Starting a Business in California Made Easy

Fran Majidi
October 2, 2019

Small business and medium-size businesses in California are flourishing. As a densely populated state, California boasts multiple thriving industries and millions of small business that include retail shops, salons, spas, gas stations and more. Many of them are successful and growing. It’s a good time to start a business, if you’ve been considering doing just that. Tax credits and incentives for starting a small business in California can make your dream a reality. Let’s look at how you can benefit from starting a business and how to get started building your empire!

Loans For Small Businesses

In addition to getting investors onboard, you have the option of applying for California loans for businesses. Check out the following to see if you are eligible:

California Small Business Loan Guarantee Program

The Small Business Finance Center (SBFC) works with the Financial Development Corporations to offer loan guarantees and direct loans for small businesses that need to raise capital, either for startup costs or to pay for other business-related costs.

Small businesses with 750 employees or less are eligible for loans, up to $20 million, with a maximum guarantee of $1 million. What’s nice about this loan is that interest rates can be negotiated with the lender.

Businesses that take advantage of this program have used funding for new construction, startup costs, inventor, working capital, export financing, franchise fees, business expansion, lines of credit, gap financing and more.

Jump Start Loan Program

The Jump Start Loan Program helps small businesses in California get started, grow and thrive. Jump Start offers microloans, technical assistance and financial literacy training. Loans are available to small businesses and people starting a small business in California.

The eligibility requirements for this program are intended to help those in less developed and low-wealth areas of California. For instance, the borrower’s income must be equal to or less than the state average.

All loan proceeds must be used in California, for the following types of expenditures: start-up costs, property, buildings, machinery, equipment, inventory, etcetera. Loan amounts range from $500 to $10,000 with terms up to 5 years, fully amortized. Not bad at all!

Farm Loan Program

The Farm Loan Program provides direct loans to small farms through participating Financial Development Corporations (FDCs). These loans are 90% guaranteed by the U.S.D.A Farm Serviced Agency (FSA).

To be eligible you must be a U.S citizen or resident alien (including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa and certain former Pacific Trust Territories). You must have a good credit history but be unable to get a loan without a guarantee. You cannot have more than 3 instances of debt forgiveness since April 4, 1996, or any after April 4, 1996.

There are also other requirements like having no history of delinquency on a federal debt. You can be the owner or operator of a family farm after the loan is closed (for a Guaranteed Operating Loan, or OL, the producer must be the operator of a family farm; for the Guaranteed Farm Ownership, or FO, loan, the producer needs to own the farm.

This loan pays up to $1,399,000, which is adjusted based on inflation. Hemp farming, anyone?

How to Start a New Business in California: Business Checklist

Prepare and Plan

By plan, we mean that you should put together a business plan after you conduct extensive market research to see if your business idea can actually prove to be profitable. You’ll want to know what kind of demand is out there for the product or service you’ll be selling.

All the information you can pull will help you determine your market size so you can price your products/services competitively. Here is a list of market research resources to help you create your plan. Your business plan can be one page long or dozens of pages long, depending on your needs and preferences. If you plan to apply for loans, the longer traditional business plan format is much preferred over the lean startup plan.

For steps on how to write both types of business plans, visit here.

Calculate Costs and Apply for Loans

Take into consideration business costs, which can be costly in California: office space, equipment and supplies, utilities, licenses, permits, insurance, lawyer(s), accountant, inventory, employee salaries, advertising, marketing, market research (in addition to the preliminary one you did for the business plan) and your business website.

Business License in California

Before you get your business license in California, you’ll need to do a few things, like choosing a business structure, choosing a business name and registering your business. Don’t forget that you’ll also need federal and state tax ID numbers before you apply for necessary California business licenses and permits.

Pick a Business Location in California

Your business location will determine taxes, zoning laws and specific regulations for your industry in that particular city. It’s a good idea to plan strategically when choosing a location. Some local government agencies have restrictions that may not work for you. You’ll also be choosing a location based on your target demographic. Maybe you should compare the different incentives for small businesses amongst a handful of cities before you choose your spot. Spend some time going over the pros and cons of each town or city you’re considering, and choose wisely.

Launch Your Business

You’ll need to choose an entity type for your business, or a business structure. The most common business structures are: sole proprietorship, partnership and limited liability company (LLC). To see how California defines the different business structures, visit here.

Choose your name, not based on whim, but on market research. Choose one that reflects the brand identity that you’ve decided on for your business.

Next, you’ll need to register your name as entity name protected at the state level; trademark protected at a federal level; Doing Business As (DBA), which may be legally required; and domain name, which protects your business website address.

In some cases, you won’t need to register at all if you’re conducting business as yourself using your legal name. It’s best to speak with the local government agencies, but for some types of business you may need to file with the federal agencies. In certain situations, you may not need to do much other than simply filing to get a federal tax ID.

Get Licenses and Permits

After you get your federal and state tax ID numbers, you’ll need to look at the required licensure. Most small business owners are surprised to find out that they need a combination of licenses and permits from both federal and state agencies. Which permit(s) and business license(s) you need depends on the business services and activities, the location and government rules surrounding business operations.

To see a list of different industries for requirements and to find out where to get licensing, visit here.

Find Business Insurance in California

Business insurance will protect you against unexpected losses, like accidents, natural disasters and lawsuits that can be very expensive if you don’t have the right insurance. Almost all business require general liability insurance. Other commonly purchased coverages include: product liability insurance, professional liability insurance, commercial property insurance, home-based business insurance and business owner’s policy.

Business owner’s policy insurance is a very popular small business insurance in California. Often called BOP, this is a bundled package of the most vital forms of insurance small businesses need. However, you will want to speak with a knowledgeable insurance agent to customize a plan that fits the needs of your company and the scope of its operations. Get business insurance quotes in California by entering your zip code here.

There are small business health insurance plans in California that can complement your BOP policy too. You’ll need small business health insurance in California, if you have 50 or more employees on staff or else you’ll be subject to a fine. Worker’s compensation is required in California too but is included in a BOP.

Get a Free Commercial Insurance Quote.

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