7 Key Steps to Sarting a Successful Business in California
Launching your own business is your chance to be your own boss and gain the freedom to carve your own path. It’s something that many have turned to in recent years, which is why there are 4.15 million small businesses in California alone.
On the other hand, starting a successful business is no easy feat. It requires careful planning and putting all your ducks in a row. Although many criticize things like added regulation in California, the Golden State remains one of the best places to run a business, with a business survival rate of 81.5%, the highest in the nation.
Let’s go through the seven steps you must follow to open the doors of your new business.
1. Think Up an Idea
You cannot start a new business until you know what you want to do. With countless types of startups across a highly diverse state economy, opportunities exist everywhere. So, where should you start?
Generally, most entrepreneurs begin with determining what they’re good at and finding a market opening. Any idea should be thoroughly researched to ensure that there’s a need and a realistic chance of making it work.
2. Create a Business Plan
Business plans are the first step in laying down your idea. At their heart, they’re roadmaps detailing what your business is, how you plan on launching it, and how it’ll be operated. Some of the points to include in any good business plan include:
- Executive summary
- Company description
- Market research
- Estimated startup costs
- Financial plan
It doesn’t have to be perfect at this stage. This is a living document, meaning you’ll make changes as your business evolves. If you’ve never written a business plan, you’ll find plenty of free business plan templates available online to guide you.
3. Secure Funding
You’ll need to fund your business via loans unless you’re bootstrapping or relying solely on your savings. This is where you have various options, each with its pros and cons. What matters is that any funding option is viable and self-sustaining. Otherwise, you may struggle with CA debt relief and even bankruptcy.
Here’s a rundown of the different funding options:
- Self-Funding – Many entrepreneurs throw in their own funds. This can also make lenders feel more comfortable funding a startup with no track record because you already have “skin in the game.”
- Family/Friends – Another popular avenue is lending money from family and friends. If you go down this route, ensure you’ve drawn up a formal loan agreement laying down the terms and conditions.
- Small Business Loans – Whether from a bank or specialized lender, small business loans offer lump sums at competitive rates.
- Small Business Grants – California also has a small business grant program to support entrepreneurship throughout the state. If you qualify, the nature of a grant means that you never have to repay the money, but they’re difficult to win due to the sheer competition.
- Small Business Administration (SBA) Microloans – The SBA also offers loans of up to $50,000 via its microloans program. Again, these are highly competitive, so ensure you’ve created a detailed business plan first.
As with any credit, it’s critical to do your research to determine whether you qualify and can get funding at a rate that makes sense for your new business. Expensive loans can quickly become a burden if things don’t pan out as intended.
4. Choose Your Business Structure
Various business structures exist. Each has pros and cons, so it’s important to evaluate it carefully. Different business structures also have various rules regarding record-keeping and reporting.
Generally, most small business owners will opt for a Limited Liability Company (LLC). LLCs are easy and cost-effective to establish while shielding the owner’s personal assets.
Corporations like the C-corp and S-corp can also be used for extra liability protection and lower tax rates. However, corporations have far more tax and legal responsibilities, so many entrepreneurs only form corporations when their businesses are fully established.
Remember that many types of businesses, including corporations and LLCs, require you to obtain a registered agent. They can cost as little as $50 per year and receive tax and legal correspondence on your behalf.
5. Select Your Name
The next step is to come up with a name for your business. Write down a shortlist of names and check out California’s business name search portal to ensure that your number one choice isn’t already taken.
Even if a name isn’t taken, you should ensure that your name hasn’t been trademarked anywhere else. This is not only important for preventing legal action but also for registering a web domain.
You can also register a fictitious name for your customer-facing activities if your name is taken. This is known as a DBA, or Doing Business As, and allows you to have an official and public business name.
DBA names are easy to register, but they’re typically done on the county level, with fees ranging from $10 to $100.
6. Get an Employer Identification Number (EIN)
All businesses hiring employees require an EIN for tax purposes. The IRS uses EINs to track every taxable business in the country, and they come in the form of a unique nine-digit number.
To get an EIN, you should fill out Form SS-4. If using snail mail, expect the process to take four weeks, but doing it online could take as little as 7-14 days.
7. Register Your Business
Under state law, every new business other than sole proprietorships must register with the California Secretary of State. Depending on your company type, fees for registration range from $30 to $150.
Beware that the registration forms you’ll use depend on whether you’re a domestic or foreign applicant. Domestic applicants live and plan to operate their business in California. Foreign applicants may be business owners living overseas or simply in another state.
Start Your Path to Financial Freedom Today
These seven basic steps cover most of the bases for starting your business. Once established, you must consider various taxes and charges, such as California’s Minimum Franchise Tax on LLCs.
But if you follow these seven steps, you’ll already have everything you require to meet your obligations and turn your idea into a recognized brand.
When are you starting your new business?