22 Fascinating California Small Business Statistics

The state of California has the largest economy in the United States. Its gross state product of $3.16 trillion supersedes that of Texas (the second largest) by $1.26 trillion. Actually, if California was a sovereign nation, it would be the 5th largest economy in the world, behind Germany and slightly above India. California’s economic hegemony is based partly on the roles played by small businesses. 

However, due to size constraints, micro-enterprises in the Golden State have a hard time maneuvering through the complex state regulations and requirements of credit facilities to say the least.

Below are a few statistics on small businesses in California:

  1. There are 4.8 million micro-enterprises, that’s 99.8% of all businesses in the state.
  1. Micro-enterprises employ approximately 7.2 million people, 48.5% of the private workforce.
  1. A total of 1.2 million members of minority groups are self-employed.
  1. 681,997 small enterprises are engaged in the professional, scientific and technical services sector which makes this the largest industry in the state.
  1. There are 1,677 small enterprises engaged in the utility sector with 2,131 employees. This is the smallest industry in the state. 
  1. The largest share of small business employment in the state goes to the 1,087,904 people who are employed in the food and accommodation services sector.
  1. Self-employed individuals running incorporated businesses have an average median income of $64,523.
  1. Small businesses with fewer than 20 employees comprise approximately 88% of all businesses in the state and employ 18.2% of all workers.
  1. 97% of all businesses are micro-enterprises with 100 or fewer employees and employ 36% of all workers in the state.
  1. Very small businesses in California are likely to be owned by women and minorities than larger businesses. For instance:
    • Asians own 23% of very small businesses compared with 10% of large businesses. 
    • Latinos own 11% of very small businesses compared with 2% of larger businesses. 
    • Women own 22% of very small businesses compared with 7% of larger businesses.
  1. California state law requires that every new California LLC designate a California registered agent that will be available during regular business hours at a physical address within California.
  1. Every new California LLC is assigned a 12-digit corporate number by the Secretary of State or the Franchise Tax Board. These numbers are different from tax ID numbers and are given to every newly-incorporated business in the state.
  1. To incorporate an LLC, you need to file for the LLC-1 Articles of Organization for $70 plus $5 for a certified copy. The LLC must also pay a yearly minimum tax of $800 for every year it’s in business.
  1.  Businesses that use a name other than the given legal name must file for a DBA (Doing Business As) in accordance with the Trade Name Registration Act.
  1. Filing fees for DBAs are charged by counties and vary by city. The average charge is around $40. DBAs must be registered within 40 days of opening the business.
  1. Small scale traders in the retail and wholesale sector need to have a seller’s permit to sell their goods. This allows them to purchase inventory without paying taxes.
  1. Every business with employees is required to have an Employer Identification Number (EIN). The EIN is issued by the IRS. 
  1. Workers’ Compensation Insurance is a must for any business with employees. If a worker is injured in the line of duty, the insurance caters for their medical expenses.
  1. Despite the Covid-19 pandemic in 2020, there were 442,324 applications for new business licenses, a 21.7% increase over the previous year.
  1. LLCs are taxed at flat dollar amounts based on gross tiers. For instance:
    • Gross incomes between $250,000 and $499,999 pay a tax of $900.
    • Gross incomes between $500,000 and $999,999 pay a tax of $2,500.
    • Gross incomes between $1 million and $4,999,999 million pay a tax of $6,000.
    • Gross incomes of $5 million or greater pay a tax of $11,790.
  1. The state imposes double taxation on small businesses. Both taxes, business and personal, are imposed on owners who set up their enterprises as ‘pass through’ entities, that is S corporations and LLCs.
  1. As of 2019, businesses with fewer than 25 employees had a minimum wage of $11. Businesses with more than 26 employees had a minimum wage of $12.

Sources:

  1. California State Assembly
  2. Public Policy Institute of California
  3. California Small Business Administration – Startup Guide
  4. U.S Chamber of Commerce
  5. Business News Daily
  6. Investopedia
  7. U.S Small Business Administration – State Profiles

Small Business Statistics by State