Texas LLC or Corporation

Texas is one of the top destinations for startups and entrepreneurs but the most popular business structures are that of a limited liability company and corporation. The overall cost to form Texas Corporation is also low as compared to some of the other states. Depending on the specific needs or requirement, entrepreneurs can opt for several other forms of business like sole proprietorship, general partnership, limited partnership, and limited liability partnership. The formation and related aspects of a new business are governed by the Texas Business Organizations Code (BOC). The annual maintenance cost of Texas Corporation is different from that of Limited Liability Company or any other forms of business.

Which business entity should I choose for Texas business?

As a new business owner, one of the most important aspects is identifying the legal structure for your company. The structure of an entity has a significant impact on several key areas like the cost to form Texas LLC, taxation, legal liability, and ownership control of the entity. The following factors will help you to make an informed choice when it comes to choosing a specific form of business entity.

• Limited Liability Protection: The term limited liability refers to a type of legal structure where the private assets of owners and investors will not be at risk if the business fails to perform. It is considered as one of the biggest advantages and can help reduce the Texas LLC cost per year. In fact, different forms of businesses like a limited liability company (LLC), limited liability partnership (LLP), and even corporations offer this advantage.
• Pass-through entities: A pass through entity is a type of business where there is no double taxation. This simply means that the taxes of an entity will actually get “passed through” to the owner of the entity and hence tax returns will be filed by the owner instead of the business. This ensures the overall cost to form Texas LLC is less than that of a corporation. The businesses that are considered as pass-through entities include sole proprietorship, limited liability companies, and S corporations.
• Startup Cost: The new business registration or incorporation fee plays a key role in determining the cost to form a Texas Corporation or LLC. A cost of forming a new business is governed by several factors including:
  • Name reservation & renewal
  • Annual reports
  • Taxes
  • Correction and amendments
  • Assumed name certificates
  • Rent or lease of commercial space
  • Employees
  • Equipment

Pros and Cons of forming an LLC or Corporation in Texas

The most adopted business structure in the state is that of a limited liability company and a corporation. The overall cost to form a Texas Corporation or an LLC is low as compared to other forms of entities. Of course, there are pros and cons of forming a Texas LLC or a corporation.

Texas LLC

A Texas limited liability has several advantages and disadvantages. Here are some of the pros and cons that will help you make an informed choice.

Pros of LLC

• A limited liability company will enjoy the flexibility of being taxed as a partnership, sole proprietor, C corporation, or S corporation
• The Texas LLC cost per year is less as compared to some of the other forms of business entities
• There is less paperwork involved for new business formation
• You can form a single-member LLC (with one person) or multiple-member LLC (several people)
• You can take advantage of flow-through taxation
• Members of a Texas LLC will enjoy limited liability protection against debts or legal issues

Cons of LLC

• Once you become a member of an LLC, you will not be able to pay wages to yourself
• One of the important costs to form a Texas LLC is the franchise tax
• An LLC vs Corporation in Texas reveals that investors would prefer a corporation over an LLC
• In a multi-member LLC, the ownership will be spread across all members

Texas Corporation

A Texas corporation is one of the most opted for structures but has its own advantages and disadvantages as mentioned below.

Pros of a Corporation

• One of the salient aspects of a corporation is limited liability. Since a corporation is seen as an entity separate from its owners and hence provides protection to them
• If you consider LLC vs Corporation in Texas then a corporation has the upper hand as it attracts investors
• A C Corporation provides employees with stock options and hence a more lucrative work place as compared to other forms of business
• The cost to form a Texas Corporation is lower than some of the other entities in the state
• Corporations enjoy continuity and can exist forever even if the company founder leaves or dies

Cons of a Corporation

• The process to incorporate in Texas is expensive and time consuming involving a lot of paperwork.
• There is a possibility of double taxation where the profit of corporation as well as dividends paid to stockholders may be taxed
• As compared to an LLC, a corporation follows a much more rigid structure and less flexibility
• Owners of corporations are not paid a salary; instead they receive dividends, which are subsequently taxed

Do you want to start a Texas LLC or a corporation?

Texas LLC Cost

A limited liability company is one of the most popular forms of business entities across the U.S. You can form a Single-member LLC (SLLC) or a Multi-member LLC depending on your requirements and to reduce the cost to form a Texas LLC. The type of limited-liability Company you want to form will depend on a variety of factors like ownership, management, personal asset protection, formation, tax treatment, and periodic and annual compliance. One of the salient aspects is that the Texas LLC cost per year is lower than the annual costs in some of the other states like California, Maryland, and Massachusetts.

Cost for forming Texas LLC

If you are planning to start a new business in Texas then a limited liability company is considered as one of the best structures for a startup. When you think about the cost to form a Texas LLC then it includes initial registration and other one-time or annual fees. The Texas LLC cost per year includes:

• You have to file Certificate of formation for a Texas LLC along with a filing fee of $300
• You have to reserve a business name prior to filing Texas LLC registration documents and the fee is $40

Annual maintenance cost for Texas LLC

When you form a new LLC in Texas it is important to maintain compliance with the office of the Secretary of State and Texas Comptroller of Public Accounts. There is an annual maintenance cost to form a Texas LLC and this helps primarily in keeping the business active. The annual maintenance expenses include:

• Once you have applied for registration or certificate of formation you will require a certified copy of the LLC Certificate of Formation and an additional fee of $30.
• The most important aspect that keeps your Texas business operational is business licenses and permits. This is one of the important aspects of annual maintenance and is seen as Texas LLC cost per year. There are no general business licenses in the state but licenses are required according to the type of business activity. For example: If your business activity is related to Food and Beverage then the fee for a business license is approximately $200 but if you are planning to start a tattoo studio then the business license fee is $927.
• The maintenance cost to form a Texas LLC also includes a fee attached to renewing your business license or permits, which will vary according to the type of business activity.
• If you make any amendments to the certificate of formation then there is a fee of $15

Do you want to register a Texas LLC?

Texas Corporation Cost

Entrepreneurs prefer corporations as their startup business model as it is easier to attract investors. A corporation is a legal business entity that has a separate existence from the owners and this gives corporations perpetual existence. There are several other advantages like the cost to form a Texas Corporation is lower as compared to other states like Connecticut and District of Columbia. If you incorporate in Texas, you will also be able to leverage the many business incentive programs the state offers, which play a key role in providing your business with financial assistance.

Cost of forming a Corporation in Texas

If you are planning to incorporate in Texas then it is important that you identify the cost to form a Texas Corporation. The cost includes initial incorporation, which is a one-time cost. The fee that you will incur initially is:

• You have to file Certificate of formation for a Texas corporation along with a filing fee of $300
• If you file a Certificate of correction then there is a fee of $15
• If you make an amendment then the filing fee for a Certificate of amendment for Texas corporation is $150
• You have to reserve a business name and this is a part of the forming cost for a Texas Corporation. The fee is $40

Annual maintenance cost for Texas Corporation

When you file for incorporation in Texas, it is important to maintain compliance with the office of the Secretary of State and Texas Comptroller of Public Accounts. The compliance can be kept by ensuring annual maintenance cost of Texas Corporation. The maintenance expenses include:

• There will be an additional fee of $30 if you apply for a certified copy of the Certificate of Formation of a profit corporation
• Business licenses and permits are integral to any business including a corporation in Texas. This is a key component of cost to form a Texas Corporation. The state doesn’t have general business licenses but permits and licenses are issued based on the business activity. For example: If you start a Retail Food Establishment in Texas then the licensing or permit fee will depend on the gross annual volume of food sales like the fee is $773 for a volume sale of $150,000 or more. The fee for a mobile food unit or a vehicle-mounted mobile food unit is $258 per unit.
• The annual maintenance cost of Texas Corporation also includes a fee attached to renewing your business license or permits, which will depend on the type of business activity.

Do you want to form a Texas Corporation?

Need any Assistance in Forming Your Texas LLC or Corporation

If you are planning to incorporate in Texas or want to start an LLC then there will be several aspects you need to consider pertaining to the process of new business formation. There are several formation and compliance requirements of the state that you will have to fulfill and this makes the entire process complex. We, at IncParadise can help in making the process simpler by handling your new business formation or incorporation requirements along with the state compliance.

Entrepreneur’s guide to form a business in Texas

Texas is a popular choice amongst entrepreneurs as it has inched forward towards being the 9th largest economy in the world and 2nd largest in the US based on its GDP. According to the IMF, Texas GDP in 2021 is $1.9 trillion, which is more than the GDP of Brazil ($1.8 trillion). The Lone Star State is also ranked first in the nation where business and economic growth prospects are concerned. If you are planning to start a business in Texas then as an entrepreneur or small business owner, you will be able to leverage the high-end infrastructure, competitive tax climate, skilled workforce, high quality of life, and business-friendly economic policies.

Why do companies prefer to register business in Texas?

The state of Texas has a business climate that is just perfect for entrepreneurs and small business owners. One fun fact is that top 25 Fortune 500 companies are headquartered in Texas and these include McKesson, ExxonMobil, AT&T, Dell Technologies, Phillips 66, Valero Energy, Sysco, and Oracle among others. If you are planning to start a business in Texas then it is important to first understand why the state is quite the first choice for new business formation. There are several key drivers that govern growth and success of a small business in Texas from a long-term perspective. Some of the key drivers include:

• Abundance of right talent: It is the people who drive the economy of Texas and this stands true when you look at the availability of skilled talent or dedicated professionals in the state. If you start a business in Texas then there will be no dearth of talent especially in cities like Austin, Dallas-Fort Worth, San Antonio, and Houston. There are almost 170 colleges and universities and 125 schools that offer a variety of tech programs. This ensures there is never any shortage of potential hires for a small business in Texas or medium sized enterprises.
• Significant tax benefit: Texas is one of the few states in the U.S. with a low tax burden. The state also does not levy any corporate income tax or state income tax. When you register a business in Texas, you will also be able to leverage the variety of tax incentive programs that are geared towards helping new businesses in boosting their bottom line. Some of the top programs include Research & Development Tax Credit, Ad Valorem/Property Tax Exemption, Sales and Use Tax Exemptions, Freeport Exemption, and Sales Tax Exemption or Franchise Tax Credit for Qualified Research.
• Platform for innovation: One of the important reasons for entrepreneurs to start a business in Texas is that the state provides just the right platform for innovation. Innovation by entrepreneurs not only aids in the economic activity of the state but also helps a new small business in Texas to become an integral part of that innovation. Innovation along with advanced technology has become a strong driving force for a wide array of industries including aerospace advancements in the NASA Johnson Space Center in Houston and the SpaceX South Texas launch site.

Steps to start a business in Texas

Small businesses are integral towards helping states like Texas to achieve their state mission including creating a business-friendly environment while ensuring the overall state economy flourishes. Texas does offer many benefits but how do you incorporate in Texas? There are different approaches and aspects to be considered right from creating a business plan to naming your business and finally the process to register a business in Texas. Let us look at each of the guiding steps in detail.

1.Prepare a Texas Business Plan

Before you can register a business in Texas; it is necessary to prepare a business plan. A business plan is a type of written document that defines the primary and secondary objectives of a startup. The importance of a business plan lies in the fact that it incorporates several aspects of small businesses in Texas and the steps required to make the startup successful in terms of revenue generation and growth or expansion. A well crafted business plan often helps businesses in attracting investors. Since it is a framework of your company, it should include the following according to the Texas Governor’s small business handbook.

• Executive Summary
• Business set-up and structure
• Market analysis and competition
• An outline of the development and regulatory process
• Marketing plan along with sales strategies
• Operating Plan
• Strategic Financial Plan
• Launch and delivery plan

2. Attend Entrepreneurial Training or Development Programs in Texas

One important thing that helps you to start a business in Texas by providing the right platform, knowledge, skills, and resource assistance is entrepreneurial training or business development programs. There are training programs offered by the state as well as private institutions and then there are networks that create physical hubs for imparting education and skill based programs for startups. These networks have been created to assist modern day entrepreneurs planning to start a small business in Texas. The resources offered by them include:

• Access to mentors
• In-person and virtual events
• Dedicated program for women entrepreneurs
• Co-working space
• Private conference rooms
• Networking opportunities

3. Choose a Business Structure for Texas Business

One of the most important decisions as a new business owner is selecting the right business structure. The type of structure you choose in order to start a business in Texas will have a wide variety of implications pertaining to the financial success of your business. The business structure for a small business in Texas should be chosen taking into consideration aspects like:

• Protection of personal assets
• Federal and state taxation
• Access to Capital
• Startup Costs
• Business management
• Continuity upon ownership change
• Business operations
• Transferability of ownership interests
• Structure flexibility

• Sole proprietorship
• General partnership
• Corporation
• Limited Liability Company
• S Corporation
• Limited Partnership
• Limited Liability Partnership

4. Naming Your Texas Business

A business name is one of the most crucial aspects of a startup as it not only provides an identity to the company but also helps in the creation of value for prospective customers. Hence, it is important to ensure that the name you choose to register a business in Texas is not complex. Research studies have shown that simple and easy to remember names have higher brand recall value. While ideating a business name, it is important to ensure the name is compliant with various requirements as mentioned in TX Bus Orgs § 5.053 (2019). The subchapter B – General Provisions Relating to Names of Entities suggests that your chosen name should be distinguishable from any other name existing in the records of the Secretary of State. Once you have chosen the name, you need to search for business organization name availability with SOS Direct. If your chosen name is available then you can reserve the name for a period of 120 days by filing the “Application for Reservation or Renewal of Reservation of an Entity Name” with the office of the Texas Secretary of State.

5. Choose Your Location for Texas Business

If you are planning to start a business in Texas then one of the factors defining success is the location of the business. There are specific aspects that you need to consider when choosing a location. The most common aspects are:

• Targeted Audience
• Startup Cost
• Competition
• Availability of skilled labor
• Rental rates and availability of commercial space
• Supply chain
• Visibility of the office
• Zoning regulations
• Parking facility
• Utilities and other related costs

• Dallas: More often than not, the growth and success of a business is dependent on the city where a business is being formed and operated from. Dallas is such an ideal city as it has low unemployment rates, diverse workforce, and is home to numerous Fortune 500 companies. Another important reason to register a business in Texas in the Dallas city is availability of affordable commercial real estate and its central location in the state makes handling transportation and logistics much easier.
• Houston: Famous as the home of NASA space center, Houston is home to over 1,000 information technology companies. It is one of the top cities in terms of location if you are planning to set up your small business in Texas. It is considered as the “center of technology entrepreneurship” in the state. It is also famously known as the world capital of the oil and gas industry and also has more than 10,700 manufacturing companies. The city boasts of an array of logistical as well as distribution channels that makes moving goods around the east and west coast as well as anywhere in the country easier.
• Austin: One of the cities that is one of the favorites amongst entrepreneurs and startups. The gross domestic product (GDP) of Greater Austin metropolitan statistical area was $159,361.291 million in 2019 and is ranked right at the top of the “2020 Tech Town Index Ratings”. The city has become a hotspot for innovation centers, leisure and hospitality, and R&D labs. When you register a business in Texas, Austin will play a key role in defining future growth of your company.

6. Register Your Texas Business

Once you have selected the type of business structure, the next step would be to register the business in Texas. The process for registering a new business can vary from one state to another and the application and fee may differ according to the type of business but that is not the case in Texas. For example: If you are planning to incorporate in Texas then you will be required to file the Certificate of Formation: For-Profit Corporation pursuant 2019 Texas Statutes, Business Organizations Code (BOC), Title 2 – Corporations, Chapter 21 – For-Profit Corporations, Subchapter B. The filing fee for a corporation is $300. Similarly, if you were to form an LLC then you would be required to file “Certificate of Formation—Limited Liability Company” along with a filing fee of $300. The certificate of formation has to be filed with the office of the Texas Secretary of State.

We can assist you with new business formation in Texas!

7. Get Your EIN

One of the important requirements when you start a business in Texas is the Employer Identification Number (EIN). It is also known as the Federal Tax Identification Number and is issued for identification of a business entity. Even if you register a Texas business online, you will need to apply with the Internal Revenue Service (IRS) for issuance of an EIN as it will be required when filing taxes or annual returns. Depending on the business structure chosen by you, an EIN may or may not be required. The Employer Identification Number for your Texas business may also be required when opening a business bank account, or for applying for loans.

8. Open a Business Bank Account for Texas Business

When you start a business in Texas, one of the important tasks should be opening a business bank account. You are probably thinking, “I already have a bank account then why do I need a business account?” The truth is that having a business bank account will simplify your ledger keeping and ensure business and personal expenses or gains are not mixed. Such accounts are also known as business checking accounts and you can open one before or after you start a business in Texas. The benefits of having a separate bank account for a small business in Texas are:

• The business records will be highly organized
• A business checking account will help in simplifying your tax returns
• It will help in building a business credit rating
• Such an account will make you or your business look professional
• You can avail of low cost electronic transactions and competitive interest rate on your business profit
• You will be able to set up credit acceptance or retail point of sale systems
• A business bank account can have multiple signers

9. Obtain License and Permits

You can start a business in Texas in some of the high growth and innovation based industries like Advanced Manufacturing, Aerospace, Aviation & Defense, Energy, Biotechnology & Life Sciences, and the information and computer technology industry among others. However, one of the important criteria for conducting business in the state is applying for and obtaining a business license. Only when you have acquired a license, can your business become fully operational.

If you are planning to start a Food Manufacturing or Distributing business then you may require some or all of the below mentioned licenses and permits:

• Air Permits issued by the Texas Commission on Environmental Quality
• Alcohol Licenses and Permits by Texas Alcoholic Beverage Commission
• Egg Broker/Dealer/Processor Licenses issued by the Texas Department of Agriculture
• Food Handler License issued by the Department of State Health Services
• Milk and Dairy Facilities Licenses issued by the Department of State Health Services
• Retail Food Operation Permit issued by the Department of State Health Services

Identify, and apply for the right Texas business licenses and permits!

10. Register for Taxes

One of the important aspects to consider when you start a business in Texas is taxes. When you apply for and obtain an EIN, it makes the process of filing annual returns easier. As compared to some of the other states, taxes in Texas are quite low and there is no corporate income or personal income tax. The taxes that may be applicable for a small business in Texas are:

• Franchise tax: The franchise tax is a type of tax that is levied on a state level. This tax is applicable to different forms of small business in Texas including corporations, limited liability companies (LLC), business associations, general, limited and limited liability partnerships, professional associations, business trusts, joint ventures and other forms of legal entities operating in Texas. If you register a business in Texas and qualify for franchise tax then you will have to file returns with the Texas Comptroller of Public Accounts (CPA).
• Sales and use tax: If you are operating your business in the retail industry then you may be required to file sales and use tax returns. Texas imposes a 6.25 percent tax on all businesses involved in retail sales, lease and rental of goods, and other taxable services like information services, telecommunication services, and amusement services among others. The sales and use tax has to be filed with the Texas Comptroller of Public Accounts (CPA).

11. Annual and Ongoing Requirements

Once you register a business in Texas, there are annual and ongoing maintenance requirements by the state that every business needs to be compliant with. Once you register a Texas business online, the annual requirements are:

• Public Information Report: One of the most important annual requirements is the “Public Information Report”. In some states, it is known as the annual report and in other states it is referred to as the statement of information. The Public Information Report is also known as the Ownership Information Report and has to be filed with the Texas Comptroller of Public Accounts. It has to be submitted annually on or by May 15 each year. For example: If you register a business in Texas on July 31, 2021 then your Public Information Report will be due on May 15, 2022. It has to be filed by corporations, LLC’s, limited partnerships, or professional associations pursuant to Texas Tax Code – TAX § 171.203..

Some Important Quick Resources for Texas Business

In the stage between ideating and transforming your ideas into a small business in Texas, you will require information pertaining to various aspects of company formation. Hence, it is important to find the right guidance and resources that will not only help you to start a business in Texas successfully but also achieve company objectives. We have created a list of resources that are targeted towards helping new businesses, entrepreneurs, and startups.

Texas Secretary of State

The office of the Texas Secretary of State is governed by the Texas Constitution and its primary role is to administer the Texas Election Code while maintaining public filings. The website of SOS provides an encyclopedia of information and guidance on various areas of new business formation and operation. It provides information on business services like startup information or how to start a business in Texas, forms for registration or incorporation in Texas, filing options, fee schedule, Texas business law, Texas registered agent information, and notary public & apostille among others.

• Texas Secretary of State
  James Earl Rudder Office Building
  1019 Brazos
  Austin, Texas 78701
  Phone: (512) 463-5555
  Fax: (512) 463-5709
  Website – https://www.sos.state.tx.us/

Texas Comptroller of Public Accounts

The primary duty of the Texas Comptroller of Public Accounts is to collect all forms of tax revenue that is owed to the State. They are responsible for collecting 60 applicable taxes in the state right from the sales tax to the minor tax fees like the battery sales fee. If you are planning to register a business in Texas then you can find information and guidance on Texas tax rules and laws, different forms of taxation applicable to a small business in Texas, tax training resources (seminar, webinar etc.), Sales Tax Permit Application, eSystems or online filing, tax fee, and refund information among others. The contact information for Texas Comptroller of Public Accounts is:

• Texas Comptroller of Public Accounts
  Lyndon B. Johnson State Office Building
  111 East 17th Street
  Austin, Texas 78774
  Phone: 800-252-5555
  Fax: 800-531-1441
  Website: https://comptroller.texas.gov/

Texas Department of Licensing and Regulation

The Texas Department of Licensing and Regulation (TDLR) is a state agency that is responsible for licensing as well as regulating different types of businesses, occupations, equipment and facilities in the state. When you start a business in Texas, you will need to apply for and obtain different licenses and permits and TDLR can provide you the required information, guidance, and help regarding the same. You can refer to their detailed list of licenses and understand the process of applying for or renewal of such licenses. The contact information for Texas Department of Licensing and Regulation is:

• Texas Department of Licensing and Regulation (TDLR)
  920 Colorado
  Austin, Texas 78701
  Phone: (512) 463-6599
  Website: https://www.tdlr.texas.gov/

Official Government website for the State of Texas

The official government website (Texas.gov) for the state of Texas provides guidance and information pertaining to Government Services Directory, professional and occupational licensing, online payments, license renewal, state news, and how to start a business in Texas guide. You can use the website for resources before or after you register a Texas business online. The contact information for Texas.Gov is:

• Official government website (Texas.gov)
  Phone: 1-877-452-9060
  Email: support@texasgovhelpdesk.com
  Website: https://www.texas.gov/

Texas Department of Economic Development

The Texas Department of Economic Development is also known as the Texas Economic Development Corporation (TxEDC) and its primary objective is to promote and market the state of Texas nationally as well as internationally in a manner that it becomes the best place for a business to form, locate and expand. If you are planning to register a business in Texas then this department can provide detailed information and resources of various aspects of a startup. You can find resources and information on business incentives, Enterprise Zone Programs, opportunity zones, moving your company, webinars and events for small business in Texas, trade and export, and target industry clusters among others. The contact information for the Texas Department of Economic Development is:

• Texas Department of Economic Development
  P.O. Box 12428
  Austin, Texas 78711
  Phone: (512) 936-0100
  Email: smallbusiness@gov.texas.gov
  Website: https://gov.texas.gov/

Ready to Start a Business in Texas

Texas is considered a haven for entrepreneurs and new businesses as it offers a pro-business climate. The state has passed a new legislation that will provide tax relief of $4 billion for new and existing businesses. You can register a Texas business online or offline and we at IncParadise can provide meaningful assistance. We are one of the most reputable Texas registered agents with experience and expertise in new business formation. We have helped thousands of businesses in Texas to successfully form an LLC or a business corporation.

Doing Business in California

The Gross Domestic Product (GDP) of America was approximately $21.5 trillion in 2019 with California ranked number one for being the largest state economy. One of the top industries in California is manufacturing as it accounts for approximately 10.67% of the total output generated in this state, which was $316.76 billion in 2018. There are more than 35,000 entrepreneurs running a business in California in the manufacturing industry. The state is also home to some of the biggest corporations and hosts events and meets where as a first time entrepreneur you can learn how to run a California business successfully like others have before you.

Why is California good for small businesses?

There are 4.1 million small businesses in California and there are plenty of reasons why so many businesses are registering in the state. As an entrepreneur or first time business owner, you may wonder whether doing business in California is beneficial or not. The honest answer is that the state offers several small business programs, incentives, and provides an overall business and economic value that can be considered the most competitive.

• Customer Base: One of the underrated aspects related to running a business in California is the customer base. Yes, every new business forming in the state has access to over 39 million residents or prospective customers. Whether you are running a retail store, a pharmacy, a home-based business, or an online business; if you can tap into the customer base then you will never have to worry about how to run a California business successfully.
• Talent Pool: One of the challenges of running a business in California or any other state is hiring the right employees. On the bright side, California is home to some of the top universities and large research institutions, which provides businesses with the talent pool as required. Some of the top institutions include Stanford University, California Institute of Technology, University of California—Los Angeles, and University of California—Berkeley among others.
• Small Business Assistance Centers: Whether you are running a business in California or any other state; you may require assistance in a variety of areas. You can find assistance on business related areas from the several small business assistance centers located within California. They provide assistance in areas like drawing up a checklist for starting a new business, information pertaining to various state business programs, financing a startup, contracting opportunities, getting import or export licenses or permits, and small business resources like taxes and planning assistance.
• Business Incentives: If you have been wondering how to run a California business successfully then here is a tip – take advantage of the various state business incentive programs. Some of the top incentive programs include California Competes Tax Credit, New Employment Credit (NEC), Manufacturing and Research & Development Equipment Exemption, California Research & Development Tax Credit, California Small Business Loan Guarantee Program (SBLGP), California Capital Access Program (CalCAP), and the California Opportunity Zones program.

Challenges for running a California business

Doing business in California has its many benefits but at the same time, there will be hurdles and challenges to overcome. It is never easy to operate a business in any state and there are certain challenges of running a business in California that you will need to work around or overcome during various startup lifecycle stages. Although, California is the land of opportunity and innovation, the various challenges that your startup may face are:

• Tax: One of the first challenges of running a business in California is taxes. The state is known to have one of the highest state business tax rates in the nation. The sales tax is at 7.25 percent and goes up to 10.75 percent if local sales tax is included. California also has a minimum franchise tax of $800, which is the highest in the country. If you are planning to set up a small business then these taxes will increase the average cost of doing business in California significantly.
• Regulations: California is known for experimenting with new regulatory measures and this creates challenges to running a business in California. A new business in the state will have to keep itself updated with regulatory changes and also ensure regulatory compliance.
• Cost of living: This is one of the major challenges of running a business in California as it can be quite an expensive affair from a purely operational standpoint. Higher cost of living translates into higher rent for commercial property and higher wage. The cost of living and doing business in California can vary from one city to another. For instance the cost is higher in Los Angeles as compared to lower costs in Camarillo or Simi Valley.

How to Run a Business in California?

California is not just an economically strong state but is a heaven for startups as it promotes innovation and technology. If you are thinking of doing business in California then you can establish your startup in any industry as all industries and sectors are highly growth oriented. For example: The hospitality sector is one of the top industries that has a dynamic and vibrant economy with $65.1 billion in travel-related spending in 2020 while the restaurant industry shows estimated sales of over $97 billion. The question is how to run a California business successfully in any industry and the processes that will help in making your business fully operational. Let’s take a look at the fundamental requirements for starting a new business in this state.

1. Understand your target market

A target market is essentially a specific segment that constitutes your potential customers whom you can reach out to or attract using various marketing strategies. The target market is often known as the target audience and hence it is important to define your audience prior to launching and running a business in California. Let’s look at an example to understand this:

If your business believes in selling or supplying or retailing PlayStation Games then your target market will be in the age group of 18 to 40 but if your business is in the hospitality industry then your target audience can be any age group. At the same time, you have to also determine what exactly you are offering in the hospitality industry because for example, a business spa or conference center will not cater to children, teenagers, and even retired senior citizens.

2. Set revenue goals

The ultimate objective of doing business in California or any other state is generating revenue (profits) and achieving growth. Revenue and growth are interrelated as higher revenue will open the door for expansion, which is a type of growth that every business aims for. Hence, it is important to set your revenue goals early. Revenue goals will revolve around generating profits and this is possible with a strong sales and marketing strategy that will help develop a strong customer base. One of the challenges of running a business in California is to create a fine balance between generating income and controlling operational costs. An illustrative example of revenue goals is:

3. Prepare business plan

If you are wondering how to run a California business successfully then a business plan is what you need. Even before you register your business, a business plan needs to be in place. A robust business plan has the following benefits:

• It will help you to steer your business in the right direction
• It will help you in creating an effective business growth and expansion strategy
• You will be able to identify the various marketing and sales strategies for creating brand awareness
• It will help you to overcome the challenges of running business in California
• A good business plan will attract investors as well as lenders
• You will gain a higher understanding of your existing market and competition

• Company description
• Market analysis
• Description of products or services
• Marketing strategies
• Management and operational structure
• Staffing requirements
• Financial projections

4. Choose a business location

One of the rules of “how to run a California business successfully” is to always choose the right location for your business. It is important to understand that choosing a business location is like a strategy playing out and a number of factors will help you to decide the location you choose. Some of these factors are:

• Business activity: The location for retailing or selling products will be different from those in the service industry.
• Accessibility: Your business location should be accessible to customers/clients as well as vendors and suppliers
• Competition: Competition can make doing business in California challenging hence choosing a business location not saturated by competition will be beneficial
• Utilities and Rental: If the cost of rented commercial space and utilities is high then it will increase overall startup costs. Hence, you need to look for a location that is within your budget

5. Choose a legal structure for your business

A legal structure for your business is as important as operating or running a business in California. The legal structure of any entity will play a key role in influencing several aspects of the business right from day-to-day operations to filing of taxes and even asset protection. It is hence always recommended to choose a legal structure that doesn’t create challenges of running a business in California and instead provides benefits and legal protections. You can choose any of the following business structures:

• Corporation
• Limited Liability Company
• Limited Partnership
• General Partnership
• Limited Liability Partnership
• Sole Proprietorship

Do you want to form a California LLC or a Corporation?

6. Obtain necessary license and permits

If you plan on doing business in California then one of the foremost requirements is a business license. If you don’t have the necessary license or permit then you will be unable to make your business operational in the state. In California, there are business licenses or permits that are categorized under two types, they are:

• General business license
• Regulated professions and industries licensing

For example: If you plan on doing business in California and form your startup in San Francisco then licenses and permits will be issued by the Office of the Treasurer & Tax Collector. A business license has to be renewed annually or on the date as prescribed by the Ordinances or Regulations Code of the issuing city or county. The fee for general licenses vary from one city to another and the renewal fee depends on the business activity.

7. Secure funding

It is never easy running a business in California but with the right strategies you can achieve all your business objectives. Every business is unique and so are its requirements. One of the challenges of running a business in California is the high startup costs. So how do you manage the cost? The best option is to secure funding. There are several ways to secure funding or financial aid in the state and they are:

• Approach venture capital firms
• Look for Angel investors
• Find the top business incubators or accelerators
• Apply for government grants and subsidies
• There is an option for bank loans
• Apply for business incentive programs like the Small Business Loan Guarantee Program

8. Hire right employees

One of the challenges of running a business in California is finding the right employees. California is home to some of the most prestigious universities as well as a highly motivated talent pool. The first step is to introduce a formal hiring process as it will improve your chances of finding and hiring efficient and professional talent. Here is a checklist of points to consider prior to hiring employees.

• Job analysis is necessary as it will define responsibilities, skills, and outcomes of a specific job
• Have an Employee Recruiting Strategy in place
• Prepare a well structured interview using evaluation scorecards and behavior-based interviewing techniques
• Always try and look beyond the resume or CV of a probable candidate
• Ask for references of previous employers

9. Comply with taxes and other state regulations

Once you start doing business in California, you will be required to comply with state regulations and other requirements including filing of taxes. As a business owner in California you will have to comply with federal, state, and local tax requirements. California has different types of taxes including sales tax, franchise tax, corporate tax, and alternative minimum tax (AMT). You need to identify the taxes applicable for your business and ensure they are filed on time. One of the challenges of running business in California is following all state regulations. In order to do so, you will have to identify the annual business requirements and fulfill them so that the business remains in active status.

10. Keep finance in order

One of the key challenges of running business in California is keeping business finances in order. There are many small business owners who are unable to use the various technologies available in the market to keep their finances in order. One of the options of doing business in California is opening a business bank account, which can help separate your personal expenses from the expenditure and revenue earned by your business. This will also ensure that your annual tax filing is smooth. Here are some tips that will help you to maintain organized and clean financial records.

• Use accounting software like QuickBooks Online, Xero, or FreshBooks
• You can also use a custom enterprise resource planning (ERP) system for complex accounting
• You can set aside 20% to 25% of your net income for income taxes
• Use a cloud based tool for better management of payments across customers and vendors
• Hire a professional bookkeeper to ensure tax filing is correct while maintaining optimal cash flow

11. Implement right tools for business growth

Small businesses can achieve high growth quickly but it requires strategy and tools to achieve that. Running a business in California will not necessarily translate into business growth as achieving your short-term and long-term objectives may take time. There are several variables that influence business growth like:

• Customer loyalty
• Adoption of technology
• Cultural, political and economic conditions of the market
• Business location
• Brand positioning
• Marketing & sales strategies

• Business contact database tools to help grow contact or customer database
• Influencer marketing campaign tools and community intelligence marketing platforms
• Search Engine Optimization (SEO) tools to create higher visibility online
• Tools for Social Media Monitoring & Publishing
• Email and Marketing Automation tools

12. Focus on giving a great customer experience

The essential aspect of running a business in California is to create a loyalty base of satisfied customers. This is possible only when a business offers a positive customer experience. What is customer experience? It is an impression developed by your customers regarding the brand through their journey of using your product or service. This impression is basically how a customer views your brand and this can have short-term and long-term impact on the bottom line including revenue generation. The following tips will help you focus on giving a positive customer experience:

• Measure your customer experience by analyzing results of a customer satisfaction survey
• Identify the reasons and the rate for customer churn
• Create a forum for customers where they can request new features or products
• Make the process of returning a product easier
• Identify the customer’s touch point with the business
• Create promo runs offering products or services at discounted rates
• Use customer experience management tools like Zendesk, IBM Tealeaf, and Satmetrix among others.

Need any Assistance in Running Your California Business?

If you are thinking of doing business in California, online or offline then you will require leading registered agent services to help you with the formation or incorporation of your small business. IncParadise is one of the top California registered agents and we have helped thousands of companies to register their business successfully in the state.

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)

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.

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)

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
• Corporation
• Limited Liability Company
• Limited Liability Partnership
• Limited Partnership
• General Partnership

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).

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

• 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.

California Corporation

California‘s economy is the largest in the U.S and although 12 percent of Americans reside in California, the state has made a contribution of 14.8 percent to US GDP in 2020. Most of the GDP contribution can be attributed to 99.8% of California small businesses. A large percentage of the small businesses as well as big companies are corporations. You can incorporate in California as there are a multitude of advantages that you will be able to benefit from. You can register a California corporation online or offline in some of the top industries and have access to the state’s transportation gateways, tax credits, business incentives, and human and capital resources.

What is a California Corporation?

A California corporation is a form of legal entity, which is separate as well as distinct from its owners. If you register a corporation in California then it will enjoy the responsibilities and rights that an individual would possess. You can form a domestic or a foreign corporation although the requirements of incorporation will be different for foreign and domestic entities. There are several different types of corporations that can be formed in the US but the key forms include:

• C Corporation
• S Corporation
• Statutory Close Corporation
• Publicly Held Corporation
• Quasi-closed Corporation
• Professional Corporation
• Non-profit Corporation
• Benefit Corporation

What are the benefits of incorporating in California?

California, home to some of the most innovative businesses, is one of the fastest economies in the nation. California has the distinction of being the largest manufacturing state in the nation with San Diego, CA being home to 25,000 manufacturers. The San Francisco Bay Area is famous globally as it is home to global technology companies based in the famed Silicon Valley. You can also start a California corporation and become a part of the expanding economy and the innovative business environment. There are also several benefits of incorporating in California like the following:

• Separate Entity: If you form a California Corporation then it will be considered as a separate entity from the owners. Once you have incorporated, the corporation will have its own rights, liabilities, responsibilities, and capabilities. This means that a corporation can also buy or own real estate, lend money, invest in funds, and make guarantees and contracts. One of the salient aspects of a C corporation is that it will continue to exist even when owner’s change and management members are replaced.
• Liability Protection: One of the primary benefits of incorporating in California is the limited liability protection it offers. When you register a corporation in California, it limits the personal liability of shareholders, officers, directors, and employees. Thus, the legal obligations of the corporation will not affect any individual associated with the organization.
• Transferability of shares: One of the top benefits of incorporating in California is that a shareholder of the company can transfer or sell his/her stocks and shares. The buyer of such a share will then automatically become the shareholder of the corporation with all the applicable rights.
• Attracts Investors: One of the reasons why entrepreneurs incorporate in California is because a corporation in this state is attractive to investors as compared to other business structures

Starting a California Corporation

If you are planning to register a corporation in California then there is a process that you will have to follow and also be compliant with the various state requirements and regulations. The process has several steps right from identifying and reserving a business name to filing the articles with the office of the California Secretary of State.

1. Name your Corporation

A name is one of the most defining aspects of any form of business entity as it creates an identity that prospective customers can relate to and also increase brand recall value. It is mandatory to have a business name in order to register a corporation in California. When identifying or choosing a business name, you need to adhere to the name regulations as mentioned in California Code of Regulations, Title 2, Division 7, Chapter 8.5, Section 21000 to 21005.

2. Appoint a California registered agent

If you are planning to form a California corporation then one of the mandatory requirements is to maintain a registered agent in the state for service of process pursuant to CA Corp Code Section 202, §1502, §2105, or §2117. The primary responsibility of a California registered agent is to accept legal as well as tax documents from the office of the Secretary of State or other government agencies on behalf of the entity. Hence, such an agent is also known as agents for Service of Process.

Choose IncParadise today as your California Registered Agent!

3. File Article of Incorporation

In order to start a California corporation, you will be required to file the “Articles of Incorporation” with the California Secretary of State pursuant to CA Corp Code § 200.5 (2018). You will have to provide specific information in the articles pertaining to the business including name of the entity, business addresses, California Agent’s name and address, number of shares if it is a stock corporation, and purpose statement. The Articles of Incorporation California has to be submitted along with a “submission cover sheet” and a fee of $100. If you submit in person then there is a counter drop-off fee of $15.

Incorporate your new business in California Today!

4. Choose Corporation’s initial directors

The owners or incorporators or initial directors have to be named when filing Articles of Incorporation California. Hence, it is important to choose the directors. Appointing initial directors will help in appointing corporate officers, adopting bylaws, selecting a corporate bank, authorizing issuance of shares of corporate stock, setting of the fiscal year, and adopting an official stock certificate form along with a corporate seal. This process is important and has to be conducted before you register a corporation in California. The initial corporate directors will also serve on the board until the first annual shareholders meeting is held. The California state law advocates that a professional corporation should have a minimum of 3 directors unless the entity has less than 3 shareholders.

5. Prepare bylaws for Corporation

Bylaws is an internal corporate document that provides details of the entire operational structure of the business including the conducting of business and who, when, and how the decisions related to the business entity would be made. The rules and regulations contained in a corporation’s bylaws also known as company bylaws ensures the smooth, efficient, and consistent running of the said corporation.

6. Get an EIN

One of the most important requirements to incorporate in California is an Employer Identification Number (EIN). This is a unique nine-digit tax ID number often known as the Federal Employer Identification Number (FEIN). This tax ID number is issued by the Internal Revenue Service (IRS) to specific business entities. If you are planning to register a California corporation online then you will need to apply for and obtain an EIN. We at IncParadise are an experienced and reputable California registered agent and we can help you to obtain an Employer Identification Number (EIN) so that you are able to file your tax return conveniently.

7. Hold an organizational meeting

One of the requirements when you incorporate in California is holding an organizational meeting. This is a type of initial meeting where several tasks related to the business are initiated or completed including the plan to register a California corporation online. Some of the other tasks that are completed in an organizational meeting include election of officers and board of directors, issuance of stock or initial shares, adopting employee benefit plans, and approval of corporate bylaws.

• Signing a “Waiver of Notice” of organization meeting
• Taking note of the people present
• Presenting and accepting the articles of incorporation
• Electing directors
• Election of officers
• Presenting and accepting the corporate seal
• Adopting bylaws
• Presenting and accepting the stock certificates
• Adopting a resolution towards accepting stock offers
• Adopting the banking resolution
• Adopting a resolution for reimbursing expenses
• Adopting any special resolution like IRS Form 2553 for S corporation election

8. Obtain a Business License

In order to form a corporation in California you have to file Articles of Organization in California but to make your business operational, you will need to apply for and obtain business licenses and permits. There are two types of licenses or permits applicable and they are the general business license and the regulated professions and industries licensing.

9. Open a bank account

Once you register a corporation in California, your business is active but what about transactions? When you start spending (business expenditures) or accepting (revenue) money, it is time to open a business bank account. There are different types of business bank accounts like checking account, merchant services account, and credit card account among others. Some of the benefits of opening a checking account with a bank are:

• Clean and accurate bookkeeping: When you opt for a business bank account, the expenses and revenues are kept separate from your personal account. This separation of personal and business transactions ensure clean and accurate bookkeeping for your accountant.
• Tax: Once you register a California corporation online, you will need to file taxes with the state. If you maintain a business bank account, it will help segregate your business and personal finances thus ensuring you avoid any tax issues.

• Ability to accept credit card payments
• Getting a line of credit for your company
• Credit card accounts help increase purchasing power
• Business banking offers limited personal liability protection

10. File taxes and reports (Statement of information)

Once you have filed your articles of incorporation in California and obtained the required business license then your company can be termed operational. Once your business is active, there are certain annual requirements that you will need to be compliant with like filing your taxes and statement of information.

• The statement of information has to be filed within 90 days from the date of filing the Articles of Incorporation in California.
• Once you start a California corporation, you will be required to file annual state taxes with the California Franchise Tax Board (FTB). This includes an annual minimum tax of $800, sales tax if required, and an additional tax based on total annual income.

Ready to Start a California Corporation?

There are over 30 million small businesses in the U.S and more than 4 million are based in California. If you want to start a California corporation then there are several industries and business areas to launch your startup in. If you are wondering how to register a California corporation online then we at IncParadise can assist you with the entire incorporation process in the state while ensuring your startup fulfills all California formation requirements.

LLC in California

California nicknamed the “Golden State” is home to some of the big companies of the world including JBL, Mozilla Corporation, Netflix, Warner Bros., Wells Fargo, Universal Pictures, Tesla, Inc., Seagate Technology, and San Jose Sharks LLC among others. You can also start an LLC in California and leverage the dynamic capabilities and innovation platforms in a rapidly evolving California business environment. Due to the fact that a limited liability company is a pass-through entity, they are the most popular legal entity in the state of California. Once you form an LLC in California, you will need to keep it active by filing California LLC statements of information and annual tax.

What is California LLC?

You can form a domestic or a foreign limited liability in California. You can also form a California LLC in any other state and move your business to California. The process for the registration of a domestic LLC is different from that of a foreign LLC. There are several different types of LLC that can be formed in the US and they are:

• Single-Member LLC/Sole Proprietorship
• General Partnership
• Family Limited Partnerships
• Series LLC
• Restricted LLCs
• L3C Company
• Anonymous LLC
• Member-Managed LLC or Manager-Managed LLC

What are the benefits of forming an LLC in California?

Boasting a $3.2 trillion gross state product (GSP), California is the 5th largest economy in the world. This growing economy can be attributed to the 4 million small businesses along with the big names in the IT sector. You can also form a California LLC in such a thriving economy but that is not the only benefit the state offers. There are several other benefits of starting an LLC in California like the following:

• Pass-Through Taxation: One of the primary reasons entrepreneurs start an LLC in California as opposed to other business structures is pass through taxation. Pass-through is a type of tax treatment where-in taxes of the LLC literally “flows through or passes through” to the tax returns of the LLC owner or members. Hence, when you register a California LLC, it will not be subjected to any double taxation like some other business structures may be subjected to. It is also important to note that when a limited liability company elects to be taxed as a corporation then pass through taxation will not be applicable.
• Limited Liability Protection: California LLC incorporation will provide you with limited liability protection. This simply means that as the owner you will not be held responsible if the company suffers a loss. This also means that all your personal assets like home, car, and bank accounts will have necessary protection from lawsuits and business debts.
• Credibility: If you register a California LLC then the company will help increase credibility in the market. In fact, a limited liability company is recognized as a formal business structure as compared to partnership or sole proprietorship.

Forming an LLC in California

California provides strong business infrastructure and a robust platform for startups and hence is considered a favorite location for starting a new business. You can form a limited liability with the help of a top California LLC registered agent like IncParadise although there is a process that you will be required to follow. The process has several steps right from the conception of a company name to actually filing the articles with the office of the California Secretary of State.

1. Choose California LLC name

Every business is known and defined by its name and hence choosing an appropriate name is crucial towards business operations. The business name is provided in most of the official documents including application for EIN tax ID, California LLC statement of information, and Articles of Organization. When you are ideating a name, it is important to follow the name regulations mentioned in the 2021 Revised Business Entity Name Statutes and the California Revised Uniform Limited Liability Company Act.

2. Choose California LLC registered agent

One of the important steps towards California LLC incorporation is finding, hiring, and maintaining a registered agent. Most first time business owners would ask if hiring a registered agent is necessary or not. Apart from the fact that having a California LLC registered agent can be quite beneficial, it is also mandatory for all corporations, LLCs and other business entities to appoint and maintain a registered agent pursuant to the California Corporation Code Section § 1700-1702.

IncParadise offers a wide variety of registered agent services in California!

3. File Articles of Organization with CA SOS

In order to form a California LLC, you will be required to file the “Articles of Organization” with the California Secretary of State pursuant to CA Corp Code § 17702.01 (2017). You will have to provide specific information in the articles pertaining to the business including LLC name in compliance with Section 17701.08, office street address, and name and street address of your California LLC registered agent among others. The filing fee for Articles of Organization is $70. If you submit in person then there is a counter drop-off fee of $15.

Register a California LLC Today!

4. Prepare LLC operating agreement

An LLC Operating Agreement is an integral aspect of forming a limited liability company in California. It is a legal document, which outlines the duties of members and owners of the company. It is not possible to start an LLC in California without the operating document although you are not required to submit it with the office of the Secretary of State. The importance of the agreement lies in the fact that it helps in setting down the working and financial relationship among members or business owners as well as between managers and members. The content of an LLC operating agreement will vary from one entity to another but the six key areas included in this are:

• Organization
• Management and Voting
• Capital Contributions
• Distributions
• Membership Changes
• Dissolution

5. Obtain EIN

EIN is an Employer Identification Number and it is also known as the Federal Employer Identification Number. This is a unique 9 digit tax ID number that is assigned to businesses by the Internal Revenue Service (IRS). It is used for reporting employment taxes and most businesses in California would require this number bar a few exceptions. If you register a California LLC with one member (single member LLC) and are considered a disregarded entity without any employees then you will not be required to apply for an EIN. If your company is a multi-member LLC then you will be required to apply for and obtain an EIN.

We can help you get your EIN number in California!

6. File initial statement of information

Once you have filed the Articles of Organization for California LLC incorporation, there is another filing required by every LLC in the state. It is known as the Statement of Information (Form-LLC_12) and has to be filed with the California Secretary of State, within 90 days from the date of registration of the limited liability company. After the initial filing, the statement of information has to be filed once every two years. If your LLC has more than one member or manager then you will be required to also file an “Attachment to Statement of Information” during the initial statement filing. The initial statement filing fee is $20. As one of the top California LLC registered agents, IncParadise can assist you with the filing of the statement of information.

7. Pay California annual franchise tax

If you register a California LLC then there are certain annual requirements you will be required to fulfill including filing annual franchise tax. A limited liability company organized in California or conducting business in the state has to file an annual tax of $800. The tax is due on the 15th day of the 4th month from the day of registration of the LLC e.g., if you formed LLC on June 22, 2021 then your tax will be due on September 15, 2021.

8. Obtain necessary business licenses and permits

Once you register a California LLC, it will become operational only after you apply for and obtain necessary business licenses and permits. You can start your business in a variety of industries but the type of business license and permit will depend entirely on the business activity. In California, business licenses or permits can be classified under two categories, which are:

• General business license
• Business licenses or permits for specific industries

9. Open a bank account

One of the important requirements pre or post California LLC incorporation is that of a bank account. Whether it is a single member LLC operating as a sole proprietorship or a multi-member LLC, having a business bank account always reduces any problems that may arise due to the mixing of your personal and business finances. Having a separate business account will also help in tracking your business cash flow while helping manage business specific budgets along with income and expenditure.

10. Comply with taxes and other regulations

Most businesses established in California will have to pay some form of tax. If you register a California LLC then depending on the business activity and the type of LLC, you may be required to file one or more forms of state tax. According to the California Franchise Tax Board (FTB), an LLC classified as a partnership for tax purposes will have to file Form-568 for Limited Liability Company Return of Income. Some of the different forms of taxes that a California LLC may have to file include:

• If you start an LLC in California as a retailer or are in the retail business where selling of goods and merchandise takes place then you will be required to file sales tax. You will have to first register with the California Department of Tax and Fee Administration (CDTFA) to pay this tax.
• If your company is a single-member LLC then you will be required to file self-employment tax on your business profits
• Owners of a California LLC will be required to pay federal income tax on profits earned less federal deductions or allowances
• As an employer, you will be required to file payroll tax on any salaries paid to an employee

Ready to form a California LLC?

If you are planning to form a California LLC or you have an innovative startup idea then the state provides just the right balance of opportunity and growth. We at IncParadise are one of the most reputed California LLC registered agents and have helped thousands of startups and new businesses to register and operate in the state. We can assist you with the entire process of LLC formation as well as annual maintenance of your company.