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Starting a Business in California: The Step-by-Step Guide

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So you’ve decided to start a business in California, congratulations! You’re probably feeling a rush of emotions, possibly including an overwhelming feeling that you don’t know exactly how to start a business in California. It’s no easy feat, but the best approach is to take it one step at a time.

There are several requirements for starting a business in California so that your company can run efficiently, and more importantly, legally. In this guide to starting a business in California, we’ll explain all the steps you’ll need to take to get your business up and running.

Step 1: Choose a business name and structure

When starting a business in California, the first thing you’ll need to do (after coming up with your business idea, of course) is to choose a name for your business and decide on a business structure.

A business can fall into one of several business entity structures. Some common options are forming an LLC in California, starting a sole proprietorship, or a C-corporation. There’s no “best” type of business entity; this will depend on what type of company you’re starting in California, as well as how you want your company taxed and how much risk you want to be exposed to in the event that someone sues your company. In other words, there are serious legal and financial implications tied to this decision, so it doesn’t hurt to consult a business attorney when deciding which structure is best for your business.

You will also need to choose a business name to officially start a business in California. You may have the perfect name in mind, but before you can make it your own, you first need to check to make sure that name isn’t already in use. In California, you need to check the names for limited liability companies, limited partnerships, and corporations. For these structures, the business name must be distinguishable from names already on the record of the California Secretary of State, and in the case of LLCs and corporations, it cannot be misleading to the public.

It’s important to note that each name is only checked against the type of business you’re trying to open, so an LLC name would be checked against already established LLC names. In order to check the availability of your business name, you will need to mail a name availability inquiry letter to the California Secretary of State’s office in Sacramento. This process can be done for free. However, if you frequently check business name availability, you also have the option to set up a prepay account for a telephone service. This option requires a minimum deposit of $100, with a $4 fee for each name you search.

If the business name you want is available, you’ll then need to reserve it. You can reserve a business name for a total of 60 days and to do so, you will fill out and mail the name reservation request form, which costs $10. You also have the option of dropping off the form to the California Secretary of State’s office in Sacramento with the $10 reservation fee plus a $10 handling fee. Or, if you have the prepay telephone service, they’ll automatically charge you $10 for every name you reserve.

Step 2: Create a business plan

Once you’ve decided on your business name and structure, the next step in starting a business in California is to write a business plan. Just like you would draw up blueprints before building a home, a business plan creates the strong foundation from which you’ll build and grow your business.

Your business plan will include everything from the basics, including an overview of the business, what type of business it will be, whether you plan to have a physical location, etc. to the more specific, heftier details like what sort of marketing or sales you have in mind, your financial plan for running the business, and a plan for growth. Be sure to avoid common mistakes such as a lack of risk analysis and unrealistic financials.

The business plan you create can be a roadmap for you to follow as you’re developing your business. It can also be important in your efforts to get funding for your business. Whether you’re looking for a small business loan or an investor, you’ll need to provide your business plan during the application process. If you’re unsure how to get started on your business plan, there are several business plan software options to make the process as easy as possible, and the Small Business Administration also features their own business plan builder.

Step 3: Register your business 

When starting a business in California, you will also need to register your business. The steps to register your business will vary depending on how your business is structured and what type of business it is. The California Secretary of State offers a “Forms, Samples, and Fees” section that outlines exactly what you’ll need to file and how much it will cost to officially register your business.

At this stage, you’ll also need to register as an employer with the IRS and get a federal employer identification number (EIN), also known as a business tax ID number. This is a nine-digit number assigned to your small business by the IRS and is used when filing taxes, applying for a business loan, opening a business bank account, and more.

If you plan on filing a DBA, or “doing business as,” meaning you will use a name other than the legal name you file with California, also called a fictitious name, you’ll need to file this with the county in which your business is located. Filing requirements vary by county.

Step 4: File the appropriate taxes

Starting a business in California also means paying taxes on that business. There are a number of agencies responsible for administering taxes on a state and federal level, as well as state agencies and programs to help you navigate the small business taxes you’re required to pay, like the Franchise Tax Board, the California Tax Service Center, and the California Department of Tax and Fee Administration.

Most businesses will likely have to pay a franchise tax for simply doing business in the state of California. Corporate income tax applies to most businesses as well in the state. Sole proprietors pay income taxes on the money they bring home as personal income. Members of an LLC have to pay income tax on that money, and the LLC has to pay a state tax as well. Shareholders in corporations have to pay taxes on the dividends they get and the corporation is also responsible for its own California corporation taxes. This is one area where your EIN comes into play, as you’ll need to file business taxes separately from your personal taxes in many cases.

In addition to the various California state taxes you as an individual and your business have to pay, there are always federal taxes to be paid to the IRS, as well.

Step 5: Obtain any required business licenses or permits

While the Secretary of State does handle a lot of business-related forms and filings, business licensing and permits is not in the department’s wheelhouse. To obtain any necessary licenses or permits you’ll need when starting a business in California, the CalGold website hosted by the California Governor’s Office of Business and Economic Development is your go-to resource. While this site itself does not issue permits or licenses, it catalogs the appropriate agencies you’ll need to contact. First, select your city or county and your business type.

Once you input that information you’ll get a list of permits and licenses that apply to your new business and resources that are available to help you with setting up your business, plus the contact information for the agencies that oversee them.

Source: California Governor’s Office of Business and Economic Development

To look up licenses, file a complaint, or apply for your own licenses, the Department of Consumer Affairs’ BreEZe online services portal is a great resource.

Step 6: Open a business bank account and explore your funding options

With your business legally ready to open for business, there’s still the question of whether you’re financially ready. Starting a business in California is not inexpensive, especially depending on the type of business you want to open.

First, you’ll want to open a business bank account and potentially get a business credit card, as well. You can read more about the best banks for small business in California here. Keeping your business finances separate from your personal finances is incredibly important. You don’t want your personal financial decisions impacting your business or your business credit score (you can check your free business credit report online). Plus, for tax purposes you want to make sure it’s clear what you spent on your business versus personal spending.

Having a business bank account and credit card—and managing them responsibly—can help boost or establish your business credit score. Building your business credit score can also help your eligibility for certain types of small business loans. If you find you need some extra cash to get your business off the ground, there are several financing options you can explore, even as a new business.

The bottom line

Coming up with a good business idea may be the easy part compared to the steps it takes to actually start a business in California. And the work doesn’t stop once your business is registered and you have your permits and licenses.

There’s plenty to keep doing after you take the initial steps above; after all, these are just the steps to take if you are starting a business in California. You’ll also want to look into getting small business insurance, hiring employees, creating a marketing plan to get the word out about your new business, finding a location if you’re going to need a physical store or office, and more.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

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How to Grow Your Small Business Startup: 4 Essential Steps

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Around 90% of startups fail. And while some of those failures can be attributed to bad luck, many others were the result of poor decisions at the early stages of building the company. 

But while that statistic may seem discouraging, it can also provide motivation to those entrepreneurs who are willing to follow the best practices of launching a startup and push through the various challenges that will inevitably come up during the process.

With the help of a few simple (but fundamental) strategies, you can separate yourself from the majority of other startups and give yourself a real shot of making a product that will break through and make a difference.

To help you get started, let’s look at four crucial aspects of launching a startup that you should consider.

Start with the “Why?”

The number one thing you should do when launching a new company is to ask yourself a simple question:

Why is this solution necessary? 

There are millions of startups globally, and the majority of them would fail to provide a viable answer. Some just want to break into a hot market because they think that will increase their chances of success. Others believe they have a unique idea without knowing whether there’s any demand for it. 

But in most cases, ideas that might seem reasonable at first glance crumble when their purpose is questioned even a little.

So, if you want to avoid pouring your heart and soul into a project only to find out that it was a waste of time, it’s a good idea to spend a fair amount of time thinking about the core purpose of your product and the effort it will take to launch it.

Most of the successful startups you might have heard in recent years started with a very clear idea of the purpose behind the company. It can be a feature that no other product in the market can offer. Or, it might be a unique process for solving a problem that will change the industry forever.

Most of the time, there’s at least a clear answer to why the startup needs to exist in the first place. If you strip away the gimmicks and the additional features, you should still be left with the core idea of what you can offer that no one else can.

Take Care of Your Employees

No matter how you decide to finance your startup, you won’t be able to go forward alone for long. And that means that at some point, you will need to figure out how you’ll take on employees and ensure that they are happy and protected.

Then, there are various state and federal regulations that determine how much paperwork you’ll need to file out, what protections you’ll need to offer, and countless other details that someone outside of the HR world has probably never dealt with.

Because of that, startups can benefit from using HR outsourcing services that can take over the entire process. The team at SnackNation recommends using services like Bambee or Workday, which provide comprehensive solutions for companies of all sizes.

These companies can offer HR consulting, benefits administration, performance management, payroll, bookkeeping, and various other services that can be a hassle to manage on your own when you’re just starting a new company and have a lot on your plate already.

Plus, it ensures that you implement the best HR practices of today and that your employees are taken care of. And that will make attracting the top talent you need for growth that much easier.

Use a Proven Website Platform

Launching a startup is impossible without a strong web presence. And that inevitably starts and ends with your website. But if you don’t have experience with building and designing websites, the entire process can be a bit overwhelming.

The good news is that with a platform like WordPress, you can have a website set up in a matter of days if you want something simple. But at the same time, the platform offers robust customization capabilities and it can get a bit confusing when picking the right ones. That’s why it’s a good idea to curate your own WordPress toolbox that includes a wide variety of powerful themes, plugins, add-ons and WordPress resources that you know would always work for your website. 

In the end, you want to find fast hosting, install robust security features, and provide a seamless User Experience (UX) to all of your site’s visitors.

Designing a site from scratch can be appealing. But WordPress can give you enough versatility to get any features you need while remaining user-friendly enough to keep costs down and provide you with a simple way to get started.

Maintain Focus

As a startup owner, you will probably never run out of avenues you could pursue. Whether it’s the new shiny marketing tool or a promising networking opportunity, there will be times when you’ll want to do everything at once because that’s what could give the company the best chance of success.

But in reality, maintaining focus and clarity in terms of priorities might be the most practical choice for your startup in the long term.

By only focusing on a few things at a time, you will allow yourself to really give them time, tweaking your approach until you find what’s working. Moving on to something else is easy, but then you might miss out on incredible opportunities because you were too quick to dismiss something without giving it a real shot.

So, whether it’s a marketing approach or adding features to your product, always weigh the potential benefit against the resources it would require and against how it would impact what you’re doing right now.

Sure, at some point, you will need to cut your losses with projects that didn’t pan out. But it’s a good idea to stick with them for a bit longer than you might want to, especially if you know that it’s a sound strategy that could deliver big if you would just find the right approach. 

Final Words

Launching a successful startup is a dream that drives millions of entrepreneurs worldwide. But only those that follow sound business principles and are disciplined in their decision-making can expect to see success.

The strategies listed above may not be flashy, but they represent essential parts of running and scaling a startup. And sometimes, taking care of the less flashy details like HR management can set you up for exceptional results in the future.

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Starting a new online business during the pandemic: Two COVID-era tales of renewal in Miami

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The pandemic forced more than three-quarters of small businesses across the U.S. to temporarily close up shop in the spring of 2020, and thousands have since shut down for good.

But the COVID-19 pandemic also led to a record number of people trying to start their own businesses: 4.5 million filed new business applications in 2020, according to an analysis of U.S. Census Bureau data by the Economic Innovation Group.

That’s the highest number ever and a 24% increase from 2019.

 

And the momentum isn’t slowing. The Census Bureau says 492,000 new business applications were received in January 2021, a 43% jump over the previous month. Many more informal businesses are believed to have been created, often as side hustles, but never registered.

Few cities saw more aspiring entrepreneurs than Miami. Although new business creation was not distributed evenly across racial and socio-economic lines, green shoots of entrepreneurship popped up across the metro area, helping to bring a dose of resilience to the local economy.

[At the same time, untold numbers of existing small businesses — restaurants, neighborhood shops, salons — decided to establish a digital presence, allowing them to find new customers and take orders from beyond their immediate area.

In all, the number of digitally connected microbusinesses in Miami-Dade County rose 6.7% from 2019 to 2020, according to data from GoDaddy’s Venture Forward project, which studies the economic impact of these small online businesses. The Miami metro area, which includes the neighboring cities of Fort Lauderdale and Pompano Beach, has more microbusinesses per 100 people than any other large metro area in the country.

These everyday entrepreneurs make a big impact on their communities, with each new one leading to the creation of two additional jobs, Venture Forward data shows. Additionally, each new microbusiness per 100 people can reduce the unemployment rate by .05 percentage points.

And between 2016 and 2019, every microbusiness per 100 people that’s active online was associated with a $485 increase in a community’s household median income.

Here are the stories of two inspiring women entrepreneurs who took the initiative when the pandemic upended their lives.

Natasha Nails: Rethinking the press-on

It took a painful case of contact dermatitis, a type of allergy, following a visit to a nail salon for Natasha Williams to come up with an online business idea for the future of press-on nails.

The Miami native, who lives in Little Havana, has had her nails done since her teens.

But after her allergic reaction in March 2020, she was forced to switch to press-on nails that used hypoallergenic adhesive pads.

Unhappy with the appearance of what was available — they felt cheap and plasticky — Williams started buying clear nails and hand painting them with her favorite colors and designs.

Around the same time, the pandemic shut down the local economy. A well-known tap dance performer and teacher around Miami, Williams suddenly had a lot of time as lessons and gigs dried up.

By July, buoyed by the admiring comments she got from friends and strangers on the street, she realized there was a market for her creations, so she quickly built an online store and Natasha Nails opened for business.

At first, it was as much a hobby as a career plan. But soon she started asking questions and understanding the opportunity was real.

Why did women tend to apply press-on nails and leave them on and then throw them out? Given how easy they are to remove and reapply, particularly the adhesive-pad type, wouldn’t it be more fun and affordable to have collections of nails so they could match outfits or daily moods, the way they choose which shoes to wear or purse to carry?

“I want people to be able to mix and match, like ‘let’s see what I have in my closet to wear today,’” she says.

If she can popularize this approach, women may one day not feel obliged to suffer the daily inconveniences of wearing long nails.

“Just try typing all day with these things on,” she laughs, showing off long, olive nails. “You really can’t do much. And anyone who tells you differently is lying!”

While her new business doesn’t make enough money for her to quit her teaching, she spends about the same number of hours on both.

That includes 30 minutes each morning tending to her growing Instagram account — where she has amassed more than 5,000 followers who account for most of the orders on her website — and a few hours in the evening painting nails, including custom orders, and packaging up boxes for customers who opt for her monthly subscriptions.

Many challenges remain ­— particularly how to scale production beyond her ability to hand-paint nails while maintaining the artistic quality. But Williams is definitely a long-term thinker who hopes that, some day, her creations will be featured at major retailers.

“I don’t see obstacles as problems, but as challenges,” she says of the process of building a company. “You just have to follow the steps.”

Read more about Natasha’s story here.

Starting an online charcuterie-to-go

Like so many healthcare workers around the world, Maryam Kheirabi faced new demands when the pandemic hit. An oncology pharmacist with a Miami-area hospital, she suddenly had more hours, more stress and more fears of the unknown.

To deal with the growing pressure, Kheirabi decided she needed a new activity, something that would take her mind off her stressful job and give her a newfound source of fulfillment.

That’s when Fig & Brie, a charcuterie-to-go business, was born.

 

“I’m happiest when I’m extremely busy, and I wanted to create something beautiful for people to share,” she says. “In a way, I think the business got me through the worst days of the pandemic. It gives me hope, and hopefully it gives other people hope, as well.”

The idea came to her soon after the pandemic began, when she saw groups of friends eating from plastic containers full of snacks at a park across the street from her home for socially distanced get-togethers.

“How cool would it be to have a charcuterie box to go,” she remembers thinking. It would give people the option to pre-order a food board that could be delivered just when it was needed.

A native of Queens, N.Y., who moved to Miami with her speech pathologist husband in 2016, Kheirabi grew up being responsible for creating food platters for family gatherings.

“We Persians are very big on hospitality, and I never lost my love for creating beautiful, delicious things,” she says.

Once the first spike in COVID-19 cases began to ease in August, she started doing research, which included the creation of a variety of charcuterie platters for colleagues at the hospital.

A cousin in New Jersey agreed to help her secure a domain name and choose website-building tools.

“The rest was left up to me, but it was mostly dealing with aesthetics, which I love, anyway,” she says.

In early November, Fig & Brie officially launched, with a range of offerings, from a $20 “solo” platter to an $85 “soiree” box.

The seed capital was $2,000 that her husband, Francisco, urged her to take from their savings, with the understanding that they wouldn’t spend any more if the business wasn’t profitable after a month. She ended up spending $1,900 of it in that time, but by early December the business was making money.

Kheirabi’s digital marketing strategy initially was solely based on Instagram, in part because she wanted to grow slowly at first. But sales jumped more quickly than expected over the holidays, as friends and fans spread the word. One local real estate broker ordered platters as gifts to her clients.

It wasn’t easy, but she and her husband managed to keep up with demand while maintaining their jobs in healthcare. It helps that most orders come on Thursdays or Fridays, for delivery on Saturday.

Francisco does everything from taking photos to taste-testing to driving their only car around the city making deliveries. When he once asked what he would be paid for all his work, she quipped, “Sorry, but we pay in cheese.”

Her near-term goal is to have enough demand to hire a driver or two, and then to find a way to ship around the U.S. (That will require some innovation, to either find a way to keep fruits and veggies crunchy and fresh, or to come up with boards that meet her standards without those foods.)

Ultimately, she’d like to open a storefront in Miami and share her business model so women in other places could follow suit.

“I wouldn’t be doing this if it was only for the money,” she says. “That’s just icing on the cake.” The primary reward, other than enriching customers’ lives, is to empower women, including herself.

“We’re living in a time when women are standing up and taking charge of themselves,” she says. She even welcomes the competition from other female-owned online charcuteries in the city. “There’s enough demand to go around,” she says. “Women shouldn’t compete with each other. We should lift each other up.”

Related: Research shows that women have what it takes to make great CEOs

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New to Entrepreneurship: Here Are 6 Tips You Can Bank On

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Entrepreneurship is not a career, it is a life choice. Many people have mind-blowing business ideas. It’s almost enticing to jump right into starting up your new business. But as fun, as that sounds, the reality of running a successful business is a lot more complicated than that.

Most times opening up a business is usually a learn-as-you-go experience, but it doesn’t have to be this way. Here are essential tips that when implemented well can be the smartest decision you will ever make for your business.

Brand Your Business

What does the term branding mean to you? Most people perceive branding as the logo, colors, and visual component that you associate your business with, but it’s a little more than that. Branding is the entire identity of the business. It is what makes your business stand out in crowds.

In a fast-growing business world, it is important to create a strong brand for your business. This way it outshines your competitors, gets people’s attention, and makes it more recognizable. Branding gives you a chance to get some control over how people perceive your business. 

Build a Team

Manpower is a vital part of any successful company. It is significant for ensuring that operations are running smoothly and efficiently. Coming up with a good workforce is the secret ingredient for achieving a good relationship between your company and your customers. They are the face of the company and give an essence of the human touch to your business.

It can not go unmentioned that with improved technology manpower is rapidly being replaced with machines. That said, creating and maintaining a reasonable amount of manpower for your business can be a life-saver hack. Coming up with a team of educated and well-trained individuals will improve productivity, provide innovations, and maintain the relevance of your business in the market, something technology can’t provide.

Buy Raw Materials in Bulk

Depending on what your company’s end product is, consider purchasing the raw materials required at wholesale. Stockpiling the raw materials when they are at their lowest prices is a money-saving hack. Buying raw materials at a low enough wholesale price reduces the cost of production and in the long run, maximizes profits from your retail sales.

Consider finding a reliable wholesale distributor, this makes purchasing more efficient and you are assured of the quality of materials you will be getting. Ensure they supply within your geographical region, have prices you can afford and are trustworthy.

Advertise Your Business.

Promoting your business is a key aspect if you want to outshine your competitors and make your product or service known to your potential customers. Businesses have different ways of promoting their brands; they range from handing out flyers to postcards to brochures to advertisements in newspapers to online marketing.

Using social media platforms to promote your product or service is a no-brainer. It is the best way to get your name out there fast enough, while also providing solutions to about ninety percent of the population online searching for similar products. Some businesses opt to invest in a large indoor LED screen because of its efficiency in displaying stunning images. These types of screens are eye-catching, outstanding, and popular for their diversity in use, hence playing a major role in advertising brands.

As a business owner, take time to research which medium of advertisement will best suit your enterprise and proceed to invest in it.

Invest in Packaging

While most new business owners overlook the need to properly package their product you must seize the chance and stand out. packaging is the first touch that customers will have with your brand.

It is therefore important to create enticing packaging for your consumers that will draw attention to your brand. It is imperative to incorporate eye-catching shapes, colors, quotes, and packaging material that is unique to your brand. This will make the unpacking experience for your customers exciting and unique hence creating loyalty and enhancing customer retention. Keep in mind that with evolving people and markets, your packaging must evolve to keep up. 

Be Sure to Keep Records

For any business, accountability is key. Efficient record keeping will help to keep everything in order and help to analyze your company’s financial status, provide insight into what your real profit is, answer tax problems, or keep track of deductible expenses.

Precise record-keeping of finances and expenses throughout a business’s lifespan makes it easier for you to adjust your business plan accordingly to help solicit new business partners or investors. 

Even after a business picks up, managers are tempted to focus more on production and profits and overlook record-keeping, so don’t fall into this trap. 

Choosing whether to keep the record in soft copy or hard copy is totally dependent on the business owner’s preference.

Conclusion.

Let’s be honest, starting a new enterprise can be a little bit hectic because it requires a lot of planning, sacrifice, and money. That said if you have your business idea don’t wait for the right moment because it will never come. Take the leap and trust your instincts. All you need to do is apply the six tips explained above and you are good to go. Good luck setting up your new enterprise.

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