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How to Set Up a New Business in California

Published By Janet Gershen-Siegel at April 30th, 2019

Starting a New Business in California

A new business in California is in your reach. Have you been wondering: just how do I start a business in California? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in California during a recession?

 California Advantages and Disadvantages

Business Insider puts California in its middle ten states when it comes to starting a new business, per a 2016 article. New business owners will have to face some significant costs. CBS News has three California cities on its list of the ten most expensive cities to start a new business in, for the whole country. They are: San Jose, San Francisco, and Oakland. San Jose and San Francisco are the most expensive and second most expensive on their list.

California has the country’s second highest cost of living, second only to Hawaii.  Plus the business tax in California ranks the third worst in the United States. California is also fourth when it comes to the highest rate of new entrepreneurs. It is sixth for density of startup firms.

Recent Changes

In 2018, Forbes put California in the number 29 slot. Also in 2018, Fit Small Business clocked in California at number 43. Keep in mind, all three sites have differing methodologies.

 Forbes praises California for its economic climate, the very best in the country. California also has an excellent growth prospects rank. Its labor supply is above average. But its quality of life is below average (possibly due to the exceptionally high cost of living in so much of the state). And its business costs and regulatory environment are in the ten worst in the nation. The latter is number 48.

Fit Small Business says California is number one for startup activity, and it also does rather well when it comes to access to capital. Quality of life and labor market are right around average. Labor market is a measure of the desirability of an area and the number of people with bachelor’s degrees. The costs of starting a business are worse than average. But it’s in the areas of taxes (number 48) and cost of living (number 49) which bring California down to such depths.

If you are considering starting a business in California, be ready to contend with an exceptionally high cost of living and a difficult tax structure and regulatory environment. But growth potential is off the charts, and you will have a lot of company with others starting up. Decide whether it’s all worth it.

Business Names

Filing for a fictitious name allows the creation of a business name which is then separate from a business owner’s legal name. This is called “Doing Business As”, or a DBA.

Sole proprietors who want to do business under a business or company name which is different from the proprietor’s legal name will need to file a fictitious name with their county registrar at the county clerk’s office.

For example, go to this webpage to file a DBA in Sacramento County. Partnerships, corporations, or LLCs may also choose to file a DBA.

Here’s how to start business in California.

California New Business Secretary of State Requirements

Start a New Business in California – Register a Business Name

An owner can file a DBA at the appropriate county clerk’s registrar’s office. Ask about name availability with this form.

Business Permits and Licenses

Use the CalGold service to find what your business might need. It is run by the Governor’s Office of Business and Economic Development.

Local Permits and Licenses

Check with your local municipality, city or county office or website. See if there may be any local licensing or permit requirements.

E.g., in Sacramento, you need to go to the Finance page on the Sacramento County website.

Business Registration

Find the forms you need with the California Secretary of State.

Tax Registration

Get a Seller’s Permit from California Tax Service Center. There is also information on other taxes you might need to sign up for there.

Start a New Business in California – Virtual Offices

California residents are spoiled for choice by Alliance when it comes to opening California virtual business offices. You may very well find you can shop around for the best price.

Alliance offers numerous California cities, including:

  • Bakersfield
  • Beverly Hills
  • Burbank
  • Carlsbad
  • Century City
  • Cerritos
  • Costa Mesa
  • Culver City
  • El Segundo
  • Encino
  • Fremont
  • Fresno
  • Fullerton
  • Gilroy
  • Glendale
  • Huntington Beach
  • Irvine
  • La Jolla
  • Long Beach
  • Los Angeles
  • Manhattan Beach
  • Marina Del Rey
  • Mission Viejo
  • Newport Beach
  • Oakland
  • Ontario
  • Orange
  • Oxnard
  • Palm Desert
  • Palmdale
  • Panorama City
  • Pasadena
  • Rancho Cucamonga
  • Riverside
  • Sacramento
  • San Diego
  • San Francisco
  • Also San Jose
  • Santa Cruz
  • Santa Monica
  • Sherman Oaks
  • South Coast Metro (Santa Ana)
  • Sunnyvale
  • Temecula
  • Torrance
  • Valencia
  • West Hollywood
  • Westlake Village
  • Woodland Hills

Alliance will also provide options in the general vicinity of a city, in case the location or pricing is better.

DaVinci offers many California virtual offices in (in addition to many of the same cities as Regus), including:

  • Claremont
  • Del Mar
  • El Dorado Hills
  • Fairfield
  • Laguna Beach
  • Milpitas
  • Oceanside
  • Pleasanton
  • San Ramon
  • Santa Ana
  • Seal Beach
  • Thousand Oaks
  • Ventura
  • Visalia
  • Walnut Creek
  • West Covina

For any other areas of the state, be sure to check Regus or business owners might want to try to seek out local entrepreneurs.

Or maybe they can speak to local computer user groups in an effort to find help in this area.

Start a New Business in California – Build Business Credit

Business credit is credit in a company’s name. It doesn’t tie to a business owner’s consumer credit, not even when the owner is a sole proprietor and the only employee of the small business.

As such, an entrepreneur’s business and personal credit scores can be very different.

The Benefits

Since business credit is independent from individual, it helps to safeguard a small business owner’s personal assets, in case of a lawsuit or business insolvency.

Also, with two distinct credit scores, an entrepreneur can get two separate cards from the same merchant. This effectively doubles purchasing power.

Another advantage is that even startup ventures can do this. Going to a bank for a business loan can be a formula for disappointment. But building company credit, when done correctly, is a plan for success.

Individual credit scores are dependent on payments but also additional factors like credit use percentages.

But for company credit, the scores actually only hinge on if a company pays its bills promptly.

new business in California Credit Suite3 1 1 - How to Set Up a New Business in California

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

The Process

Establishing company credit is a process, and it does not occur automatically. A business will need to actively work to establish business credit.

That being said, it can be done readily and quickly, and it is much speedier than developing personal credit scores.

Merchants are a big aspect of this process.

Performing the steps out of sequence will cause repetitive denials. No one can start at the top with company credit. For example, you can’t start with retail or cash credit from your bank. If you do, you’ll get a rejection 100% of the time.

Start a New Business in California – Business Fundability

A business needs to be fundable to loan providers and merchants.

That’s why, a small business will need a professional-looking web site and email address. And it needs to have website hosting from a merchant like GoDaddy.

In addition, company telephone and fax numbers must have a listing on

Likewise, the business phone number should be toll-free (800 exchange or comparable).

A small business will also need a bank account dedicated purely to it, and it needs to have every one of the licenses essential for operation.

new business in California Credit Suite3 1 1 - How to Set Up a New Business in California

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Start a New Business in California – Dealing with the IRS

Visit the Internal Revenue Service web site and acquire an EIN for the small business. They’re free. Choose a business entity such as corporation, LLC, etc.

A business can get started as a sole proprietor. But they will probably wish to switch to a kind of corporation or an LLC.

This is in order to minimize risk. And it will maximize tax benefits.

A business entity will matter when it involves tax obligations and liability in the event of litigation. A sole proprietorship means the entrepreneur is it when it comes to liability and tax obligations. No one else is responsible.

Sole Proprietors Take Note

If you run a business as a sole proprietor, then at the very least be sure to file for a DBA. This is ‘doing business as’ status.

If you do not, then your personal name is the same as the business name. Because of this, you can find yourself being personally responsible for all business financial obligations.

Also, according to the IRS, with this structure there is a 1 in 7 probability of an IRS audit. There is a 1 in 50 possibility for corporations! Avoid confusion and substantially lower the odds of an Internal Revenue Service audit at the same time.

Instigating the Business Credit Reporting Processnew business in California Credit Suite2 - How to Set Up a New Business in California

Begin at the D&B web site and get a totally free D-U-N-S number. A D-U-N-S number is how D&B gets a business in their system, to produce a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s websites for the small business. You can do this at If there is a record with them, check it for accuracy and completeness. If there are no records with them, go to the next step in the process.

By doing so, Experian and Equifax will have something to report on.

Vendor Credit

First you should build trade lines that report. This is also referred to as vendor credit. Then you’ll have an established credit profile, and you’ll get a business credit score.

And with an established business credit profile and score you can start to get retail and cash credit.

These types of accounts tend to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But first off, what is trade credit? These trade lines are credit issuers who will give you preliminary credit when you have none now. Terms are commonly Net 30, rather than revolving.

Therefore, if you get approval for $1,000 in vendor credit and use all of it, you must pay that money back in a set term, such as within 30 days on a Net 30 account.


Net 30 accounts must be paid in full within 30 days. 60 accounts need to be paid completely within 60 days. Unlike with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you made use of.

To launch your business credit profile the right way, you ought to get approval for vendor accounts that report to the business credit reporting agencies. As soon as that’s done, you can then use the credit.

Then pay back what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit – It Helps

Not every vendor can help like true starter credit can. These are vendors that will grant an approval with hardly any effort. You also need them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You want 3 of these to move onto the next step, which is retail credit.

Retail Credit

Once there are 3 or more vendor trade accounts reporting to at least one of the CRAs, then progress to retail credit. These are service providers such as Office Depot and Staples.

Just use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use the small business’s EIN on these credit applications.

Fleet Credit

Are there more accounts reporting? Then progress to fleet credit. These are businesses such as BP and Conoco. Use this credit to buy fuel, and to repair, and maintain vehicles. Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make certain to apply using the business’s EIN.

new business in California Credit Suite3 1 1 - How to Set Up a New Business in California

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Cash Credit

Have you been responsibly managing the credit you’ve gotten up to this point? Then move to more universal cash credit. These are service providers like Visa and MasterCard. Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

These are usually MasterCard credit cards. If you have 14 trade accounts reporting, then these are in reach.

Start a New Business in California – Monitor Your Business Credit

Know what is happening with your credit. Make certain it is being reported and address any errors ASAP. Get in the habit of taking a look at credit reports and digging into the particulars, and not just the scores.

We can help you monitor business credit at Experian and D&B for 90% less than it would cost you at the CRAs.

Update Your Data

Update the info if there are inaccuracies or the relevant information is incomplete.

Start a New Business in California – Fix Your Business Credit

So, what’s all this monitoring for? It’s to contest any inaccuracies in your records. Mistakes in your credit report(s) can be corrected. But the CRAs usually want you to dispute in a particular way.


Disputing credit report mistakes usually means you mail a paper letter with copies of any proof of payment with it. These are documents like receipts and cancelled checks. Never mail the original copies. Always mail copies and keep the original copies.

Fixing credit report mistakes also means you precisely spell out any charges you dispute. Make your dispute letter as clear as possible. Be specific about the concerns with your report. Use certified mail so that you will have proof that you mailed in your dispute.

Start a New Business in California – A Word about Business Credit Building

Always use credit sensibly! Never borrow beyond what you can pay back. Track balances and deadlines for payments. Paying off on schedule and fully will do more to raise business credit scores than virtually anything else.

Establishing small business credit pays off. Good business credit scores help a business get loans. Your loan provider knows the small business can pay its financial obligations. Because they know the small business is for real.

The small business’s EIN attaches to high scores and lending institutions won’t feel the need to call for a personal guarantee.

Business credit is an asset which can help your company for years to come.

Learn more here and get started toward opening a new business in California.

Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.

California’s Response to COVID-19 

This is how California is handling the COVID-19 situation. The city of San Francisco has started the COVID-19 Small Business Resiliency Fund.

To be eligible for the COVID-19 Small Businesses Resiliency Fund, small businesses must have at least 1 employee. Also,they can have no more than 5 employees. Plus, they must demonstrate a loss of revenue of 25% or more. They must have less than $2,500,000 in gross receipts as well. In addition, they must be engaged in activities regulated by the City and County of San Francisco. Of course, they need to have a license or permit associated to that regulation.

In California, employers experiencing a hardship as a result of COVID-19 may request up to a 60-day extension from the EDD to file their state payroll reports and deposit state payroll taxes. This is without penalty or interest. A written request for extension must be received within 60 days from the original delinquent date of the payment or return.

On April 11, the Paradise Post provided more information on the CARES Act.

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