Two things define starting a business in California: paperwork that's genuinely simple, and an ongoing cost that isn't. The $70 filing fee is the easy part. The expensive part is the annual franchise tax, which the state collects regardless of whether your business turned a profit that year. What follows covers the full process for 2026.
1. Which business structure fits you?
Choosing a structure comes first, and it's worth understanding what each one actually means before you commit.
- Sole proprietorship. Starts with zero paperwork, since legally you and the business are one entity, but that also means you're on the hook personally for anything the business owes.
- Partnership. Same liability picture as a sole proprietorship, just shared between two or more people running the business together.
- LLC. The most common pick for small California businesses. It shields your personal assets, but it's also the structure that triggers the $800 franchise tax below, so factor that into whether the liability protection is worth it for you.
- Corporation, S-corp or C-corp. More formality and more paperwork, generally worth taking on once you're bringing in investors or splitting ownership across multiple shareholders.
Our guide on choosing a business structure walks through the comparison in more detail.
The California Secretary of State handles LLC and corporation filings statewide. Sole proprietorships and partnerships have nothing to file there, since neither one requires a formation document.
2. Register your business
Forming an LLC
You bring a California LLC into existence by filing Articles of Organization with the Secretary of State for $70. Within 90 days of that, a Statement of Information (Form LLC-12) is also due, $20, and then again every two years going forward.
California's term for a registered agent is an agent for service of process, and every LLC needs one at a physical in-state address, available during business hours. You can take on that role yourself, or pay a commercial service to handle it.
You won't file an operating agreement with the state, but California law does require LLCs to have one internally, even if you're the only member. Draft it anyway.
Sole proprietorships and DBAs
Sole proprietors have nothing to submit to the Secretary of State. Operating under a name other than your own legal name means filing a Fictitious Business Name statement, a DBA, with the county clerk where the business is based, not with the state, and fees and requirements shift from county to county.
3. Get an EIN
An Employer Identification Number costs nothing through the IRS, and the online application usually wraps up in about 15 minutes. You'll need one to open a business bank account, hire anyone, or file most business tax forms, even running a single-member LLC with no employees.
4. Check licenses and permits
There's no single statewide business license in California either. What applies depends on your city, county, and industry: a local business license or tax certificate from your city, professional licensing for regulated fields, health permits if you're in food service, and a seller's permit if you sell taxable goods. Our guides on professional licensing by industry and zoning laws for home businesses cover more of this ground.
5. Understand California taxes
This is where the costs add up. Every LLC doing business in California owes an $800 annual franchise tax to the Franchise Tax Board, income or no income, for as long as the LLC exists; the old first-year exemption is gone. Cross $250,000 in California gross income and there's also an additional LLC fee stacked on top of the $800, scaled to how much revenue you're bringing in.
Personal income tax climbs progressively from 1% to 12.3%, and an extra 1% surcharge kicks in above $1 million in income, putting the top effective rate at 13.3%, the highest of any state. Sales tax starts at a 7.25% statewide base and rises to around 10.75% in some cities once local district taxes are layered on.
Electing corporate tax treatment for your LLC changes these numbers; our guide on choosing a business structure covers how each option gets taxed.
6. Stay compliant
Beyond the $800 franchise tax, California LLCs owe a Statement of Information every two years, $20, to keep address and management details current with the Secretary of State. Skip it and the state can suspend your LLC, which means you can't bring or defend a lawsuit until you're back in good standing.
California business costs at a glance
| Item | Cost |
|---|---|
| Articles of Organization (LLC) | $70 |
| Statement of Information (initial + biennial) | $20 |
| Annual franchise tax (every year) | $800 |
| Additional LLC fee (if CA gross income over $250,000) | $900 to $11,790 |
| Registered agent service (optional) | $100 to $250/year |
| EIN | Free (IRS) |
| State income tax | 1% to 13.3% (progressive + surcharge over $1M) |
| State sales tax | 7.25% base, up to ~10.75% with local |
Frequently asked questions
How much does it cost to form an LLC in California?
$70 for Articles of Organization, plus a $20 Statement of Information due within 90 days and again every two years.
What is California's $800 franchise tax?
An annual tax every LLC doing business in California owes to the Franchise Tax Board regardless of income, with no first-year exemption anymore since that waiver expired.
What's the top personal income tax rate in California?
13.3%, the highest of any state, combining a 12.3% top progressive rate with an extra 1% surcharge on income over $1 million.
Do I need to register a sole proprietorship in California?
No, not if you're operating under your own legal name. If you use a different name, you'll file a Fictitious Business Name (DBA) statement with your county clerk instead.
How much is sales tax in California?
A 7.25% statewide base, climbing to around 10.75% in some cities once local district taxes are added.
Fees and rates above come from the California Secretary of State and Franchise Tax Board as of 2026, and they do change over time, so double check before you file. None of this is legal or tax advice. Talk to a California-licensed attorney or CPA about your specific situation.