Starting an online business in California will make you feel like your business has branches all over the world and a headquarters, which is your California office.
However, according to the law, every online business in the USA must have its headquarters in a state. So, if you want to run an online business in California, there are some steps that you must go through before it can become a legal business, even if you operate online.
Apart from meeting the minimum requirements to start an online business in the United States, I am sure that you want to set up a business that will grow and become successful.
Steps to Starting an Online Business in California
If you have made up your mind to start an online business in California, here are the steps you’ll take to comply with the state authorities and run your business without fear of the unknown.
1. Write a business plan
A business plan is like a guide or GPS that will give the direction of your business. Before you jump into anything too quickly or make a decision that could impact your business instantly or in the future, make sure to write down a business plan.
A business plan is crucial to your online business, and if you write it carefully, it will definitely answer some frequently asked questions about your logistics and other important business arrangements.
Not only that, but writing down your business plan will help you create a roadmap to follow before you start moving forward. A comprehensive business plan should cover the following sections and information about your company:
- Executive summary
- Company description
- Market analysis
- Organization and management
- Products or services
- Marketing and sales strategy
- Funding request
- Financial projections
- Appendix
A business plan is an important document and shouldn’t be written carelessly or informally. If you’re unsure how to write a good one, you can outsource it to a business plan writer online or offline.
If you don’t have a big budget, you can download free business plan templates online and use them to craft a plan that suits your online business.
2. Choose your business name and buy a domain
Don’t forget that your online business needs a website to function, especially since you won’t have a physical office at the moment.
Choosing a business name can be challenging because many names have already been registered. It can be disheartening to discover that a name you like has already been taken.
So, when you see a domain name that is available and matches your business name, you should buy it as soon as possible. Domain availability can change quickly, and you might visit the domain provider the next day only to discover that the name is no longer available.
Even though your business may physically operate in California, the domain name serves as your original office address. Therefore, choose an SEO-optimized domain with a high search traffic level.
Furthermore, you should make branding a priority. Your domain name should match your brand name so that your customers won’t find it difficult to locate your business URL.
For instance, if your business name is “Fast Track Logistics,” then your domain should be fasttracklogistics.com or something similar. It is not a good branding strategy to have a business name and a domain that do not match, such as goodlogistics.com. It could lead to confusion and is not ideal for branding.
Typically, your business’s domain name might cost between $1.99 and $644.99 annually. But don’t skimp on this expense—remember, your domain is like your office address, so purchase the best one you can find.
3. Register your online business with California
As soon as you’ve settled on your name and purchased your domain, the next step is to register your online business with the California Secretary of State.
This step is important because you need to register your business with the government of California. Nobody wants to do business with an unregistered company, so you can’t bypass this step.
Decide what type of business entity you want for your online business: partnership, limited liability company, corporation, or limited liability partnership. Choose the right business entity because it will affect your taxation, liability protection, and operational flexibility.
The fee for business registration depends on the type of business entity you choose, and it ranges from $20 to $150.
Registering your business entity at the state level will also mean that you have registered your business name at the state level and can officially claim the name in California after completing this step.
4. Get all the necessary registrations, licenses, and permits
Business registration is just the start of the bureaucratic process; you’ll also need to get all the necessary permits, licenses, and registrations for smooth operations.
Make sure to check the federal, state, and local requirements specific to the industry you want to venture into, the type of business entity, and the city you will be operating from.
If you want to do online business in areas like alcoholic beverages and broadcasting that are highly regulated, you must first obtain a license from the federal government to legally operate.
If you have any questions or need guidance about the database of the different city permit requirements in California, you can contact the Governor’s Office of Business and Economic Development.
5. Submit your employer and tax documents
The next important task to take care of is tax filing and employer documents. You will start by applying for an Employer Identification Number, also known as an EIN, with the IRS.
Think of this EIN as similar to a Social Security Number, but it’s only applicable for your business purposes. If you want to pay your taxes in California, you must complete and submit tax forms for payroll.
Most employers must complete the Commercial Employer Account Registration and Update Form to establish and update their business’s payroll tax account. However, additional documents may be required, depending on the type of entity you registered your business as and the industry you are operating in.
6. Organize your finances
Once you have filed your taxes and employer documents, the next step is to organize your finances. In your business plan, you should have your financial plans and projections outlined. Now is the time to implement those financial plans.
So, how will you finance these expenses? The money you spent earlier on buying a domain name, creating a logo, and designing the website are just minor expenses.
Some finance experts advise that every business owner should have enough money to run the business for at least the next six months after beginning operations.
Consider the initial investment needed for your business model. Calculate startup costs to determine if you can begin your internet business without seeking external funding.
In the situation where you don’t have enough cash to fund your startup, no problem—you can find lots of options for small business loans in California.
Therefore, if you insist on using external sources to fund your online business, here’s a list of sources to fund your small business in California:
- Small Business Administration (SBA) Loans
- Banks and Credit Unions
- Community Development Financial Institutions (CDFIs)
- Online lenders
- Angel investors
- Venture capital firms
- Crowdfunding platforms
- Small business grants
- Friends and family
7. Establish your operations and make them legal
Finally, this is the end of the process. Here, you have the biggest task, which is to build your online business from scratch until it becomes successful. In fact, this is the hardest part of running a business, which people hardly talk about.
You’ve made it through all the documentation stages, and this phase is where you will need your entrepreneurial skills to manage your business and make it profitable within the period stated in your business plan.
Promote your new business on social media by creating pages across all channels like Facebook, Twitter or X, TikTok, Instagram, YouTube, and many more. Ensure that you use the same name for all your pages so that your customers can easily find you.
That being said, you are expected to stay vigilant about the legal requirements and regulations of starting a business, although you have passed that stage in the earlier phase of your business.
Conclusion: Starting an Online Business in California
We have come to the end of this practical guide about starting an online business in California. It contains all the information you need to know to avoid making mistakes in the long run.
As it is in any other state in the USA, starting an online business in California requires following specific steps and best practices.
Therefore, if you follow the steps in our guideline diligently, you can build an online business that can help you make thousands of dollars monthly, after paying your taxes.