California is the largest market in the United States and a land of enormous opportunity for Hispanic entrepreneurs. But let's be honest: it's also one of the states with more costs and proceduresUnlike Texas or Florida, California Yes, it charges state income tax. and demands a minimum of $800 per year to almost every LLC. That's why it's important to understand the numbers before you start. In this guide, we explain, step by step and with real figures from 2026, everything you need to know to open your business in California.
This is a general guide; fees and rules may change. Before submitting any paperwork, please confirm the amounts on the official websites linked at each step.
Is registering a business the same as getting a license?
No, they are different things and many people confuse them:
- Register the business = create the legal entity (for example, an LLC) before the California Secretary of State (BizFile Online system).
- Obtain the local license = the permit from the city where you operate; in many cities it's called Business Tax Registration Certificate o business license.
- Tax Register = register with the Franchise Tax Board (FTB) for franchise tax, and before the CDTFA for sales tax if you sell products.
These are all separate procedures. Below you will find them in order.
Step 1 — Choose your legal structure and register the business
The most common structure for a starting Hispanic entrepreneur is the LLC (Limited Liability Company)because it separates your personal assets from business debts.
How much does an LLC cost in California? the fee for submitting the Articles of Organization es $70Every LLC must have a registered agent (registered agent) with a physical address in the state.
- It is submitted online at the official bizfile Online portal of the Secretary of State (bizfileonline.sos.ca.gov).
- Statement of Information: You must submit it within the 90 days to form the LLC and then every 2 years. Cost $20.
Fuente oficial: California Secretary of State (sos.ca.gov).
If you are going to operate as a natural person (sole ownerYou don't pay this registration fee, but you don't have limited liability protection. For most businesses with customers or employees, an LLC is worthwhile.
Step 2 — Get your EIN (it's free)
El EIN Your Employer Identification Number (EIN) is your business's "social security number." You need it to open a bank account, hire employees, and file taxes.
It's 100% free and you get it directly from the IRS website (irs.gov), usually in minutes. Don't pay to third parties who charge for "processing it": it is a free service of the federal government.
Step 3 — Understand California state taxes (the expensive part)
This is where California stands out. Pay attention to these three points:
- Franchise tax minimum of $800 per year: Almost every LLC that is organized, registered, or does business in California must pay this minimum. even in their first year (The temporary first-year exemption, AB 85, has already expired.) The first payment is due on the 15th of the fourth month after forming the LLC.
- Additional fee for gross receipts: If your LLC bills more than $250.000 per year, you pay an extra fee in addition to the $800. It's tiered:
- $250.000 to $499.999: $900
- $500.000 to $999.999: $2.500
- $1.000.000 to $4.999.999: $6.000
- $5.000.000 or more: $11.790
It is estimated and paid using Form 3536, usually before June 15. Your LLC's annual tax return is Form 568.
- State personal income tax: Unlike Texas or Florida, California yes It charges income tax, with progressive rates that are among the highest in the country. Plan it with your accountant.
Official source: California Franchise Tax Board (ftb.ca.gov).
Step 4 — Obtain your local business license
California does not have a general state license to operate; the license is local, from the city where you work. Each city has its own system and its own rate.
Local example — Los Angeles: The city demands a Business Tax Registration Certificate (BTRC) to anyone who does business within the city limits (you are considered to do so if you physically work in the city 7 or more days a year). The good news: there is a small business exemption whose global gross income did not exceed $100.000To keep it, you must register and renew on time (the 2026 renewal deadline was March 2).
- City of Los Angeles — Office of Finance (finance.lacity.gov).
If your business is in another city (San Diego, San Jose, Fresno, Sacramento…), search for “[your city] business license" or "[tu ciudad] business tax certificate"to find the office and rate that corresponds to you."
Step 5 — If you sell products: register the Sales Tax
California cobra 7,25% state sales tax (the highest base rate in the country), plus district taxes of 0,10% a 2% Depending on the city and county, the combined rate varies by location. If you sell physical products, you must obtain a seller’s permit (seller's permit) before the CDTFA (California Department of Tax and Fee Administration). The permit is free.Then you collect the tax from the customer and send it to the state.
Summary of costs to get started in California
| Concept | Cost |
|---|---|
| Registro de LLC (Articles of Organization) | $70 |
| Statement of Information (every 2 years) | $20 |
| Minimum franchise tax (annual, incl. 1st year) | $800 / year |
| EIN (IRS) | Free |
| Seller’s permit (CDTFA) | Free |
| Fee based on gross income (if you exceed $250.000) | from $ 900 |
Free resources for Hispanic entrepreneurs in California
You don't have to do it alone. There is free advice available, and in many cases, it's in Spanish.
- California SBDC (Small Business Development Center): Free advice for business plans, financing and procedures.
- Franchise Tax Board (FTB) for the franchise tax and Form 568.
- CDTFA for the seller's permit and the payment of sales tax.
- State Secretariat (bizfile Online) to create and maintain your entity.
- Office of Finance in your city for the local license.
Keep learning (related guides)
- How to start a business in Texas: steps, costs and real procedures
- How to start a business in Florida: steps, costs, and real procedures
- How to start a business in Tennessee: steps, costs, and real procedures
FAQ
How much does it cost to open an LLC in California?
$70 to file the Articles of Organization, plus a minimum of $800 in franchise tax each year (including the first year) and $20 every two years for the Statement of Information. The EIN and seller's permit are free.
Does California have income tax?
Yes. Unlike Texas or Florida, California levies a state personal income tax, with some of the highest progressive rates in the country. In addition, almost every LLC pays the minimum $800 annual franchise tax.
Do I have to pay more if my LLC has high revenue?
Yes. If you exceed $250.000 in gross income per year, you pay an additional tiered fee: $900, $2.500, $6.000 or $11.790 depending on the bracket, in addition to the $800.
Do I need a local license in Los Angeles?
Yes, a Business Tax Registration Certificate. But if your worldwide gross income did not exceed $100.000, you may qualify for the small business exemption, provided you register and renew on time with the city's Office of Finance.
