Costs for Starting a Business in California

California Startup Costs Overview

Setting up a small business in California requires navigating substantial initial costs due to several key factors. Real estate prices, particularly in cities like San Francisco, Los Angeles, and San Diego, are among the highest in the nation, making commercial lease rates a significant expense. Labor costs are also elevated, driven by the state's high minimum wage and a competitive job market. Additionally, California's regulatory environment entails various licensing fees and compliance costs that can add to the setup burden. Despite these high costs, California's vast and diverse market, coupled with its reputation for innovation and access to venture capital, presents substantial growth opportunities. Entrepreneurs can also benefit from state-sponsored programs and incentives aimed at supporting small businesses, though they must be prepared for the considerable financial investment required to establish a foothold in this dynamic economic landscape.

California State-Specific Costs

Formation Costs

There are several types of business entities you can choose for your company.  Which is best for your business depends on a variety of factors, like ownership in the business, taxation, and more. Each structure has its own one-time formation or set-up cost that varies by state.

ENTITY
Cost
Notes
C-Corporation
$105
--
S-Corporation
$105
--
LLC
$75
--

Franchise Tax Fees

Franchise taxes are state fees that businesses pay in order to have the right to operate in those states. They are paid in addition to state and federal income taxes. Here are the franchise tax fees for each business entity structure in this state.  

ENTITY
Cost
Notes
C-Corporation
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S-Corporation
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LLC
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Annual Reporting Fees

In many states, business entities must file an annual report. Annual reports are short documents that provide updated information about your business, including the name and address of the business, the people who run it, and its registered agent. Keeping this information up to date ensures you stay compliant.

The most cost efficient way to report annually is to do it yourself. Here are the costs for annual filings for the state.
ENTITY
Cost
Notes
C-Corporation
$25
--
S-Corporation
$25
--
LLC
$800 + tiered fees
--

State Income Taxes

Most states (44 out of 50) levy a corporate income tax. If the income tax is pass-through, use your personal income tax rate. For C-Corporations, file based on C-Corp rates.

ENTITY
Percentage fee
Notes
C-Corporation
8.84%
--
S-Corporation
1.50%
--
LLC
--
--

Sales Tax

The California Sales Tax is 7.25%-10.25%

Outsourcing Costs

The Minimum Wage in California is $$$

Here are some resources for outsourcing help.

Additional Information

[URL by state – secretary of state and small business website link…maybe any other URLs custom to this state]

Non-State Specific Costs

These costs are similar across states. We estimate the total non-state specific costs to be $XXX. Link to Overall Costs page.

Total Costs for Starting a Business in California


Summing up the above fees, we estimate the total cost for starting a business in this state to be:

$XX