must be completed annually for each employee by January 31 for the preceding year. Copy A must be sent to the Social Security Administration (SSA). For full instructions on what you need to do, you can view the SSA’s Employer W-2 Filing Instructions and Information.
  • Form W-9: If you do business with a freelancer or independent third party, you must obtain a W-9. This is used for third parties who are responsible for filing their own taxes with the IRS.  

Insurance Requirements for California

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