California is considered the richest and the largest state in USA, one of the preferred destinations for all kinds of investors who want to generate profits on the American territory in varied and attractive fields. With about 40 million residents, local and from overseas, prestigious colleges, business schools and a respected commercial environment, California is also named the Golden State, due to its biggest opportunities offered in each city. Sacramento (the capital), Los Angeles, San Jose, Santa Barbara, Santa Monica, San Francisco, Malibu, Palm Springs, Long Beach and Palo Alto are among well-known cities in California, where numerous companies successfully perform their activities in different and appreciated sectors. Our company formation specialists in USA can offer support and assistance when opening a company in California, considering the requirements as mentioned by the laws of the state.

Forming an LLC in California

The most popular business form in California is the limited liability company which can be set up by at least one shareholder and there is no minimum share capital requirement with the Business Entities Division of the California Secretary of State. The owners are not personally responsible for the company’s liabilities or debts. Furthermore, an LLC in California is subject to pass-through taxation which means that all profits and losses are passed through the company to each member of the firm. After deciding on a name of the company, which must contain the abbreviations LLC or L.L.C., one must prepare the logo of the business and register with the Patent and Trademark Office in USA.

Appointing a registered agent for your company in California

A professional registered agent must be appointed for your company in California and he/she will act in legal terms when dealing with the firm’s documents. Please keep in mind that a registered agent in California may be an already registered company or a natural person who will be in charge of the documents of the company. If you want to open a company in USA, you should consider that our representatives in company incorporation in America can act like registered agents for your businesses in California.

The EIN for your company in California

Each company in California must have a social security number which is the same thing with the employer identification number, the EIN. This can be issued by the IRS (Internal Revenue Service) as soon as the company is registered in California with the authorities in charge and represents the social number of the business.

Opening a bank account for a company in California

Even if business persons with intentions of opening companies in California already possess a bank account, it is suggested to set up a new one, in order to separate the personal assets and incomes from the ones related to the new firm in the state. Once you have chosen the bank in California, you must prepare copies of the company’s documents and consider other bank requirements. A corporate bank account in California comes with a business bank card and varied online services linked to the future financial transactions.

Sales tax in California

Companies with trading activities should consider the sales tax in California which is usually added to the prices of goods and services. This tax is then collected and deposited to the tax authorities in California. All sellers with a physical storage address in California and who offer products and services for a particular price must consider the addition of the sales tax. The exemption regards the medical devices, machinery, medicines, grocery and also the design area where the sales tax is not imposed.

A website for your company in California

Regardless of the activity field in California, but with complete focus on the competition, an entrepreneur should take into consideration the idea of creating a website for his/her business. There are numerous companies that offer such services in varied domains, and for creating awareness on the market, it is impetuous to understand that the online environment is a good start for promoting the products and services offered. In addition to a website for your company, it is necessary to explore the social media and the suitable channels which can prove to be successful for your business in California.

Virtual office for a company in California

Numerous companies in California have traditional offices in the state, but there are many investors who decide to use the services of a virtual office, not only for the low costs, but also for the facilities involved. A notable business address, mail and correspondence services, business meetings with future partners and a local phone number are among services of a virtual office in California. If you do not intend to settle a traditional office in California, please keep in mind that our local consultants in America can provide you with virtual office services on request.

Do I need licenses and permits for my business in California?

Yes, if you think of business in agriculture, mining, and drilling, fish and wildlife, maritime transportation, commercial fisheries or alcoholic beverages, it is best to observe the regulations for obtaining the necessary licenses and permits. This is a mandatory condition at the time a company is registered. It is good to know that sole traders in California will have to observe the general rules for professions like electricians, lawyers, accountants, contractors and doctors. In the case a person wants to open a restaurant in California, he/she needs to obtain special licenses from the waste management and fire department. Food and liquor licenses are also necessary before the restaurant is open for business. Let us remind you that our team of consultants is at your service at the time you want to open a business in California and need to apply for licenses and permits.

What is the corporate records book?

The shareholder’s meetings, the stock certificates, and other important company documents are kept in a corporate records book which is normally held at the head office of the firm. We mention that an internal corporate document comprising the general rules in the company is normally prepared and it is called Bylaws. Feel free to ask our consultants for assistance in company documents’ preparation if you want to start a business in USA, especially in California.

Do I need insurance for my company in California?

Yes, it is recommended to consider a business insurance and especially the general liability insurance. No matter if you have a small, medium or a large company, it is necessary to protect your company from any kind of risks that might appear. Here are a few facts to consider when deciding on business insurance:

• The general liability insurance is normally recommended for companies with establishments in California, the type of insurance which can cover property damage, medical payments, bodily injury, personal liabilities, legal defense, and judgment, plus the losses caused by copyright violation.
• In the case of companies providing legal advice or accounting services, it is best to observe the conditions for professional liability insurance in California.
• There are many benefits that come with business insurance and among them, complete security, employees covered by insurance and an insurance agent that can take care of the necessary policy of your business.
• It is important to know details about the necessary insurance for your business from our team of company incorporation agents in USA.

Can I open a subsidiary in California?

Yes, existing companies can have subsidiaries in California and can work independently from the parent enterprise. There is no need to worry about the registration procedure because it is the same as for any kind of company formation and incorporation. The board of directors of the parent company must agree on the subsidiary formation through a statement in this sense and on the type of entity. It is good to know that a limited liability company is the proper business entity through which a subsidiary can perform the activities. The business address and the Articles of Association are among the requirements to be observed for establishing a subsidiary in California. Instead of misunderstandings in matters of subsidiary registration in California, it is best to have in mind the support and recommendations which can be provided by our team. Let us handle all the requirements when opening a limited liability company in California.

Do I need an operating agreement for my company in California?

Even though it is not imposed, an operating agreement is recommended for your company in California. This is an internal document which comprises the internal procedures and rules for voting in the firm and the ways in which is controlled. There are cases in which the voting procedure takes place without the owners and/or managers to be present in the company, meaning that it can be organized remotely. A majority decision is necessary, therefore, it is not important how the voting procedure takes place, as long as it is mentioned by the operating agreement in your firm. Any voting changes in the company need to be mentioned by the operating agreement and then signed by the company members. We remind that such a document is used only internally, however, it is important to have a clear idea about the necessity of such a document. Please talk to our advisors in this sense.

Why open a company in California?

Without a doubt, California is one of the most attractive destinations in America, for both business and development. An influent and wealthy state like California is chosen with no second thoughts by entrepreneurs in search of success on a fruitful and respected market. The skilled workforce in California’s main industries is also a point of start when thinking of performing economic activities in the state. Additionally, California is a synonym for entertainment, a domain where small, medium and large businesses have success. We also mention that Silicon Valley is the home of technology and related businesses where we remark that companies like Apple, HP (Hewlett Packard), EA (Electronic Arts), Google, Facebook, Tesla or Intel are among huge and well-known companies with headquarters established here.

California has the 5th biggest economy in the world and it is a prolific business center for numerous investors, local or foreign, who generate significant revenues in this states’ generous and appealing industries. When opening a company in California, entrepreneurs need to understand the taxation system and to respect the requirements of this important sector. Our company formation agents in USA can assist foreign investors when opening companies in any American state. They can also provide information about the tax regime for each type of company.

What is the sales tax in California?

The standard sales tax in California is set at 7.25% rate and it is imposed for companies with products and services available for sale purposes on the market. This is the highest sales tax in USA, and it is good to know that cities in California can collect their own sales tax.

The personal income tax in California

The progressive income tax applicable in California ranges from 1% to 12.3%, as stated in the below table for each type of incomes and taxpayers:

Taxable Income – Single Payers Tax Rate                   Taxable Income – Married Persons Tax Rate
Up to $8,015: 1%                                                              Up to $16,030: 1%
Between $8,015 and $19,001: 2%                                   Between $16,030 and $38,002: 2%
Between $19,001 and $29,989: 4%                                 Between $38,002 and $59,978: 4%
Between $29,989 and $41,629: 6%                                 Between $59,978 and $83,258: 6%
Between $41,629 and $52,612: 8%                                 Between $83,258 and $105,224: 8%
Between $52,612 and $268,750: 9%                               Between $105,224 and $537,500: 9%
Between $268,750 and $322,499: 10.3%                        Between $537,500 and $644,998: 10.3%
Between $322,499 and $537,498: 11.3%                        Between $644,998 and $1,074,996: 11.3%
$537,498 and more: 12.3%                                               $1,074,996 and more: 12.3%

The above-mentioned tax rates are relevant only after all the deductions and exemptions were applied on the registered incomes. It is good to know that for personal incomes over $1 million, a surcharge of 1% is applied. Please feel free to address your inquiries regarding the taxation on incomes in California to our team of advisors. Also, if you want to start a business in USA, we are at your disposal with information and assistance.

Is there an estate tax in California?

No, California does not impose an estate tax. Most of the American states are not subject to such tax, but it is best to bear in mind other taxes imposed.

The franchise tax in California

Companies with establishments in California need to align with the tax requirements in this sense, for example, they need to consider the federal franchise tax. This has a 1.5% rate imposed on the company’s net income. For limited liability companies in California, a flat rate needs to be paid, as seen in the table:

Taxable Income Flat Rate
Between $250,000 and $499,999 $900
Between $500,000 and $999,999 $2,500
Between $1,000,000 and $4,999,999 $6,000
$5,000,000 or more $11,790

Short details about taxes in California

California is known as a state which imposes the highest taxes in America. Here are some quick facts about the taxes imposed in this state:

Tax Rates
Income Tax 1%-13.3%
Sales Tax 7.25%-10.25%
Property Tax 0.75%-2%

The corporate tax in California

LLCs in California are levied with a 9% corporate tax rate which is applied to the net taxable income of the companies. C-Corporations in California need to pay a corporate tax of 8.84% or 6.65% if they state the net taxable income. Besides this tax, the shareholders of the company need to consider the taxes imposed on personal incomes.

Alternative minimum tax in California

AMT or the alternative minimum tax is imposed for corporations, trusts, and individuals with residency in California. The AMT in California is set at 7% rate for the incomes registered in this American state as a company with businesses and activities in California.