How to Form a Company in California


Starting a business in California is a great way to take advantage of the state’s rich economy. The Golden State is home to some of the most innovative industries, including technology and entertainment. It also has a strong financial services industry, which means that if you’re looking to start your own bank or insurance company, you’ve come to the right place.

Step 1: Choose an Entity Type.

When you are forming a company, you must first determine the type of entity that best fits your needs. This decision is critical to the success of your business, as it impacts how much money you can make and how much personal liability you face if something goes wrong.

The most basic options are:

  • Sole proprietorship
  • Partnership
  • Corporation (or “C corporation”)
  • Limited Liability Company (“LLC”)

Step 2: Form the Legal Business Entity.

Now that you’ve decided on the name of your business and have chosen the type of entity it should be, it’s time to actually form your new company.

The most common types of businesses in California are sole proprietorship, partnership, corporation and limited liability company (LLC). Each has its own unique characteristics and benefits/disadvantages; however there are some general guidelines that you should follow when deciding what form your business will take in order to provide maximum protection for yourself as well as other people who may be involved in running or investing in your venture.

Step 3: Obtain an EIN.

You may need an Employer Identification Number, or EIN, to do business in the United States. The EIN is an identifying number assigned by the Internal Revenue Service that provides federal tax reporting and withholding services for sole proprietorships, partnerships, corporations and other entities. A single-member LLC is considered a disregarded entity for tax purposes, so it does not require an EIN but can choose to obtain one if you want to open external bank accounts or file taxes independently from your LLC’s parent company (your business’ registered agent).

To apply for a free EIN online:

  • Go to the IRS website at,,id=106760,00.html#step3
  • Click “Get Your Employer ID Number” under the “Other Services” section of the home page, then choose “Apply Online” from the dropdown menu on this page
  • Enter your personal information into all fields provided—namely name; address; phone number; email address; state where you reside (for example California); etc.—and then click submit

Step 4: Open a Bank Account.

You should also consider the fees and charges that your bank will charge you. Banks have different fee structures, so compare them before deciding which one to go with. If it is a big enough account, some banks offer free checking accounts where you don’t pay any monthly fees but you may be charged for ATM transactions and overdrafts.

Some banks require minimum deposits (usually around $1,000) in order to open an account and fund it with money from your business. Make sure you have this amount ready before choosing a bank account for your new business!

Step 5: Understand Your Tax Obligations.

Now that you’re a company, it’s time to start thinking about taxes. As with most other states, California requires you to pay a minimum tax amount each year. You can find this information in the Franchise Tax Board’s (FTB) online publication, Filing Requirements for Corporations, which is available on their website.

When it comes time to submit your tax return, make sure that you have all of your receipts and invoices ready; these documents will be important when calculating deductions and credits. Additionally, keep in mind that if you receive an IRS Form 1099-MISC for services rendered by an independent contractor who isn’t considered an employee due to being hired on a contract basis rather than being employed directly by the company/person paying them (i.e., freelancers), then these payments must be reported as income even though they were not made directly from one’s own business bank account or credit card – so keep accurate records!

Step 6: Comply With Ongoing Filings.

Once you’ve formed your company, it’s important to stay in compliance with all of the state and federal requirements. This includes filing annual tax returns and paying any appropriate fees. For example:

  • File an annual income tax return.
  • Make sure that your company pays the correct California franchise tax.
  • File a statement of information (form FTB 944) every year that your business is active in California. For example, if you have employees who work in California during their employment or are self-employed individuals who live or work here part time, then you must also file an Employment Tax Return (Form DE 4) each quarter as well as two other confidential forms related to withholding taxes (Forms W2/W3).

If any sales and use tax applies to your business—for example, if its activities involve selling tangible personal property within California—then it will pay those taxes through filing a Sales And Use Tax Return (Form 730) on a quarterly basis. A nonresident alien employee may also need to file Form 540 NR/540NR-EZ Nontaxable Income Exclusion Statement – Individual .

This is the main takeaway for starting a business in California

The main takeaway for starting a business in California is that you need to register your company with the state. You can use the Secretary of State website to file the necessary paperwork. This involves filling out Form LLC-12, Statement of Information and paying any applicable fees. Once you’ve registered with the state, you may file taxes as well as buy insurance and make other legal filings with them from time to time.


With this structure, you can easily open a bank account in California and make business transactions. You will also need to file some tax forms every year. Keep in mind that if you own an LLC or corporation, there are certain requirements for these types of businesses as well. You should consult with an attorney before making any decisions about how best to form your company or corporation so that they can provide you with their professional advice on the matter!

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