What is an S-Corporation?

The letter S laying on concrete, symbolic of answering the question: what is an S-corporation?

Everything You Need to Know About S-Corporations

If you’re in business, you’ve heard of S-corporations (or S-corps). You probably even have a lot of people in your life that have strong opinions on whether you should be an s-corporation or not.  But what exactly is an S-corporation and how does the structure affect how you run your business? Or, simply put: what is an S-Corp?

S-corporations entered the small business scene in 1958 when the federal government passed legislation allowing their formation.  Now, by IRS estimates, there are over 5 million S-corporations in existence. Read on to learn everything you need to know about S-Corps.

Benefits of Forming an S-corporation

Pass-Through taxation.

One of the biggest benefits of s-corporations is that the taxation of the company’s profit passes through to the owner.

In a regular corporation (or “C-corporation”), the business’ profit is taxed at the business level.  If the shareholders want to take money out of the company, they must either do so by taking a salary which is subject to payroll taxes or taking a dividend.  In the case of a dividend, that income has already been subject to the corporate tax rate and then is taxed again on your personal return.  The income being taxed on the corporate level and personal level is known as double taxation.

In an s-corporation, this double taxation is avoided because the profit of the corporation is passed through to the shareholder and only taxed at the individual level.

You only pay payroll taxes on your salary.

If you are actively involved in a partnership or the owner of a sole proprietorship, the company’s profit is all subject to self-employment taxes.  As the owner, you are responsible for both the employee and employer portion of payroll taxes which currently are 15.3%. 

In an s-corporation, you are required to pay yourself a reasonable salary.  The term reasonable salary is not defined by any IRS regulations, so this amount is open to interpretation and you should consult your accountant to discuss a reasonable salary for your business.

That being said, you only pay payroll taxes on the salary you pay yourself.  The remaining profit after paying yourself and all your other expenses is not subject to the payroll taxes which can yield significant tax savings.

S-corporations provide liability protection.

The s-corporate structure provides liability protection for the shareholders.  The shareholders’ assets are protected from the business creditors for claims rising from contracts or litigation.

Drawbacks of Forming an S-corporation

There is the initial setup cost and ongoing taxes.

There are several initial fees including the registration fees with the state and state taxes that the corporation is subject to.  If you operate in multiple states, you’ll need to review each state’s requirements and determine which states you need to register with. 

In California, s-corporations are subject to an annual $800 minimum tax although it may be  waived in the first year of operation depending on your profit.  There are annual Statement of Information filings required by the Secretary of State.  You should obtain local businesses licenses to ensure compliance with local regulations as well. 

Having a third-party filing your initial paperwork can cost thousands of dollars depending on which firm you use, but is often worth it to ensure that the paperwork is filed correctly and you have properly set up your corporation to receive the benefits listed above.

You are required to pay yourself a reasonable salary.

As noted above, you are required to pay yourself a reasonable salary. The reasonable salary can vary and should be discussed with your accountant.  However, the salary requirement requires you to have a payroll processing company or process the payroll yourself.  Payroll requires quarterly and annual filing (such as W-2s) and has stiff penalties for missing required payment dates. 

Your best bet is to use an online system to process payroll or work with a professional payroll processor, however the fees add up for either of these services.

You can only have one class of stock.

Distributions to shareholders must be made in proportion to the stock ownership.  So, if one personal owns 75% of the company, they must receive 75% of all distributions.  Distributing funds in a non-proportional manner creates a second class of stock which is not allowed under the s-corporation rules. 

Limitation on the number of shareholders.

Though this is not a problem for most small companies, the number of shareholders for an s-corporation is limited to 100.  In this case, married couples can be counted as single shareholder when calculating the limitation. 

You must use a calendar year.

Like the limitation on the number of shareholders this is usually not a problem for most people who are used to thinking about finances on an annual basis. An s-corporation is required to have a fiscal year that is the same as the calendar years ending on December 31.  C-corporations have the option of selecting a fiscal year end which may serve them better based on seasonal fluctuations in business. 

A woman stands on top of a hill with her arms outstretched, like you might if you just started an S-Corp!
It’s time to take on the world and start that S-Corporation at last!

How to Start an S-corporation

Register your corporation with your state.

Each state has their own policies and procedures when it comes to corporate formation.  The first step to establishing an S-corporation is to register as a corporation and then you file the s-election.

For California, you need to file your Articles of Incorporation with the Secretary of State (SoS).  You can create your own document for the filing as long as it meets the SoS guideline or you can use the form available only.  While the SoS required paper documents to be filed, it has recently changed its policy to allow online submission of the Articles.  Processing times still take a few weeks, so you need file weeks before you need to be up and running.

Register for an EIN.

Once your corporation hs been registered with your state, you need to head over to the IRS website and obtain an EIN.  The EIN (Employee Identification Number) is required for banking, paying employees, and filing your tax returns.  The IRS process for obtaining an EIN is relatively straightforward and you can obtain your EIN letter immediately online.  One item to note is that the IRS EIN website is only available during certain hours of the day and only on weekdays. 

You also do not want to get the EIN prior to receiving approval for your state corporate filing because it’s possible that the state will reject your corporate filing because of a name conflict in which case your EIN will have the wrong name associated with it.  You can fix an incorrect name, but it requires extra paperwork (and starting up a business takes enough paperwork, as is, so there’s not need to add more!)

File the S-election (Form 2553) with the IRS.

Form 2553 is an election to be taxed an S-corporation.  The form is straightforward and requires the business and owner’s information.  All owners of the corporation must sign the election.  If any owners are in a community property state (such as California) the spouse is also required to sign the election even if they are not listed as a shareholder.  The s-election needs to be filed within 2 months and 15 days of incorporation or the start of the tax year in which the corporation wants to make the election.  The IRS does allow late elections in some circumstances, but it’s always best to file timely paperwork.

While the submission process is easy, wait times for approval can vary.  It can take 2-3 months for the election to be approved and you to receive your approval letter.

Set up payroll services if they’re not already in place.

With the s-election’s tax savings comes the requirement for paying yourself a reasonable salary as discussed above.  To ensure that you’re following these rules, you should establish a payroll service for yourself if you don’t already have payroll set up through a processing company or online system.  There is no rules about when the payroll needs to be paid during the year, so you have until the end of the year to get this set up, but you don’t want to be scrabbling at the end of the year.


Have more questions about S-Corps, or anything else about business or accounting for that matter? Reach out to us at My OC Bookkeeper. We provide bookkeeping, accounting, and business advisory services to businesses all over Southern California. Want to learn more about starting a business in CA in general? This post will teach you everything you need to know about starting a new business in CA, or if you are a visual learner take a look at the video below.

One final great resource: check out the CA Secretary of State website to learn directly from the source. Always good to supplement your learning by spending a few minutes with the CA SOS.

Is the Name I Want for My CA Business Available?

A building with a sign saying "Your Name Here", symbolic of the process of checking to see if the name you want for your business is available.

How to Do a Business Name Search in CA

So you are ready to setup your great new California business when it occurs to you: how do I find out if the business name I want is available? Don’t worry, there’s actually a pretty easy process for this. Why is there a process in the first place? That’s because the state of California – like other states – doesn’t want multiple businesses using the same name, which seems pretty reasonable to us.

In addition to ensuring your name is unique, you’ll also need to follow the CA Business Naming Guidelines. (Don’t worry, this is pretty easy to do.)

So, just follow our step by step process below and soon you’ll have a shiny new business name.

Step 1: Follow the CA Business Name Guidelines

Suffice it to say, if the name you want is illegal, well then it’s not available.

  • If you are forming a Limited Liability Company, “limited liability company”, “L.L.C.”, or “LLC” must be part of your name. (But if you don’t like any of those you can always setup a dba with a different name. For more on dbas check out our detailed guide on setting setting up a business in CA.)
  • Using certain words in your business name such as “University” or “Doctor” or “Attorneys at Law” may necessitate further registrations and regulatory steps. Obviously, if you aren’t a doctor or a bank CA doesn’t want you implying you are via your name.
  • Don’t use words that imply that your business is a government agency like the FBI or CIA. The government doesn’t like this.
  • If you want to go deep into the weeds on this issue, you can read the CA Secretary of State business name regulations here.

Step 2: Do a CA Business Name Search on the CA Secretary of State Website

This is where things start to get exciting. The CA Secretary of State website is actually pretty user friendly, so this process should be pretty easy.

  • Go to the CA SOS search page.
  • Depending on whether you want to start a Corporation, LLC, or LP, select the appropriate business type in the Search Type field and search for the name that you want.
The CA Secretary of State Business Name Search Portal
The portal on the CA SOS website where you search for your desired business name.
  • Hopefully there won’t be a business using your desired name. If there is, be sure to check the status column. If it says dissolved, then depending on how long they have been out of operation you may be able to get the name after all. (Reach out to the CA SOS for the latest rules in that regard.) If not, you’re out of luck – but hopefully you have a good backup in mind.
  • If you click on a name that comes up after running a search, you can obtain further information about the company such as its location, when it was registered, and whether it has completed its basic ongoing regulatory requirements. This may not be very helpful now, but after setting up your company you may want to come here periodically to ensure you haven’t fallen behind on anything. (And believe me, MANY companies fall behind. It’s a headache, and can be expensive. Don’t fall behind.)
  • If you don’t see the name you desire than you are likely good to go, but there is a slight chance there is a very similar name that didn’t come up. In rare cases, for example, a pre-existing business may have used the plural form of a word while you may have used the singular. (Cat LLC vs. Cats LLC.) If this is the case you won’t be able to get your name because your name won’t be considered unique. To avoid this you can fill out a Name Availability Inquiry Letter and send it in to the Secretary of State’s office. They will let you know with complete authority whether the name you desire is currently available. Keep in mind though that even if the name which you thought was available actually isn’t, the CA SOS office will simply tell you this when you attempt to register it, so you’ll find out eventually one way or another.

This is a simple and quick step that can help you avoid headaches down the road. If someone already has a strong web presence either with the name you want or something similar to it, it may be worth considering coming up with something different. Depending on what you do, competing with another website may be something to avoid, even it they are out of state. Not only that, if someone has a website with the name you want they may have already registered the name with the state of CA (or may be in the process of doing so) – so take extra care when searching the CA SOS website.

In addition to a basic Google search, you can pop into GoDaddy to see if someone owns the URL desired, and if not that is where you can buy the URL.

Step 4: Reserve the Name You Want If Necessary

If you’re not quite ready to setup an LLC but want to ensure that the name you want will be available you can reserve it for 60 days by filling out a Name Reservation Request. There is a $10 fee and the request must be either mailed or dropped off at the Secretary of State’s office in Sacramento. If need be you can re-reserve the name but there must be at least a one day break between each 60 day reservation and you must refill out the form.

Optional Bonus Step: Check the Trademark Directory and/or Trademark Your Name

Most small to medium sized businesses aren’t too worried about trademarks. But if you want to be extra cautious you can check the US Patent and Trademark Office database. If you find a name similar to yours in the database you probably will be best served to choose something different. If you don’t want to do that then you should speak to a lawyer before proceeding. If you are planning on creating a brand that will be national in scope than you may want to trademark the name, otherwise there are likely better ways to spend your money. If you decide you do want to get a trademark, follow the instructions on the USPTO website. It’s not a terribly difficult process and shouldn’t take more than a couple of hours of work.

A man smiles and reaching out his arms while confetti falls, symbolic of the excitement of getting the name you want for your business.
Yay! The name you want for your business is available! Now on to building the business…

Step 5: Setup Your Business with the Desired Name

If everything has gone smoothly so far than you should be good to go. Now all you need to do is determine the kind of business structure you want to use and go through the steps necessary to set it up. For help with choosing the appropriate business structure and setting them up, check out this great post on setting up a business in CA. Whatever you choose, proceed with confidence that the name you want is available. (Unless of course someone takes it just before you, which is a bummer, but quite unlikely – and if it happens the state of CA will let you know.)


There you have it, 5 steps (plus an optional bonus step) to answer the oft-burning question: Is the Name I Want for My CA Business Available? Need more help with your business? My OC Bookkeeper is Southern California’s premier bookkeeping, accounting, outsourced CFO and business consulting firm. We can help you with everything from day to day bookkeeping to setting up your initial accounting processes to building complex financial models. If it has to do with accounting or business finance, we know how to do it.

Want to learn everything you could ever want to know about setting up a business in CA? Watch the video below.

How Do You Setup a Sole Proprietorship in CA?

A glass shop door with an open sign, symbolic of setting up a sole proprietorship in CA.

Everything You Need to Know About Setting Up a CA Sole Prop in 5 Simple Steps

Before starting a new business in California, you first need to decide what type of business entity you want to form. In general, a Sole Proprietorship is easy to establish in CA. In fact, you don’t even need to register with the California Secretary of State to set it up.

Be aware though. Sole Proprietorships are risky. This type of business does not provide the owner with any protection against business liabilities. This means that you will be personally liable for all of your business’s debts.

Here are the five simple steps you should take to start a Sole Proprietorship in California.

Step 1: Choose a Name for Your CA Sole Prop

In California, you can choose any name for your Sole Proprietorship as long as it is not the same or similar to an already registered business name, providing it isn’t misleading to the public. For example, you cannot choose a business name that contains the word government. To check the availability of a name, check the California Secretary of State website.

That having been said, the default name of a Sole Prop is the legal name of the owner. In most cases, however, business owners choose to use a different business name. (Obviously a good business name can help your customers understand the type of product or service your Sole Prop provides.) In order to change the name you need to file a dba. How do you do it? Read number 2.

Step 2: File a Fictitious Business Name Statement

This process is also called filing for a DBA or “doing business as”. The owner of a Sole Proprietorship must file for a DBA if they do not intend on using their surname. In California, you can file a Fictitious Business Name Statement in the county recorder’s office where your business is located.  

The filing fees are $26. From the start date of your business, you will have 40 days to file a DBA statement. To complete the process, you must follow the county’s requirements for publicizing your new business name. This often involves a predetermined list of local papers where you have to publish the information. Just ask the clerk for some info on this and they’ll provide it.

A street sign of California Ave with palm trees in the background, symbolic of starting a sole prop business in California.
How do you setup a sole proprietorship in CA? Simple, just keep reading and you’ll know.

Step 3: Obtain Required Licenses, Permits, and Zoning Clearance

This step depends on the nature of your Sole Proprietorship. Some businesses need to obtain one or more licenses or permits from the state. Fortunately, California provides a comprehensive database of every license and permit required for any kind of Sole Prop. This will guide you through the process and help you better understand the required documents for your Sole Proprietorship.

Just visit the California Governor’s Office of Business and Economic Development CalGold website. Type in your county and city and you will get a list of all the required permits and licenses for your business activity. You will also find useful information that will help you file and obtain these documents.

Step 4: Obtain an Employee Identification Number (If Necessary)

As a Sole Proprietorship owner, you will not automatically need an Employer Identification Number (EIN). However, under certain circumstances, you might need to obtain one. For example, if you want to hire employees, you’ll need to have an EIN.

You might also need this nine-digit number for tax reporting purposes or to open a bank account. Check with the tax authorities in California to learn if your Sole Proprietorship is required to take this step. Registering for an EIN is done through the IRS. This process can be completed online at the IRS website.

Step 5: Do the Things Any New Business Owner Should Do

Anyone starting a new business, regardless of if it is a sole prop or something else, should consider setting up a bank account, obtaining any necessary insurance, and potentially setting up a business credit card and or line of credit. These are basic for most businesses regardless of the type of entity or industry.

That’s it! Now, you’re ready to start your new business and will never ask yourself how do you setup a sole proprietorship in CA again! (Although if you do you can just come back and reread this article…) Want to learn even more about setting up a business in California? Check out this awesome blog post which breaks down everything you need to know about starting a business in CA, including the difference between all of the business types (Sole prop, LLC, etc.)


Starting a new business in California? We’ve got your back! You can count on My OC Bookkeeper for the best bookkeeping and business strategy services in Orange County. Reach out to us now and let’s do great things together!

Want to learn everything you could want to know about starting a business in CA? Watch the video below. It’s great, trust us we know, we made it. (We’re not biased, it really is great.)

How Do You Setup an LLC in CA?

The California coastline lined with palm trees, symbolic of setting up an LLC in beautiful CA.

Setting up an LLC in California will take your entrepreneurial idea to the next level. It will add legitimacy to your business and provide important legal and tax benefits. In general, starting a business can be a difficult, costly task that requires a lot of paperwork. But do not worry, we are here to help and guide you each step of the way.

LLCs are considered one of the easiest, quickest forms of business to set up in California. You just need to know exactly what to do. That is why we will provide you with a complete guide to make the process less confusing for you. First, let’s learn more about LLCs and all the benefits they provide.

What is an LLC?

“Limited Liability Company,” that is what LLC stands for. It is a type of legal entity that can be formed to own and run a business. Unlike other business types, LLCs offer liability protection and tax advantages. That is why LLCs are very popular in California and across the US.

Many business owners in California also prefer LLCs as they combine the best parts of corporations, sole proprietorships, and partnerships. An LLC offers liability protection, management structure flexibility, and some tax advantages. LLCs are also much simpler and cheaper to form and operate. You do not need to have officers, directors, and other administrative burdens that come with forming a corporation.

Why Should You Choose the LLC Business Type?

  • Limited Liability: As an LLC owner, you will not be personally liable for any debts incurred by your business. This means creditors or people whole file lawsuits against your LLC will not be allowed to collect against your personal assets. They can only collect their money from your LLC assets or LLC bank account. Your personal car, home, and bank accounts will be safe.
  • Pass-Through Taxation: The profits or losses of the LLC will pass through to the owner’s personal tax return. This means your LLC profits will be taxed at your personal tax rates.
  • Flexibility: Unlike other business types, an LLC provides huge flexibility. First, there is ownership flexibility. There are no minimum or maximum limits on the number of owners or members when it comes to LLCs. Your LLC can have only one member or hundreds of them. There is also management flexibility.The LLC can be managed by all the members, or you can choose to designate one or more managers to run the business. The designated managers can be members, non-members, or a combination of both.

Who Should Setup an LLC?

Whether you are starting a business or currently running one, you should consider setting up an LLC. It does not matter what type of business you have. LLCs can be used to own and operate almost all kinds of businesses. You can also set up an LLC for a business of any size. That is why LLCs are the most common legal form used to own and run a business in California.

A woman holding a large mug that says, "like a boss", symbolic of how you can be the boss if you setup an LLC in California.
If you start a new business in CA, you can finally be the BOSS. Very exciting…

What Are the Steps in Setting Up an LLC in CA?

Starting an LLC in California is relatively easy. It does not require using a lawyer. You can form the LLC yourself. Our step-by-step guide will help you go through the LLC setup process smoothly from start to finish.

Step 1: Name Your CA LLC

The first step of setting up an LLC is to choose a name for it. You need to make sure the name complies with the business name regulations of California. These are some of the most important naming requirements to keep in mind:

  • The name of the business must include the phrase “limited liability company,” or one of its abbreviations, like LLC, L.L.C., Limited, Ltd., Company or Co.
  • Your business name cannot contain words, such as FBI, State Department, Treasury, etc. These words can make people confuse your LLC with a government agency.
  • Some restricted words such as bank, university, attorney, lawyer, etc., may require additional paperwork and a licensed individuals to be part of the LLC.
  • Your LLC name must differ from all existing businesses in the state of California. To make sure the name you want is not already taken, you can conduct a search on the Secretary of State’s website.

We recommend also choosing a name that is easily searchable for your potential clients. Even if your business will not currently need a website, it probably will in the future. So, make sure to buy the domain name you want for your LLC from the start. Otherwise, it might be taken by somebody else.

Step 2: Choose Your Registered Agent

“Agent for Service of Process” is the common name for a registered agent in California. Every LLC in California is required to appoint an agent for service of process. This can be a person or a business entity. They will be your LLC’s point of contact with the state. Your agent for service of process will be authorized to receive official legal documents, government correspondence, and notices on behalf of your LLC.

Any agent for service of process must be either a full-time resident of California or authorized to conduct business in the state of California. It can be a person or an entity. You can even choose yourself or an employee of your LLC to be your agent for service of process. In all cases, the agent for service of process must meet the following criteria:

  • Entities must provide registered agent services.
  • Must have a physical street address in California.
  • Must be available on-site to accept documents on behalf of your LLC, during regular business hours.

Step 3: File CA Articles of Incorporation

To officially create an LLC in California, you must file Articles of Organization using Form LLC-1. This form must include your LLC’s name, purpose, management structure, address, and registered agent information. As the person forming the LLC you must also sign the form.

The Articles of Organization can be submitted to the California Secretary of State online or via mail. You can also hand-deliver the form to the office of the California Secretary of State. The online filing fee is $70. Once you file the form, the Secretary of State will review it. If it gets approved, you will receive a certificate that confirms your LLC formally exists. You can use this certificate to obtain an Employer Identification Number (EIN), business licenses, and a business bank account.

A large "Open" sign in a shop window, symbolic of starting a new business in CA.
Thinking of opening a new business in CA? Do some reading, thinking, and planning, and reach out to My OC Bookkeeper if you need help!

Step 4: File a Statement of Information with California

Within 90 days of filing the Articles of Organization, you will be required to file an Initial Statement of Information (Form LLC-12). This ensures you retain the name of your LLC and its status with the state. The Statement of Information is also filed with the Secretary of State. Just like the Articles of Organization, it can be done online, in-person, or by mail. The online filing fee for the Statement of Information is $20

Any Statement of Information should include:

  • Name and mailing address of your LLC
  • LLC’s California Secretary of State file number
  • LLC’s agent name and address
  • LLC’s principal business activity
  • Name and business or residence address of the LLC manager or chief executive officer

Before filing your LLC Statement of Information, remember that all the information in it will be open for public record.

Step 5: Create an LLC Operating Agreement

This legal document should outline the ownership and operating procedures of your LLC. In California, it is required for an LLC to have an operating agreement, even a single-member LLC. However, it is an internal document. The operating agreement does not have to be filed.

Having a comprehensive operating agreement in place is important for various reasons. It could be used to settle financial or managerial disputes that may arise in the future. An operating agreement should include:

  • The LLC name, address and purpose
  • Duration of the LLC
  • Members of the LLC and their contribution
  • Management structure of the LLC
  • How the profit/loss will be divided
  • Contacts of the registered agent
  • Information about the Articles of Organization
  • Liability clauses

Step 6: Apply for an Employer Identification Number (EIN)

The EIN is basically the Social Security number for your LLC. It is what the US Internal Revenue Service (IRS) uses to identify and tax any business. Your LLC can apply and obtain the EIN for free by mail or online through the IRS.

Receiving an EIN is a necessary process for any LLC. It allows you to open a business bank account. The EIN is also required to hire employees for your LLC.

Other Resources for Starting a Business in CA

Setting up your LLC in the state of California comes with many benefits. California is not just a place of sunny weather and great beaches. It is also a thriving market filled with exciting businesses. Feel free to use the resources below to learn even more about how to join them.

California Secretary of State – this is the go-to website to start a business in California. It includes all the essential information to get you started.

California Franchise Tax Board – here, you will find all the information you need to handle your personal and business income taxes in California.

You can also learn even more about Setting Up a Business in Orange County, California (including more detail on the differences between the major business types) through our previously published blog post. (Just click the link above.) Or, check out our video guide on how to start your business in California. Both are great resources.

Have a friend or family member who is wondering, “How do you setup an LLC in CA?” – send them here!


To successfully start a new business in California, you need to find all the support you can get. At My OC Bookkeeper, you will find the best bookkeeping, accounting, and business strategy experts in California. Reach out to us now and let’s do great things together. Click on the surfers to learn more!

How To Start a Business – 7 Steps You Don’t Want to Miss

how to start a business, how to start a business from scratch, how to start a small business, small business start up requirements, ways of starting a business, cfo services

The funny thing about business is that many of the people who start them don’t really know what they’re doing at first. It’s not as though entrepreneurs spring neatly from the ranks of business college graduates–far from it. So many amazing companies start from the spark of an idea from an everyday person. A teacher. A chef. A janitor.

Some people simply see a need and have the imagination to fill that need creatively. When the idea becomes a good or service, a business model is required to bring it to the consumer. But how to do this? If you’re someone whose spark has become a product and you want to expand, we’ve created a list of steps to follow when starting a business.

Step 1: Conduct Market Research

The first thing to do is find out if the general public finds your product as brilliant as you do. Market research helps you to gather information about what consumers are looking for and if there are similar businesses in your area.

You can do this by gathering information directly, or using secondary info (information that has already been gathered). You need to know your audience from the very beginning so that you can gather relevant demographics. You may choose to use any or all of the following to gather information:

  • Interviews
  • Surveys or questionnaires
  • Focus groups

Step 2: Create a Business Plan

A business plan is the cornerstone of your company. It’s essentially the strategy for building your idea into a successful venture. It needs to be clear, concise, and demonstrate to your audience that your business is one worth investing in.

Take a look at the competition in your marketplace. Identify some strengths and opportunities, and decide how your own business will do things differently. What will you be marketing, and how will you market it? What is your target audience? Answer these questions before moving forward.

Create a conservative sales projection, so that you’ll have a cash reserve. Don’t go too hard at first, as you need to create brand awareness and convince existing consumers of your competitors that your product is better. This takes time, so it’s best not to overreach.

Step 3: Find the Funding

If you don’t have the capital on hand to start a business on your own (and congrats if you do!), you’ll have to find the funding. As part of your business plan, you should have decided how much money you’ll need to start your venture. Now it’s time to figure out how to get it.

You can self-fund with your own money (but be careful with this…while you have total control, you also have all of the risk). This can be done by dipping into savings, or by getting a small business loan.

You may also reach out to investors. If you are doing this, make sure that you have a really strong business plan to share. Also realize that you will very likely that any investor will want a spot on your board of directors so you’ll have to be ready to relinquish some control.

Finally, you could try crowdfunding. This is low risk as you retain control as owner, and don’t typically owe anything to the funders if you aren’t able to follow through (check the fine print of your platform to be sure). In return for their contributions, funders are offered some sort of gift. This could be a copy of the product itself or perks like a name credit or a special item not available to the typical buyer.

Step 4: Decide on a Location

Nowadays, the big choice here is whether you’ll have a brick-and-mortar shop, or run your business completely online. There are pros and cons to each, so take some thought to decide which best suits your product or service.

The choices you make here can affect your revenue, as well as taxes and legal requirements.

Step 5: Find a Memorable (and Original) Name

This may seem like a simple step, but the truth of the matter is it may take a little more time than you’d think. First, you want it to really capture your vibe and brand. Then you have to make sure that the name you want is not already being used anywhere else. A really catchy name can be the start of a business empire.

Step 6: The Legal Stuff

You want to register your business to protect your new company name. In most cases for small businesses this is a simple process where you simply register the name with state and local governments.

Next, take care of the tax stuff. You’ll need to get an employer identification number (EIN) so that you can open a business bank account and pay your taxes. Think of the EIN as a social security number for your business. Depending on your state, you may also have to apply for a tax ID.

Finally, let’s make sure that your company is legally compliant by applying for any and all required licenses and permits. Which ones you’ll need depend upon various factors such as state, location, industry, etc.

Step 7: Open a Business Bank Account

Now it’s time to open a business bank account. These accounts are helpful to small business owners, as they are able to better help you with taxes, legal things, and the day-to-day of running a company, not too mention they make your accounting and bookkeeping much easier. Many also offer business credit lines as a perk of signing up.

The Final Word

Creating a business is something that requires a lot of focus and drive, but almost anybody can do it if they have a product or service to sell. All it takes is careful consideration of all the steps outlined here. Just be sure that you move slowly and carefully, and that you don’t overreach. Remember that there are competitors out there and that you have to take the time to carve out your own niche.

To take a deeper diver into the regulatory and administrative tasks that need to be undertaken when starting a new business, we have a great blog post that provides a detailed step by step guide on what you need to do. Or, if you prefer videos take a look at our YouTube piece on the same topic, or just watch the content below. (The first video is the full guide and the second is an abridged guide.)

That’s it for now. We hope that our article on how to start a business was helpful for you. My OC Bookkeeper has extensive experience in helping individuals set up businesses from scratch and are always ready to help you. Make sure to contact us here for more information.

Hiring Employees in California

How do you hire employees in CA?

What Does a Company Have to Do When It’s Ready to Hire Employees in CA?

So, you are wondering what a new company has to do when it is ready to begin hiring employees in California. First of all, if your company has grown enough that you are planning on hiring employees, congratulations, you are clearly doing something right. Bringing on staff is an exciting time for a business, but, like everything else it involves some important steps that you don’t want to miss.

My OC Bookkeeper, the best accounting and bookkeeping firm in Orange County, has put together this handy guide to walk you through some of the basic things that you need to know when hiring employees in California. (Please remember, we are not lawyers, so this is not legal advice. Rather, this is a quick guide to make your life easier and save you some time! Believe us, wandering through a million websites trying to find info on state regulations can be quite frustrating.)

First things first, if you employ one or more people and you pay over $100 in wages during a given quarter you have to register as an employer with the California Employment Development Department (EDD). This is fairly easy and can be done online via the e-Services for Business portal. There you will get your employer payroll tax account number. (This is important so file it away somewhere safe.) The e-Services for Business portal is worth remembering. A lot of the information you will have to file with the California government can be addressed there.

Another useful site is the EDD’s Employer Portal. This is a great place to go to search for information and learn more about California’s various regulatory requirements.

Requirements for hiring employees in CA

As it turns out, there are a number of other things that you will need to do once you hire employees. Other ongoing responsibilities include:

  • Reporting wages paid and State Personal Income Tax (PIT) withheld from wages.
  • Paying Unemployment Insurance (UI) and Employment Training Tax (ETT) on employee wages, as well as withholding and remitting State Disability Insurance (SDI) and Personal Income Tax (PIT). (Refer to Rates and Witholding Schedules.)
  • Reporting all new employees to the New Employee Registry within 20 days of their start-to-work date.
  • If you use the services of independent contractors, you may also have to report them. Refer to Independent Contractor Reporting.
  • Posting notices in your workplace and providing employees with benefit information. Refer to Required Notices and Pamphlets.

If you can remember all of this you will be well on your way, but be sure to read through the EDD’s website, in particular the aforementioned Employer Portal, to make sure that your business is entirely compliant given its unique circumstance and the ever changing regulatory landscape.

So there you have it, My OC Bookkeeper’s quick guide to hiring employees in California. Have follow up questions or need help from the best accounting, bookkeeping, and business consulting service in Orange County? Reach out to us today!

Interested in learning more about setting up a business in CA? Check out our blog post on how to register a new business in CA. Or, better yet, watch  our Comprehensive Guide to Starting a Business in CA, (this is the one below) or our Quick Guide to Starting a Business in CA. If you like them, please don’t hesitate to ‘like’ and ‘subscribe’ – you will get good karma.

Best of luck with your business!

How Do You Start A Business in CA? Our Video Guide Will Teach You!

Video Guide on Registering a Business in CA

Time to Learn How to Register a Business in CA!

Have you been wondering how to start a business in CA but don’t know where to start? The process can be a bit daunting, but it doesn’t have to be. Watch our quick video tutorial to learn everything you need to setup a business in California. Believe me, it will make your life a lot easier.

Or, if you are looking for a more extensive introduction into how you can start a business in CA, enjoy our more comprehensive video further down the page. We call that one: Starting a Business in CA – Our Step by Step Guide. It goes into a bit more detail, particularly regarding the advantages and disadvantages of the various kinds of businesses you can form.

Then again, some of us our readers. If you like to learn by reading, then check out our extremely thorough and informative blog post explaining all the key steps needed to register a business in sunny CA. Don’t worry if you aren’t in California, the basic ideas will put you on the right track wherever you are.

CA Business Registration

So good luck with the business. If you’re here, you’re already on the road to success. And if you need any help, feel free to reach out to us. At My OC Bookkeeper we help businesses all over California with everything from business registration to day to day accounting to developing complex financial models. Whatever your needs may be, we are here to help!

Oh yes, one last thing. If you like our videos please don’t hesitate to let the world know and ‘like’ them. It will give you good karma and help spread the word about My OC Bookkeeper. Really want some good karma? And some great videos? Subscribe to our awesome Youtube Channel that will teach all kinds of great things about accounting, business, and bookkeeping.

Starting a Business in California – Our Quick Guide

Starting a Business in California – Our Step by Step Guide

Why Do Companies Hire Outside Bookkeepers? For About a Million Reasons. Watch the Video to Learn More!

That’s the end of today’s lesson. Check back soon to learn more. And best of luck in your business endeavors. As far as we’re concerned the more people who start a business in CA the better! By the by, are you looking for a bookkeeper or accountant? My OC Bookkeeper provides the best bookkeeping services in Orange County.

Why Bookkeeping Is Important for New Businesses

Why Bookkeeping is Important for New Businesses

Why Is Bookkeeping Important for New Businesses?

When starting a new business, it is easy to get consumed with the ‘exciting’ parts of the project: designing a product, coming up with sales strategies, marketing, hiring employees, etc. However, there are integral ‘behind the scenes’ parts of running a business that sometimes get overlooked when starting out. One of these is bookkeeping. Read on to see why bookkeeping is important for new businesses.

Bookkeeping may sound interesting to the math enthusiasts of the world (yes, they do exist!) but to everyone else, especially during the exciting early days of a startup, it may seem dull and get overlooked.

Unfortunately, if keeping track of your company’s financials isn’t prioritized, it can cause significant complications down the road. To position yourself to succeed, don’t let bookkeeping become something that you put off.

Accounting and Bookkeeping Help Businesses to Manage Their Cash Flows

Managing cash flows is hugely important for new businesses and proper bookkeeping practices can help you to prevent many cash flow problems before they start. By keeping track of all of your outstanding accounts receivable and accounts payable, for example, you can make sure that you will have sufficient cash to satisfy any upcoming obligations. If you anticipate more accounts payable (i.e. bills) than accounts receivable (i.e. revenue), then you had better make sure that you have sufficient cash and/or credit to satisfy your upcoming financial obligations or you may find yourself in trouble.

Similarly, by properly tracking and managing your accounts payable you can increase the probability that you will pay them on time. (Forgetting for the moment the larger problem described above.) This will help you to maintain good relationships with your vendors, keep your credit in good standing, and minimize your interest payments – all good things for a new business to do.

Then there is the classic business school problem of growing so fast that you run out of cash. How does that work? It’s really pretty simple. When you grow really fast you have a lot of orders, projects, contracts, etc. In order to satisfy them you must spend money. In order to satisfy a lot of them you must spend a lot of money.

Generally speaking, you have to spend the money to complete the work before you get paid for it, and if you are doing too many projects or making too many widgets you can run out of money before that happens. Imagine, for example, you receive 1,000 orders for razor blades you are making – far more than you ever dreamed you would receive. You start to make them and then run out of money after only 200. It’s possible you might be able to get a loan of some sort, but even so, that creates delays and costs money. Loans notwithstanding, this situation can lead to angry customers, angry vendors, new costs, and even the end of your business entirely.

Proper bookkeeping and accounting can help prevent this situation altogether by enabling a business to model out the costs associated with incoming orders and make sure that it has enough money to complete them. If not, than it may be time to slow down the growth.

Bookkeeping Enables New Businesses to Manage Their Cash Flow

Accounting and Bookkeeping Help Businesses to Keep Their Tax Bills Down

Taxes are hugely important for new businesses and if not properly managed they can greatly decrease your profits and even kill you off completely. (Just ask the countless new marijuana businesses that have learned this the hard way…) For one, you don’t want to miss out on any deductions that you can begin tracking now. If you don’t know about them until tax time you may not be able to go back and figure out how much to deduct. Mileage is a good example. If you can deduct mileage than be sure to keep track of every business mile from day one. (There are some great apps to help with this.)

Likewise, if you don’t keep good bookkeeping records from the beginning you will have a major headache come tax time. This will at the very least cost you a lot of time and may also cost you a lot of money. It takes a lot more work to figure out where you spent your money six months ago than it does to get it down when it happens. This means more effort trying to remember things on your part, more time and money spent by bookkeepers trying to get everything organized, and a greater chance there will be costly mistakes. As an added bonus, bookkeepers may charge you a hefty premium for taking up a great deal of their time during their busy season.

Another common problem is failing to make reasonable quarterly tax filings. Making such filings is a requirement for many businesses and doing them poorly, or not at all, can result in costly penalties and more money down the drain.

Financial Statements Help Businesses to Better Understand Their Operations

Another benefit of keeping your books in order: financial statements. The basic financial statements (income statement, balance sheet, and statement of cash flows) are extremely useful tools for describing how a business is functioning. (There is a reason they are central parts of annual reports.) They tell you in detail how your business is doing, what kinds of problems may be on the horizon, and fuel strategic decision making. (If you want to learn more about financial statements check out our blog on the income statement here, and our blog on the balance sheet here.)

If you don’t maintain your books there is simply no way to create your financial statements. If the financial statements were a building, monthly bookkeeping activities would be the bricks.

Maintaining Your Books Fuels Strategic Decision Making

Running a new business involves making important decisions on a regular basis, and informed decisions tend to be far more successful than uninformed decisions. Keeping your books in order can provide you with key information that can be useful in this regard. Say, for example, two clients call up with desperate pleas for some last second service. Unfortunately, you only have time to help one. Which one do you choose? If you have kept your books in order you can see which client has provided you with more revenues, and this may be the deciding factor. There are a myriad of possible situations like this where well organized books can provide you with valuable insights.

Bookkeeping Enables New Businesses to Engage In Strategic Business Planning

So, if you are starting a new business heed our warning: keep your books in order from day one. If your business succeeds you will need to get them in order eventually, and you will be better off starting now. Or, if your business doesn’t succeed, not having good books may have been one of the central reasons why.

There you have it. Key reasons why bookkeeping is important for new businesses. Interested in learning more about bookkeeping and accounting? Take a look at My OC Bookkeeper’s great bookkeeping and accounting blog or their bookkeeping, accounting and business strategy YouTube channel. Interested in hiring an outside bookkeeper, accountant, or business consultant? My OC Bookkeeper is here for you. We help businesses all over the country to tackle problems big and small. Click the video below to learn more. Let’s do great things together!

Setting Up a Business in Orange County, CA

Opening a Business in California

The My OC Bookkeeper Guide to Setting Up a Business in Orange County, CA

Ready to start a business in Orange County, CA? There are a lot of things to think about, but don’t worry we are here to help. My OC Bookkeeper (Orange County’s best bookkeeping and accounting firm) has put together this guide to help you on your way. In addition to some great info, we’ve included links to websites that will be valuable throughout the process. So, without further ado, My OC Bookkeeper’s guide to setting up a business in Orange County, CA. (By the way, if you aren’t located in Orange County don’t worry, these tips will be helpful wherever you are.)

Step 1: What Kind of Business Should I Set Up?

There are seven basic types of businesses you can set up. The types are: sole proprietorship, corporation, limited liability company (LLC), limited partnership (LP), general partnership (GP), and limited liability partnership (LLP). We will describe each one in turn.

Sole Proprietorship – a sole proprietorship, or sole prop, is generally considered the easiest and cheapest form of business to form. It enables an individual (rather than an ownership group) to setup and own a business. Importantly, with a sole prop the owner and the business are considered a single entity, so the owner is responsible for all of the obligations and liabilities of the business. They have complete control, and individually take the profits and pay the taxes. If the business is to have a name different than their own, i.e. Steve Baker, then a fictitious business name, or dba, must be filed with the county where the business operates. There are no specific documents that must be filled with the CA Secretary of State, although depending on the type of business there may be paperwork and registrations required.

Corporation – a corporation is a usually a legal entity that is entirely distinct from its ownership. The structure prevents liability from passing from the business to the owners; however taxes are paid by both the company itself and the shareholders. Unlike most business entities, corporations can sell stocks and bonds to raise capital, and the company can survive long after the initial owners have passed away.

To set one up you will need to file Articles of Corporation with the California Secretary of State. A corporation is one of the more complex business entities, and it is best to speak to a lawyer before creating one.

Limited Liability Company (LLC) – like a corporation, a limited liability company provides ownership protection from liabilities associated with the business. (For example, if someone sues the business, the owner’s assets are not at risk, only the business assets are.) An LLC is generally cheaper and easier to set up than a corporation, but more expensive than a sole proprietorship. To do so requires filing Articles of Organization (Form LLC-1) with the State of CA. You must also complete an operating agreement describing the affairs and activities of the business and keep it at your office. (You don’t have to file it with the state.) It costs $800 a year to maintain an LLC in California.

Limited Partnership (LP) – a limited partnership must have at least one general partner and one limited partner. The general partner acts as the controlling partner and is personally liable for all of the business’s liabilities. The limited partner has a certain amount of protection from the liabilities of the company depending on their level of participation. (Definitely talk to a lawyer before setting up an LP.) In CA, you will need to file a Certificate of Limited Partnership (Form LP-1) with the Secretary of State to set up an LP.

General Partnership (GP) – to form a GP in CA you must have two or more people who own the business. Generally speaking, all of the partners are jointly liable for the debts of the business, although the details in this regard may change depending on the nature of a given claim and the desires of the claimant. Profits are taxed as personal income of the owners. (Like with an LP and Corporation, it is best talking to a lawyer before setting up a GP.) To register a GP in CA, you will need to file a Statement of Partnership Authority (Form GP-1) with the CA Secretary of State; however some GPs don’t register at the state level at all.

Limited Liability Partnership (LLP) – LLPs are partnerships that work in specific industries such as public accounting, architecture, engineering, law, and land surveying, or that provide services to a CA registered LLP that practices public accountancy or law, or to a foreign LLP. LLPs are required by law to maintain certain minimum levels of insurance. To register an LLP in CA you must file an Application to File a Limited Liability Partnership (Form LLP-1) with the CA Secretary of State.

Step 2: Is The Name I Want for My Business Available?

A quick preliminary (but not final) search for a business name’s availability in CA can be done through this link. You can also do a trademark search with US Patent and Trademark Office and do a simple Google search to see if anything comes up with the name you want. Next, follow this link to read the name availability section of the CA Secretary of State website which has lots of relevant information.

A couple of other things to keep in mind (more detail is available on the Secretary of State website noted above):

  • A name for a corporation can be used if it isn’t the same as or too similar to an existing name recorded with the California Secretary of State or if the name is not misleading to the public.
  • A name for a limited liability company can be used if it is unique on the records of the California Secretary of State or if the name is not misleading to the public.
  • A name for a limited partnership may be adopted if it is unique on the records of the California Secretary of State.

Setting Up a Business in Orange County, CA

Step 3: Obtain a Federal Employer Identification Number (FEIN or EIN)

An EIN (federal employer identification number) is used by the federal government when taxing businesses and is basically the business version of a social security number. Corporations, limited liabilities companies, and partnerships need EINs. Sole proprietorships may not need one, depending on the type of business they are engaging in. To find out if you need EIN, start with the IRS webpage entitled: Do I Need an EIN?

Even if you don’t technically need one you may want to get one anyway. Why? Using an EIN instead of your social security may protect you from identity theft. If you work as an independent contractor you may have to provide either your social security number or EIN to your clients, and the more people that know your social security number the greater the risk of fraud. Having an EIN also indicates to clients that you are an independent businessperson rather than an employee, which they may prefer, and also may be required to set up a business bank account. (Which you likely will want to do.)

Getting an EIN is fast, easy, and free. Just use IRS EIN Assistant. In order to complete the process you will need the following information:

  • The mailing address and street address associated with the business.
  • The legal name of the business or individual, and the trade name, if you have one.
  • If the business is a corporation, the state or country where it was incorporated.
  • The type of business you are forming.
  • The main activities the business will engage in.
  • The reason you are applying.
  • The social security number of the ‘responsible party’. (If the responsible party is also a business entity than its EIN will be used.)
  • If the business is an LLC, the number of members.
  • The date the business was started or acquired.
  • The date when wages were paid the first time. (If there have been any wages.)
  • The greatest amount of employees you anticipate having over the next twelve months.

Step 4: Apply for the Relevant Permits and Registrations

Depending on the type of business you will be engaging in and where you are located you may need a wide variety of permits and/or registrations. A great place to start is CalGold, with the CA Governor’s Office of Business and Economic Development. After that be sure to check with your county and city governments to make sure you aren’t missing anything.

Tips on How to Register Your New Business With the CA Government

Step 5: Setup Applicable Bank and Credit Card Accounts

Setting up a bank account and credit cards used solely by your business can help to keep your business and personal finance separate. (This is true whether you are setting up a business in Orange County or anywhere else!) This can make it easier to track your business activities which will help you to stay organized, facilitate strategic decision making, and make things a lot easier come tax time. (Having a good bookkeeper – like My OC Bookkeeper can help a lot with these things too. Give us a call!) The accounts can also help you to establish a credit history for your business, which can be helpful if you ever want to set up lines of credit or qualify for business loans.

Opening the accounts often requires an EIN, copies of your business licenses, and a document signed by the business owners saying that you are authorized to open them. The U.S. Small Business Administration has some great information on specific things you are likely to need depending on the type of business structure you have.

Step 6: Satisfy Ongoing Requirements of Business Ownership

After successfully setting up your business there are some important things to remember:

  • If you setup a fictitious business name, i.e. dba, you will have to renew it every five years.
  • Corporations and LLCs in CA have to pay at least $800 in franchise tax every year. Learn more about this from the CA Franchise Tax Board.
  • If you setup an LLC you will have to file a Statement of Information every two years.
  • If you setup a Corporation you will have to file a Statement of Information annually.

Useful Websites for When You Are Starting a New Business

California Resources

California Secretary of State – if you are starting a business in CA, this is the place to start. Important information on all kinds of topics.

California Governor’s Office of Business and Economic Development – the parent site for the CA Business Portal. A wider array of topics and resources, but a great place to learn about business and economics in CA.

California Franchise Tax Board – they handle personal and corporate income tax in California.

California Tax Service Center – a government created website designed to help you navigate the confusing world of taxes. A good supplement to the CA Franchise Tax Board site.

The California Green Business Network – a certification service for green businesses in CA.

California Chamber of Commerce – a nonprofit advocate for CA businesses. You can find wide ranging resources ranging from updates on business related legislation to compliance tips to information on human resources, among other things.

The California Small Business Association – nonprofit that advocates for small businesses.

Federal Resources

IRS – The internal revenue service. Take a look for info on federal taxes.

U.S. Small Business Administration – great tips on starting a business from the federal government.

There you have it. My OC Bookkeeper’s guide to setting up a business in Orange County, CA. Do you have any follow up questions? Are you interested in starting a new business but haven’t spoken to a bookkeeper or business strategist? My OC Bookkeeper is the best bookkeeping, tax, and business strategy expert in Orange County, CA, and Southern California for that matter. (Possibly America.) Take a look at our website. Enjoy our extremely educational blog. And reach out to us. Let’s do great things together!

Finally, take a look at the video below for some great information on starting a business in CA , or checkout our YouTube channel for more great content.