Want to start a small business in California? You're entering a state where 99.9% of businesses are small businesses. This makes California one of the most entrepreneurial environments in the country. California's small businesses employ 7.5 million people across 4.1 million enterprises.
California stands as the world's fifth-largest economy. This creates a strong marketplace for new ventures. Your business launch here puts you in a thriving ecosystem where 47.1% of state employees work for small businesses. The upcoming 2028 Olympics and growing focus on clean energy make Southern California a perfect spot for entrepreneurs to expand or launch new ventures.
Our step-by-step guide will help you direct your California business journey. You'll learn everything from testing your original concept to understanding California's corporate income and franchise taxes. This piece gives you the roadmap to transform your entrepreneurial vision into reality in the Golden State, whether you're starting a telehealth venture or following traditional business models.
Wondering how to start a small business in California? Scroll down now to learn more!
Key Takeaways
- California hosts 4.1M small businesses in a strong, diverse economy.
- Entrepreneurs benefit from $150B+ in annual venture funding.
- The state supports green and telehealth startups with major grants.
- Key steps: test your idea, register, get permits, and follow tax rules.
- Bask Health helps telehealth startups launch faster and cheaper.
Why California is a unique place to start a business
California stands out as an exceptional place to launch a small business. The state's dynamic ecosystem offers entrepreneurs distinct advantages, making it an ideal location for various business ventures.
Access to capital and breakthrough hubs
California pulls in over $150 billion in annual venture funding—surpassing most countries combined. This remarkable access to capital creates a unique chance for startups to secure investment. The state houses leading venture capital firms like Sequoia Capital and Andreessen Horowitz. These firms provide both funding and strategic guidance to companies at all stages.
The state's strong infrastructure goes beyond just money. A network of accelerators, incubators, and universities helps foster entrepreneurial success. Y Combinator and 500 Startups provide vital mentorship and networking opportunities. World-class institutions like Stanford, UC Berkeley, and UCLA serve as centers of breakthroughs through their tech transfer programs.
Support for green and telehealth startups
The state champions environmentally responsible business through programs like CalSEED. This initiative gives grants up to $700,000 to early-stage clean energy entrepreneurs. The state's Expanding Venture Capital Access program puts $250 million into venture capital funds that focus on climate equity and justice.
Telehealth entrepreneurs find a thriving ecosystem that welcomes healthcare breakthroughs in California. Many successful telehealth companies call the state home, including Lemonaid Health, which uses technology algorithms to deliver quality care. Bask Health's experience shows how California's regulatory environment and forward-thinking policies make it ideal to launch telehealth services.
Cultural diversity and consumer openness
California's greatest strength lies in its cultural diversity. Minority-owned small businesses make up approximately 46% of all businesses in the state and generate $192 billion in economic output yearly. The state leads the national average in minority ownership—racial minorities represent 37% of workers and own 26.9% of businesses.
This rich diversity creates a consumer base that welcomes new products and services. California serves as the perfect testing ground for innovative business ideas before companies expand nationally or globally.
Step-by-step guide to starting your business
Starting a business in California takes careful planning and specific legal steps. Here's how you can turn your idea into a real business.
Research and confirm your business idea
Every successful venture starts with proper testing. You need to clarify the problem your business will solve and define what makes you unique. Your target audience needs a clear definition based on demographics, behaviors, and pain points.
The best ways to test your concept:
- Conduct one-on-one interviews with potential customers
- Analyze market conditions and competitors
- Check search data to see if people want what you offer
Note that testing isn't about proving your idea works—it's about finding if people want what you're offering and will pay for it.
Choose a business structure and name
Your business's structure affects everything from taxes to personal liability. California gives you several options:
- Sole Proprietorship: Simplest form with no separation between you and the business
- LLC: Provides liability protection while maintaining tax flexibility
- Corporation: Creates a separate legal entity with more complex requirements
- Partnership: Various forms exist for businesses with multiple owners
Pick a distinctive business name after selecting your structure. Since January 2021, names must be "distinguishable in the records" from existing entities and "may not mislead the public." The California Secretary of State lets you reserve your chosen name for 60 days to protect it.
Register your business and get an EIN
File the right formation documents with the California Secretary of State once you've picked a structure and name. LLCs need to file Articles of Organization, while corporations submit Articles of Incorporation.
So you'll need a Federal Employer Identification Number (EIN) from the IRS, especially if you:
- Have employees
- Operate as a corporation or partnership
- Need to file specific tax returns
The IRS website lets you apply for an EIN online at no cost.
Apply for licenses and permits
Most California cities and counties require business licenses or permits, even for home-based operations. You'll also need a seller's permit from the California Department of Tax and Fee Administration if you sell tangible goods.
CalGold, the Governor's Office of Business and Economic Development online resource, helps you find the specific permits your business needs based on your industry and location.
Managing operations and compliance
Business owners in California need to handle both operations and compliance rules to stay out of legal trouble and avoid fines. Here's what you need to know about running your business the right way.
Understanding California tax obligations
California businesses face state and federal tax requirements. The state has higher-than-average taxes that include corporate tax (8.84%), franchise tax, and alternative minimum tax (6.65%). Small businesses must pay at least $800 in franchise tax, even if they make no money. S corporations pay either 1.5% of net income or $800 minimum - whichever is higher. LLCs pay franchise tax rates that change with gross income, ranging from $900 to $11,790.
Setting up business banking and accounting
Your business needs its own bank account right when you start handling money. Keeping business and personal funds separate helps protect your assets, makes you look more professional, and builds business credit. You'll need three basic accounts: a business checking account, a way to process credit card payments, and a business savings account. Look for banks that offer low fees, good online tools, and easy access to your money.
Hiring employees and meeting labor laws
California employers must get an identification number from the Employment Development Department. You'll need to handle federal and state income tax withholding, pay FICA taxes (6.2% for Social Security, 1.45% for Medicare), and cover state unemployment insurance (3.4% on first $7,000). California law requires 30-minute meal breaks for shifts longer than 5 hours and 10-minute rest breaks every 4 hours.
Insurance and legal protections
Workers' compensation insurance is a must for all California employers - even if you have just one employee. This insurance covers employee injuries and provides medical care and disability benefits. On top of that, it makes sense to get general liability, commercial property, and professional liability insurance to protect against everyday business risks.
How Bask Health supports telehealth entrepreneurs
Telehealth entrepreneurship shows great promise in today's digital world. Bask Health provides complete support to healthcare innovators who want to establish themselves in California's thriving business environment.
Telehealth business management solutions
Our customizable white-label telehealth platform makes shared healthcare experiences possible without technical expertise. We have processed over $178 million in transactions and served more than 750,000 patients through our strong infrastructure. Our platform has:
- Patient management systems
- Integrated payment processing
- Customizable intake forms
- Complete data transparency
How to start your own telehealth business
Starting a telehealth venture needs careful planning. Your first step should be a detailed market analysis that looks at demographics, psychographics, and behavior patterns. To name just one example, professionals aged 30-45 prefer mobile healthcare options, while parents focus more on pediatric services.
You should develop an eco-friendly revenue model with flexible pricing options. Monthly subscriptions range from $25-$300 based on service scope. All the same, pay-per-visit models work better for occasional users.
Reducing telemedicine startup costs with Bask Health
Building custom systems costs between $100,000-$250,000. Our white-label solution reduces expenses by up to 65%. Entrepreneurs can launch three times faster than with custom solutions. You'll need $15,000-$50,000 for simple telehealth implementation instead of the usual $70,000-$100,000 startup costs.
Conclusion
California gives entrepreneurs exceptional opportunities to start small businesses in all types of sectors. The state stands out as an ideal launchpad with its resilient funding ecosystem, state-of-the-art hubs, and diverse consumer base. The state's support for green initiatives and telehealth ventures makes it appealing to forward-thinking entrepreneurs.
A clear roadmap will help you direct your way through California's business landscape. Start by verifying your idea. Choose the right business structure, complete your registration, and get all required permits. Your next steps should focus on efficient operations while meeting California's tax obligations and labor laws.
California offers fertile ground for growth to telehealth entrepreneurs. We at Bask Health know the challenges of launching a telehealth business. Our solutions help you launch faster at a lower cost compared to building custom systems. You can create tailored digital health experiences with our white-label platform without needing extensive technical expertise.
The Golden State's entrepreneurial ecosystem brings together capital access, innovation support, and a diverse market ready for new ideas. The state gives you everything needed for success, whether you're starting a traditional business or venturing into telehealth. This roadmap gives you the tools to bring your business vision to life in one of the world's most vibrant economies.
References
- California Governor’s Office of Small Business & Economic Development. (n.d.). Accelerate California: Funding, grants & incentives. https://calosba.ca.gov/funding-grants-incentives/accelerate-california/
- California Governor’s Office of Small Business & Economic Development. (n.d.). The state of diverse small businesses in California: Executive summary [PDF]. https://calosba.ca.gov/wp-content/uploads/The-State-of-Diverse-Small-Businesses-in-California_Executive-Summary.pdf
- California Secretary of State. (n.d.). Name reservations. https://www.sos.ca.gov/business-programs/business-entities/name-reservations
- DePersio, G. (2024, January 16). Taxes in California for small businesses: The basics. Investopedia. https://www.investopedia.com/articles/personal-finance/102115/taxes-california-small-business-basics.asp
