Everything You Need to Start an an Online Business in California

California’s thriving tech landscape and culture of innovation make it one of the best places in the U.S. to launch an online business. Whether you’re selling handmade goods or digital services, the Golden State offers an abundance of opportunity—but also a number of regulations that must be dealt with carefully.

This guide walks you through the key steps to starting an online business in California—designed for entrepreneurs and anyone else ready to take the leap into the world of online commerce. With the right knowledge and support, you can start an online business with confidence.

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Step 1: Choose the Right Business Structure

The first decision every business owner must make is selecting a legal structure. This determines how your business is taxed, how you report income, and your level of personal liability. The most common options in California are:

Sole Proprietorship: The simplest and most affordable option, ideal for low-risk businesses. You operate under your own name or file a Doing Business As (DBA) if using a different name. Keep in mind, however, that sole proprietors have no personal liability protection.
Limited Liability Company (LLC): Popular among online entrepreneurs, an LLC provides liability protection for personal assets while offering flexibility in taxation and management. It’s a smart choice if you’re planning to grow or partner with others. Check out our California DBA vs. LLC infographic for more on this topic.
Corporation: Suitable for startups planning to raise capital or issue shares. Corporations come with more regulatory requirements and are best for businesses with long-term growth plans and multiple stakeholders.

Your choice of structure affects everything from tax filing to your ability to attract investors. It’s worth consulting a legal or tax professional when starting a business, especially if you expect to scale quickly or operate in multiple states.

Step 2: Select and Register Your Business Name

Once you’ve chosen your structure, the next step is choosing a business name. In California, your name must be unique and distinguishable from other registered entities. You can check name availability using the California Secretary of State’s Business Search tool.

When selecting a name:

Choose something memorable and relevant to your brand.
Avoid names that are too similar to existing businesses to reduce the risk of rejection.
Make sure the domain name is available for your website.

If you’re a sole proprietor or general partnership operating under a name different from your legal name, you’ll need to file a Fictitious Business Name (DBA) with the county clerk’s office where your business is based. FastFilings offers a simple ordering process for obtaining a California DBA.

A distinctive and legally registered name sets the foundation for a strong brand—and ensures you’re compliant with online business requirements in California.

Step 3: Register Your Business with the State of California

Depending on your chosen business structure, you may be required to register your business with the California Secretary of State. This step is essential for forming an LLC, corporation, or partnership. Sole proprietors typically aren’t required to register at the state level unless they’re filing a DBA.

Common filings include:

LLC: File the Articles of Organization (Form LLC-1)
Corporation: File the Articles of Incorporation
Limited Partnership (LP): File the Certificate of Limited Partnership

These forms can be submitted in person, by mail, or through the online system provided by the Secretary of State. Make sure the information you provide matches any prior filings, like your business name or address, to avoid processing delays. If you need help, you can always contact FastFilings for assistance.

Step 4: Obtain Your Federal and State Tax IDs

After registering your business entity, the next step is obtaining the appropriate tax identification numbers.

Employer Identification Number (EIN): Issued by the IRS, an EIN is used to file federal taxes, open a business bank account, and hire employees. Most business structures, other than sole proprietors with no employees, are required to have one.
California State Tax ID: If you plan to sell goods in California, you’ll need to register with the California Department of Tax and Fee Administration (CDTFA). Most online businesses will apply for a Seller’s Permit, which serves as your primary California state tax ID and authorizes you to collect and remit sales tax. However, FastFilings provides a convenient online ordering platform that simplifies the process of obtaining a California seller’s permit.

Even if your business is entirely digital, certain products—like physical goods or downloadable content—may still require tax collection under California law. Always check with the CDTFA to determine your specific online business requirements. You can learn more in our California Tax-Exempt Products infographic.

Step 5: Apply for Required Licenses and Permits

No matter how small your operation, most online businesses need some type of business license or permit to operate legally in California. The exact requirements vary based on your industry and location, but may include.

Local Business License: Most cities and counties in California require a general business license for operating—even if you work from home. Contact your city or county government to apply.
Home Occupation Permit: If you run your business from your residence, you may need this permit to comply with local zoning laws.
Seller’s Permit: As mentioned above, you’ll need to acquire a seller’s permit if you’re selling taxable goods or services.
Industry-Specific Permits: Some businesses (e.g., food delivery, online tutoring, alcohol sales) may require additional permits or clearances.

To determine your full list of licenses and permits, use the State of California’s CalGold tool, which helps you find relevant applications based on your business type and location. Obtaining the right business permits for online business activity ensures you remain compliant from day one.

Note that if your California-based online business sells to customers in other states, you may be required to collect and remit sales tax for those states if you meet certain thresholds (known as “economic nexus”). This typically applies when your sales or transactions exceed limits set by individual states.

Step 6: Set Up a Business Bank Account and Financial Systems

Once your legal and tax paperwork is in order, it’s time to separate your personal and business finances. Opening a dedicated business bank account is an important step in protecting your personal assets and maintaining clean financial records.

Most banks will require:

Your EIN (or Social Security Number for sole proprietors)
A copy of your business registration documents
Your business license, if applicable

Having a business account also simplifies bookkeeping and helps establish business credit. You may also want to set up accounting software to manage your expenses, generate invoices, and prepare for tax time.

For any business owner, organizing finances from the beginning helps avoid confusion and ensures you’re ready for future investment or expansion opportunities.

Step 7: Ensure Legal Compliance for Online Operations

Operating online means your business must comply with both federal and California-specific digital laws. These rules apply even if you’re just starting out, and overlooking them can result in serious penalties.

Key areas to address:

Privacy Laws (CCPA): The California Consumer Privacy Act requires you to disclose how you collect, store, and share customer data. If you serve California residents and collect personal information (like email addresses, IP addresses, or purchase data), you likely need a CCPA-compliant Privacy Policy on your website.
Website Terms of Use & Disclaimers: These outline how customers may use your site and help limit liability. They’re particularly important if you sell products, offer advice, or allow user-generated content.
Payment Security: If you’re processing payments online, ensure your platform is PCI-DSS compliant. Using reputable gateways like PayPal helps you meet these standards.

Taking these precautions early on will help ensure you’re meeting the legal requirements for starting an online business and building trust with your customers.

Step 8: Build Your Online Presence and E-Commerce Platform

With your legal foundation in place, it’s time to build the digital storefront where customers will find you. Whether you’re offering products, services, or digital downloads, your website is the heart of your business.

Choose an e-commerce platform:

Shopify and BigCommerce are ideal for product-based businesses
Squarespace and Wix offer user-friendly drag-and-drop tools
WooCommerce is a flexible option for WordPress users

Once your platform is selected:

Secure your domain name (matching your business name, if possible)
Design your website for clarity and ease of use
Optimize for mobile responsiveness and SEO
Add legal pages like Terms of Use and Privacy Policy

This is also a good time to set up tools for tracking analytics, customer behavior, and sales trends. Starting an online business means competing in a crowded digital marketplace—so a polished, functional website can make a powerful first impression.

Final Tips

Starting a business can feel overwhelming, but breaking it down into manageable steps makes the journey far more approachable. Here are a few final tips to help you stay on track:

Keep Accurate Records: Maintain digital and physical copies of all documents related to taxes, licenses and permits, and state registrations.
Stay Informed: Regulations change—especially in California. Revisit sites like the California Secretary of State and the California Department of Tax and Fee Administration regularly to stay updated.
Consult Professionals: While this guide provides a roadmap, working with an accountant or attorney can help you through complex business situations and avoid costly mistakes.
Use Filing Support Services: Services like FastFilings can simplify tasks like applying for a seller’s permit or a Certificate of Status (Good Standing), so you can focus on building your brand—not wrestling with paperwork.

By following these best practices and tapping into the right resources, you’ll set the stage for long-term success.

Trust FastFilings for Your Business Licenses and Permits

Learning how to start an online business in California takes time and research, but it’s absolutely within reach. With the right strategy, your business can thrive in one of the most dynamic markets in the country.

And when you’re ready to take that first step, consider using FastFilings for fast, streamlined business filing online and take the paperwork off your plate—so you can focus on what really matters: building the business of your dreams.

Start Your California Online Business!

Need help filing your business documents in California?

Get Started!