California is the biggest and richest state in the United States of America.
It is also a cradle for startups and top corporations. And with the huge opportunities California provides for all businesses, registering a business in California is a desirable suggestion for entrepreneurs and investors looking to earn increasing and constant revenue.
Once you’ve decided to start your business in California, there are many significant decisions to make and many rules and processes that must be addressed. Outlined below are the main ones.
Main steps to register your company in California
Choose a name for your California business
Before you register your new business in California, there is one important step you must take: deciding on a name. While naming your new company may seem simple on the surface, it is one of the most vital and stressing steps you will take through the business launching process.
Your business’s name must be notable and catch consumers’ attention. It must also send a clear message considering what products you sell and/or what services you provide.
Considering LLCs and corporations, you have to check that your name is different from the names of other businesses already on file with the California Secretary of State. You can check for usable names by doing a business entity name search on the California Secretary of State website. You can also reserve an available name for 60 days by filing a Name Reservation Request Form. There are also specific name requirements for LLCs and corporations that must be followed.
If your business is a sole proprietorship or partnership that utilizes a business name that is different from the legal name of the business owner or surnames of the individual partners, you have to file a Fictitious Business Name Statement in the county clerk’s office for the county where your business is situated.
If you plan on doing business online, you should register your business name as a domain name. Also, to avoid trademark violation issues, you should do a federal and state trademark inspection to make sure the name you want to use is not similar to a name already in use.
Choosing a business structure for your California Business
Once you’ve selected the applicable name for your brand, next is starting the process of legalizing your business. Before you start the registration process, you have to determine which business structure is the most ideal for your needs. Each comes with its own distinct requirements. Below are the types of businesses you can incorporate in California.
Sole Proprietorship
A sole proprietorship is the clearest of all business structures. It is set up to enable an individual to own and operate a business. A sole proprietor has unlimited control, receives all revenues, and is responsible for taxes and drawbacks of the business. As a sole proprietorship, your business debts are considered personal debts.
General Partnership
Similarly to a sole proprietorship, a California general partnership is a casual entity designed for entrepreneurs who are forming a partnership. A California general partnership must have two or more persons engaged in a business for profit. The business can operate under any of the partners’ surnames, or they can acquire a DBA name. The profits and losses would be asserted under the partner’s personal tax return, and there is no personal asset insurance, and profits are taxed as personal income for the partners.
All partnerships; limited partnerships, general partnerships, and limited liability partnerships, must file authorized paperwork with the State of California.
Limited Liability Company (LLC)
A California LLC generally gives liability insurance comparable to that of a corporation but is taxed differently. LLCs may be managed by one or more managers or members. In addition to filing the relevant documents with the Secretary of State, an operating agreement among the members as to the activities of the LLC and the procedure of its business is required. The LLC doesn’t file the operating agreement with the Secretary of State but sustains it at the office where the LLC’s records are kept. LLCs offer personal insurance, legally protecting your personal assets and confining your personal liability.
California also requires you to obey specific naming requirements and file the Articles of Organization, which provides crucial details about the company.
Corporation
A California corporation is a legal entity that exists separately from its owners. Corporations must assign an agent for service of process to accept paperwork in the event of legal disputes, submission documents, and government correspondence on the organization’s behalf. The assigned agent can be a professional service, an individual, or a business entity.
To establish a corporation in California, Articles of Incorporation must be filed with the California Secretary of State’s office.
Do you have to register your business in California?
Once you’ve specified your legal business structure and registered your business name, you have to check with your state to define the business registration requirements. Each state has its own set of protocols that must follow precisely.
Generally, sole proprietorships don’t have to officially register with the State of California. But check with your local government to see if you have to register your sole proprietorship at a county or city level.
Also, some businesses are not compelled to register and file for a Tax ID Number, also known as an Employer Identification Number with the IRS but, you should consider registering anyway as there are various legal and tax advantages associated with it.
Even if you aren’t required to, registering an LLC comes with an abundance of legal and financial advantages.
Taxes for Your California Business
Obtaining Your Federal Employer ID Number: your EIN is like your Social Security Number for your company. It’s needed for Corporations and LLCs and is elective for DBAs unless you have employees. The IRS utilizes EINs to differentiate businesses for tax reporting so all businesses with employees are required to have one.
In addition to federal taxes, your California business will be responsible for several other taxes. Also, LLCs will be compelled to pay an annual tax and corporations will be required to pay a minimum franchise tax.
Obtain Permits and Licenses
After registering your business name you have to obtain a business license for your company. The business license allows your company to do business in your city or county. Generally, this also involves registering for state taxes and permits.
If you want to start your business in the great State of California, contact your Damalion expert now.
