How to Start an Online Business in California?
“Being online” is the new trend and having an online presence has been key to the growth and success of businesses today. Your business can also be a part of this increasingly beneficial trend if you start an online business in California. An online business is known as electronic business (e-business) where commercial transactions including sharing of communication takes place across the internet. Online businesses are an integral part of the electronic commerce (E-Commerce) industry. This guide will provide you with an insight on various aspects of online business including the benefits of doing business online, and the steps to follow to start an ecommerce business in California.
Online Business in California
There are different types of online businesses you can start depending on the business idea and the industry. If you start an online business in California then it can be:
- A business-to-business (B2B)
- A business-to-consumer (B2C)
- Consumer-to-consumer (C2C)
- Consumer-to-business (C2B)
- Business-to-administration (B2A)
- Consumer-to-administration (C2A)
- Mobile e-commerce (M-commerce)
The Business-to-consumer (B2C) is one of the most common forms of online business in California where a business indulges in promoting services, selling products, or sharing information directly to the consumer. Due to easy access to the internet, a large number of entrepreneurs prefer to start an online business from home as it reduces the overall startup costs. Today, the state of California is home to the highest number of e‑retail or online businesses at 4,211 followed by Florida at 2,169 and New York having 1,920 online businesses.
The e-commerce industry is attractive enough for entrepreneurs to start home-based businesses. According to the Statista Digital Market Outlook report, the total revenue generated through online marketplaces in the US was $431.6 billion in 2020 and is projected to grow to $563.4 billion by 2025.
What are the biggest benefits of doing business online in California?
California is considered as one of the hubs of the national and global emerging economy and has witnessed an increase in e-business as well as e-commerce. The steady growth of online businesses can be attributed to the integration of information and communications (ICT) technology. The continuous development and evolution of internet and web-based technologies have increased the access of business owners and consumers to the global marketplace. If you start an online business in California, the benefit and outcome of the said business is considerably higher and better than traditional brick and mortar businesses in specific industries. Let’s take a look at the biggest benefits of doing business online in California.
- Lower Startup Costs: One of the advantages that entrepreneurs leverage when they start an online business in California is the low startup costs. In a traditional startup, there are several cost factors including renting an office premise, hiring employees, buying or renting equipment, and more. An internet based business negates most of the above mentioned cost factors like if you start an online business from home, you will be able to cut down on the cost of renting commercial space.
- Easy Access to the Internet: The foremost requirement to start an online business in California is to have access to the internet. A survey conducted by the California Emerging Technology Fund and University of Southern California revealed that 91% of California households have access to high-speed internet.
- Global reach: One of the major benefits and unique selling point of an online business is that you can reach out to a global audience. For example: if you start an online business from home, which focuses on providing business consulting or search engine optimization services then you can have local, state, U.S clients as well as customers and businesses from across the world. This is more so because internet driven social media platforms enable communication across the globe in real time. Similarly, if you launch an e-commerce or drop shipping website after obtaining an online business license in California then consumers from across the world can directly buy from your website.
Top online business ideas in California
There are over 4 million small businesses in California and a large majority of them are operational online. If you have a business idea that you want to pursue over the internet as an e-commerce business then you will require an online business license in California to make it operational. The online business industry and market in California is quite dynamic and hence is open to a variety of startup ideas. Some of the top online ideas to start online business from home in today’s internet-driven society are:
- Dropshipping: If you want to start an online business in California, one of the popular and trending ideas is that of drop shipping. A drop shipping business will enable you to sell a wide range of products directly to customers. You have the option of selling your own brand or product or selling other branded products. The salient aspect is that you can set your own product pricing.
- Digital Product or a course: You can start an online business from home with low investment and create a digital product like an e-book or an educational course like an Oracle SQL certification course or a Python programming course. This type of business is a low investment opportunity where you can monetize your learning and expertise by providing online tutorials to others.
- Mobile App Development: The increased dependency on the internet has created several platforms and opportunities for first time entrepreneurs. One of the trending industry areas is that of mobile app development. The worldwide mobile app revenue in 2021 was $693 billion and is expected to cross $900 billion by 2023. If you have an interest in app development then with minimal resources and investment you can start an online business in California in this area.
- Social Media Consultant: Social Media seems to exist everywhere in our business and personal life. It is a model that facilitates the sharing of thoughts, ideas, and information through virtual networks. According to Statista, by the first quarter of 2020, almost 420 billion people were active on social media thus opening the doors for new businesses to venture into social media marketing and strategies. As a social media consultant, you start an online business from home and generate revenue promoting your experience and knowledge of social media.
There are several other areas or industries in which you can establish your online startup including consulting, ghostwriting, affiliate marketing, graphic design, Podcasting, web development, and e-commerce.
Starting an Online Business in California
California enjoys dominance in several economic and business areas with small and internet based businesses playing a crucial role in the Golden State’s international competitiveness. You can also become an integral part of the state’s flourishing economy once you start an online business in California. The question is how do you form a startup? The following steps will provide an insight into the requirements and documentation required to start an ecommerce business in California.
1. Prepare your online business idea and plan
The business idea and plan is crucial towards the sustenance and success of every business. If you already have an idea then you can create your business plan around it. If you are researching ideas then it is important to choose an area that you have expertise and experience in. For example: If you possess knowledge of blog writing and do off-road hiking then you can combine the knowledge and experience to start an online business in California that shares information, travel itineraries, and more. Once you have identified your idea based on core strengths, it is time to create a business plan. The plan for every business will be different based on the industry, activity, target audience, etc., but there are some key areas that remain the same. If you start an ecommerce business in California then the key areas would be:
- Your mission and how you will get there
- Your short and long-term goals and objectives
- Define your target online demographic profile or market
- Define the online competitive market for your niche
- Provide a value proposition
- Create a revenue model
- Define benefits of online services or products
- Develop a strong internet marketing strategy
- Define risks including future internet business issues
- Create a financial plan and scaling your business
2. Choose your online business name and buy domain
If you start an online business in California, it is important to identify a name for the business first. A business name is an essential aspect of the branding strategy and should ideally be short, memorable, and easy to pronounce or write. A simple business name is also easier to translate across geographic or language barriers if you are planning to go global. At the same time, you have to check for availability of the business name as it will help you in reserving the name with the office of the secretary of state. If you are planning to start an ecommerce business in California then it is important to also check for the availability of the domain name. The domain name extension can be any of the following:
- .com (commercial business)
- .net (network)
- .co (Commercial)
- .org (organisation)
- Country codes like .us or .uk
- .info (information)
- .biz (business)
The most common extension is a .com extension and you can research over the internet for domain name registration. There are some domain registrar and web hosting companies that offer free domain name registration if you opt for a web hosting package.
3. Register your online business with CA SOS
Once you have reserved your business name with the California Secretary of State and booked your domain, the next step would be to register the business. You can start an online business in California but prior to registration, you will need to define the structure of your business. The different types of entity that you can form in the state are:
- Sole Proprietorship
- Limited Liability Company
- Limited Liability Partnership
- Limited Partnership
- General Partnership
If you start an ecommerce business in California as a sole proprietorship then you will not be required to register but for all other businesses, you have to file new business formation documents in the state. The fee and the form will vary according to the business structure chosen.
We at IncParadise are one of the top registered agents in the state and have a team that is professional, and possess the necessary expertise to guide you towards new online business registration. We have helped many entrepreneurs and first time business owners to start an online business in California.
Register your online or e-commerce business in California today!
4. Obtain all necessary licenses and permits
Once you have registered with the California SOS, applying for an online business license in California is important to ensure the business is operational. In fact, all types of businesses have to apply for and obtain California business licenses irrespective of whether you start an online business from home or a store front. The business license or permits required will depend on your location (city or county) and the type of online business activity (selling products or service).
If you start a commerce business in California then the first requirement will be a seller’s permit. According to California Department of Tax and Fee Administration (CDFTA), a seller permit is required by online and offline businesses if they are engaged in selling or leasing in the state. A seller’s permit is applicable to individuals (sole proprietorship) as well as corporations and limited liability companies.
Every new business in the state will need to apply for a general online business license in California, which is issued by cities or counties. For example: If you start an online business from home in Glendale, California then you will need to also apply for additional permits or licenses like the home occupation business permit.
If you want to know more about the types of online business license in California that your startup may require then you can order our detailed California business license check report. This is a comprehensive report that elaborates on essential details like fees related to a business license, list of filing instructions, supporting document requirements, types of licenses and permits in the state and the issuing authority.
This is a comprehensive report that elaborates on essential details like fees related to a business license, list of filing instructions, supporting document requirements, types of licenses and permits in the state and the issuing authority.
5. Get EIN and File your taxes
Whether you are planning to start an online business from home or will be maintaining inventory in California, you will be required to file taxes in the state. There is California sales tax applicable on sales of $500,000 or more in tangible personal property in the state. You will be required to register with the California Department of Tax and Fee Administration (CDFTA), if your online business does not have annual sales of $500,000 or more. If you start an online business in California then district taxes may also be applicable. These are voter-approved sales and use taxes that are imposed primarily by counties, cities, and other local jurisdictions. In order to file taxes in California, you will need to apply for an employer identification number (EIN), which is issued by the Internal Revenue Service (IRS).
6. Open bank account
Once you have obtained your online business license in California the next step would be to open a business bank account. A business bank account plays an important role when it comes to segregating your business expenses and revenue from personal expenses. This is especially important if you start an ecommerce business in California as the revenue generated and expenses will be higher. Having a business bank account will not only help you to keep a track of all business related expenses but also simplify annual tax reporting in California. IT is important to note that you may need to show your Employer Identification Number (EIN) in order to open a business bank account.
7. Comply with taxes and other regulatory requirements
Once you start an online business in California, you will need to comply with annual maintenance and tax or business license requirements. Some of the important requirements are:
- Most business licenses in the state have to be renewed annually or on a date specified by the city or jurisdiction in which the business is based.
- Apart from this, you have to file an annual report known as the “Statement of Information” in the state of California.
- If there is any change in the name, address, or ownership of the business entity then you will be required to inform the Secretary of State and update it in the records
- You need to ensure your business is compliant with the zoning laws and regulations of the jurisdiction your business is located in.
8. Market your business
If you are planning to start an online business in California then marketing it is core to the long-term success of the business. The first step is to develop a strong marketing strategy and this will be based on three important factors, which are:
- The type of online business
- The target audience
- The competition
If you start an ecommerce business in California then your marketing strategy should comprise of several elements like:
- Company Website
- Search Engine Optimization
- Visuals to strengthen branding
- Mobile commerce (m-commerce) for maximum reach
- Digital marketing campaigns
- Organic content creation and sharing on social media
- Promoting products or services through email marketing
- Customer experience
Looking to start an online business in California?
There are several types of online businesses that you can pursue in the state of California as access to high speed internet has increased and people also prefer to shop online as it gives them the power of convenience. If you are planning to start a business in California then there is a process you will be required to follow and IncParadise can assist you with the same.
IncParadise is one of the most reputed California registered agents and we have helped thousands of companies to start their own business in California. Our team of experts will guide you through the process of starting your online business in California. We also offer a wide variety of additional services that will help you to maintain compliance in California. These specialized services include filing an annual report, and EIN assistance among others.