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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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10 Software Tools to Keep Your New Business Documentation Organized

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When it comes to documenting SOPs, training materials and other important internal business processes, what’s one tool or software (not your own) that you would recommend new business owners use, and why?

These answers are provided by Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most successful young entrepreneurs. YEC members represent nearly every industry, generate billions of dollars in revenue each year, and have created tens of thousands of jobs. Learn more at yec.co.

1. Google Docs

Stay simple and use Google Docs. With direct edits and commenting features, it’s easier than ever to constantly improve upon your living documents. That way, your SOPs can continue to evolve along with your business.

Firas Kittaneh, Amerisleep Mattress

2. Loom

You can use Loom, or a similar screen-recording software, to record short videos for your team and create sections within the platform to optimize your SOPs and onboard new hires. Video information is easier to retain for most and is also easier to look up again and parse out. Certain processes are timeless and can also be used if someone needs to take over a process in an emergency.

Matthew Capala, Alphametic

3. GitBook

Although Google Docs is an elegant and convenient resource, I think GitBook might be the next best thing. It’s far more functional than a simple Google Doc, since it allows you to structure your SOP more like a wiki page or a full website instead of a handful of files in a folder.

Bryce Welker, Testing.org

IT documentation

4. JobRouter

JobRouter is one tool that I love using for documentation purposes. It helps you manage your documents from creation, editing, approval, release and distribution. It also integrates beautifully with Microsoft Word for ease of use.

Thomas Griffin, OptinMonster

5. Process Street

When documenting SOPs, Process Street is a great option. It’s a user-friendly process management software that allows you to create, track and schedule workflows. It also lets you create checklists, collaborate with your team, capture data and more so you have full control over your processes.

Stephanie Wells, Formidable Forms

6. Trainual

Trainual is a software that helps business teams run internal processes faster, better and smoother. A pain businesses face is maintaining performance as teams are assembled, grow, mature and are refreshed. The onboarding process is one process that plays a significant role in growing and refreshing teams but, if botched, organizational performance suffers. Trainual focuses on that onboarding.

Samuel Thimothy, OneIMS

7. Trello

While I wouldn’t necessarily recommend it for distributing official materials, an excellent system for organizing, commenting on and discussing internal documents among multiple teams is Trello. Trello allows you to share, sort and comment on documents in an easy-to-manage system. With their team functions, you can also ensure only those who need the materials will have unrestricted access.

Salvador Ordorica, The Spanish Group LLC

IT project management

8. systemHUB

One tool that I love using for any documentation purpose is systemHUB. It lets you integrate your existing project management software and continue working on it. You can replicate the existing documents or start from scratch as per your requirement. You can also share it with your team and do a lot more.

Josh Kohlbach, Wholesale Suite

9. ETQ

The most important thing about document control software is retrieving what you need when you need it. I like ETQ because it streamlines the entire process from document creation through retrieval and training. ETQ lets you set up permissions for employees to access the information they need and automation to notify employees of upcoming/pending training.

Matthew Podolsky, Florida Law Advisers, P.A.

10. Your Own Internal Wiki

Create your own internal wiki. There are many plug-and-play WordPress templates that are easy to use and pre-built to act as an internal wiki. Allocate a login to each employee, categorize content and use hashtags to make your SOPs and other processes easily searchable.

Chase Williams, Market My Market

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How Startup Studios are Bringing New Ideas to the Startup Space

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By Startup Studio Insider

Even as businesses have struggled through COVID-19, investors have been eagerly bringing capital to startups with the hope that new and fresh businesses will catch on and become the latest and greatest success. This influx of capital is primarily due to the exponential growth of new investment models that have exploded into the mainstream in the last five years. It is these new funding models that are helping connect entrepreneurs with investors who fit their wants and needs.

This new phenomenon of the ‘perfectly matching’ entrepreneur is a beautiful symbiosis capable of helping startups avoid risk, increase efficiency, and continue business development in a forward trend.

In this explosion of entrepreneur-startup matching, startup studios have developed almost a cult following. As many entrepreneurs have strong ideas, but lack the experience, finances, or team to bring them to fruition, studios provide a sort of safety net, capable of helping entrepreneurs deal with business and operational aspects, leaving them the time necessary to focus on ideas. With this initial investment, the special teams behind startup studios are mobilizing to mitigate risk for new businesses and help entrepreneurs focus on what matters most.

Startup studios are a critical competent of the startup and entrepreneurial space due to their capabilities to usher new ideas and practices into the industry. As this model continues to change the startup space as we know it, take a look at the list below to learn more about how a startup studio can single-handedly turn any entrepreneurial project into a juggernaut.

A Concrete and Singular Vision

Startup studios are built to do one thing and one thing well: build companies from the ground up. As this is the core initiative of these studios, they are better equipped than any other organization to take an entrepreneur from initial idea stages all the way to launch and beyond.

Because of this singular focus, startup studios are in the business of churning out these business over and over again. What this means is that they have not only repeated the process many times, but also standardized it down to a science. They’ve experienced every step of the process, and can often forewarn against roadblocks or concerns inexperienced entrepreneurs would plow headlong into.

Complete Operational Guidance

With the repetition behind the core of startup studios, they have a layer of shared resources which allow for a more rapid development and faster growth process than many other incubators or accelerators. From strategy playbooks to cross-collaborative teams, processes, and backing, these resources have allowed companies to take their development to the next levels.

Additionally, startup studios are invested in the process of developing a product beyond its launch. As such, many studios have developed programs to share resources and guidance beyond the launches from the startup studio and into the spaces beyond them.

Startup team doing planning

Oversight on Strategy

As startup studios are deeply entrenched in the day-to-day operations of their projects from the very start, especially when compared to incubators and venture capital firms, they are more capable of providing strategic oversight than other investment styles.

By utilizing a repeated process, as well as the experience of the entire team, these studios are capable of developing plans from the start, and imparting wisdom and experience onto younger entrepreneurs. This strategic guidance has been cited by many who’ve gone through the startup studio ecosystem as one of the most essential tools they’ve taken away from their experiences.

While the startup studio model is not for everyone, it is a true partnership that provides more than just financial backing. A studio is a great model for entrepreneurs who thrive off of teamwork and collaboration, and who may be looking to deepen their experience and learnings. While they can require flexibility and trust in their studio’s guidance, they are often a critical tool in pushing startups to the next level.

As the old adage goes, if you want to go fast, go alone; if you want to go far, go together. If you want to truly take your idea to the next level, consider developing it under the help and guidance of a startup studio. For more on startup studios, be sure to check out Startup Studio Insider, the newest journal providing daily insights into the startup studio space.

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5 Mistakes Business Owners Make When They Open a New Dental Clinic

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Starting a dental clinic is a daunting task, especially for young, budding entrepreneurs. The medical equipment can be pricey, putting the owner at great financial risk. Because of that, planning is a crucial step of the process that can save you a lot of money and stress down the line. Luckily, even if you don’t have experience running a business, you can learn most of these things.

photo credit: Tima Miroshnichenko / Pexels

With that in mind, here are the five mistakes business owners make when they open a new dental clinic:

1. Hiring Too Quickly

Due to high expenditures, business owners tend to rush the initial processes when opening a clinic. Hiring the right staff is crucial for your success, but unfortunately, some entrepreneurs make a decision for all the wrong reasons.

As a way of cutting expenses, lots of owners will hire young professionals straight out of school. Sometimes, they will put them on probation even if they have experience. When the time comes to hire them as full-time employees, they might not have enough loyalty to stay with your organization.

Having enough experience is crucial for dentists, but you also need to consider if this person is the right fit. Business owners neglect long-term plans and team suitability for short-term financial goals. Hiring a reputable professional is usually a better idea as it will bring stability to your team.

2. Not Creating a Beautiful Website

Word-of-mouth marketing was always crucial for companies, and it is especially important for small businesses such as dentistry. Unfortunately, getting those first clients is always a choir.

Many owners neglect the power of promotion, thinking that it’s enough to have a good service. However, unless you’re able to attract those initial patients, you will never be able to scale the business.

Having a great website is important as it sets up the basis for search engine optimization. Down the line, it will help you reach more people through Google. But it also works as a digital business card. Like your clinic, the website needs to be clean and to instill confidence in potential patients.

3. Ignoring Search Engine Optimization

Performing search engine optimization or SEO is a time-consuming job. However, small local companies can achieve great results in just a few months.

According to several professionals that conduct dental SEO by Dental Marketing Guy, local search engine optimization is an ideal way of promoting dental services to your local community. When a person looks for medical experts in their home city, your clinic should appear at the top of Google search pages. By investing some money in this promotional activity, you can get thousands of new clients in a short time.

Among others, search engine optimization is great for branding. Unlike other digital marketing activities, such as pay-per-click, the SEO results will remain even when you stop paying for the service.

Dental assistant working on a laptop

4. Not Having a Stellar Customer Service Plan in Place

We can argue that customer service is more important for dental clinics than most other businesses. This is because lots of patients are anxious before treatments and exams. Like with any other medical procedure, a person wants to be certain they’re in good hands.

Most patients are willing to pay extra for premium dental services. However, if you have poor customer service, it can dissuade them from giving you a chance. Even if they visit your clinic once, they might not return.

Retaining a patient is especially important in dentistry. Like with some other services, a patient is willing to travel long distances to perform an exam at the same clinic. Once a person chooses a dentist, they will likely return to the same person for most of their lives. And the lifetime value of one patient can be high.

5. Not preparing for the unexpected

Similar to other businesses, dental practices are subject to inherent business risks. For example, an equipment malfunction can set you back for months. In some situations, it might take weeks before you can get back to business. Losing a staff member can also be a major problem.

Although you cannot avert some potential issues, you need to have a contingency plan. First off, a business owner needs to have a healthy cash flow to cover any unexpected expenditures. Having debt is normal for dental offices, but you need to reduce liabilities as soon as possible.

One way to protect yourself is by getting insurance. Certain policies can cover dental practice overhead and provide you with income when you go on a hiatus.

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