How to Start a Business in California

Technology and Software. Silicon Valley and the broader Bay Area remain the global epicenter for tech startups. The sector employs over 1.9 million workers statewide.

Entertainment, Media, and Streaming. Hollywood and the Los Angeles metro area drive a $150+ billion creative economy. Digital content production has expanded opportunities well beyond traditional studios.

Agriculture and Food. California is the top U.S. agricultural state, producing over $50 billion in farm output annually. The state grows over a third of the country's vegetables and three-quarters of its fruits and nuts.

Healthcare and Biotech. San Diego, the Bay Area, and Los Angeles host major biotech clusters. The life sciences sector employs over 300,000 workers and continues to grow.

Clean Energy and Sustainability. California leads the nation in solar energy capacity and electric vehicle adoption. Green technology companies benefit from aggressive state incentives and mandates.

Tourism and Hospitality. The state attracts over 250 million visitors annually, generating roughly $150 billion in spending. Restaurants, lodging, and experience-based businesses thrive in coastal and urban areas.

California's personal income tax uses 10 brackets ranging from 1% to 13.3%. The top rate applies to income over $1 million and is the highest marginal state income tax rate in the nation.

The base state sales tax rate is 7.25%. Local add-ons push the combined rate to between 7.25% and 10.75% depending on the city and county. Register for a seller's permit at the California Department of Tax and Fee Administration (CDTFA) if you sell taxable goods.

Every LLC and corporation owes an $800 minimum franchise tax annually to the Franchise Tax Board. LLCs with total California income over $250,000 pay an additional LLC fee: $900 for $250K-$499K, $2,500 for $500K-$999K, $6,000 for $1M-$4.99M, and $11,790 for $5M+.

California does not have a separate gross receipts tax at the state level, though some cities (like San Francisco) impose their own gross receipts tax on businesses. Check your local municipality's requirements.

Property tax is capped at roughly 1% of assessed value under Proposition 13, though local bonds and special assessments can add to that. Commercial properties may face reassessment under more recent ballot measures.

Employers must register with the Employment Development Department (EDD) for payroll taxes, including state disability insurance (SDI) and unemployment insurance (UI). California is one of a handful of states that requires employer-funded disability insurance.

California's cost of living index is roughly 140 (where the national average is 100), driven primarily by housing costs. Median office rent in San Francisco and Los Angeles far exceeds national averages, though remote work has made inland cities like Sacramento and Fresno more viable for startups.

The state minimum wage is $16.50 per hour in 2026. Several major cities mandate higher local minimums (e.g., $18.67 in San Francisco, $17.28 in Los Angeles). Expect labor costs to run 15% to 30% above the national median for comparable roles.

Commercial electricity rates in California average around $0.22 per kWh, among the highest in the nation. Businesses with high energy needs should factor utility costs into location decisions or explore solar incentives.

Despite the higher costs, California businesses gain access to the largest consumer market in the U.S., world-class talent, and unmatched industry clusters. Many founders find that the revenue potential outweighs the cost premium.

The California SBDC network operates over 40 regional centers offering free business advising and help with loan applications. They also host workshops on financial projections, pitch decks, and SBA loan readiness.

The SBA San Francisco District Office serves Northern California, while the SBA Los Angeles District Office covers the southern region. Both connect small businesses to SBA 7(a) loans, microloans, and disaster lending.

The California IBank (Infrastructure and Economic Development Bank) offers the Small Business Finance Center, which guarantees loans up to $20 million for businesses that may not qualify for traditional financing. The program works through participating lenders statewide.

The California Office of the Small Business Advocate (CalOSBA) administers grants for underserved communities. Programs like the California Dream Fund have awarded grants of up to $10,000 to eligible micro-businesses.

Local angel investor networks and accelerators are active throughout the state. Y Combinator (Mountain View), Techstars LA, and 500 Global (San Francisco) are among the most prominent startup accelerators in the country.

During your first 90 days, file your Statement of Information with the Secretary of State ($20), open your business bank account, and register for a seller's permit if selling taxable goods. Set up your accounting system and make your first estimated franchise tax payment to the FTB.

Apply for all required city and county business licenses within your first month of operations. Hire a bookkeeper or set up accounting software immediately so that tax time does not become a scramble.

If you plan to hire employees, register with the EDD for payroll taxes and secure workers' compensation insurance before onboarding your first hire. California enforces strict penalties for employer noncompliance.