New California small business laws in 2025 are set to reshape how companies operate across the state. From tax rules and subscription billing to retirement plans and public contracts, this year brings important deadlines and decisions that business owners may need to act on now. With several new policies either taking effect or moving through the Legislature, staying compliant will require preparation and timely action.
Emergency Grant Program Could Support Disaster Recovery
AB 265, which passed the Assembly in June, would create a $100 million Small Business and Nonprofit Recovery Fund. Grants between $2,500 and $100,000 would be made available to small businesses and nonprofits that have been affected by state-declared emergencies such as wildfires or floods.
The proposal prioritizes disadvantaged communities and would require matching funds from applicants. If approved by the Senate and signed into law, the program could be a key resource for businesses recovering from the January 2025 wildfires and other disasters.
PTET Program Set to Expire After 2025
California’s Pass-Through Entity Tax (PTET) program, established under AB 150 (2021) and expanded through SB 113 (2022), will sunset after the 2025 tax year. The program allows S corporations, LLCs, and partnerships to pay state taxes at the entity level, providing a federal tax deduction that bypasses the $10,000 SALT cap.
The deadline to make the required first installment for the 2025 tax year was June 15, 2025. Businesses that did not make this prepayment are no longer eligible to participate in the PTET program for 2025, regardless of whether they later attempt to elect in on their tax return.
Unless the Legislature acts to renew or extend the program, this year marks the final opportunity for participating businesses to claim this federal deduction. Business owners who missed the deadline should consult with their tax advisors to plan for increased federal tax exposure in 2026 and evaluate alternative tax planning strategies.
New Ownership Disclosure Proposal May Return
SB 1201, which passed the State Senate in 2024 but stalled in the Assembly, is expected to return in a revised form this year. The bill would require corporations and LLCs to disclose beneficial ownership information as part of their filings with the Secretary of State. This information would be made public, expanding on existing federal reporting requirements under the Corporate Transparency Act.
If enacted, the rule would take effect on January 1, 2026, and would apply to individuals who hold 25 percent ownership or substantial control of a business. Small business owners should begin reviewing internal records and privacy considerations in preparation for the bill’s likely reintroduction.
Corporate Tax Reform Targets Large Firms
SB 573 would establish a tiered corporate tax structure for publicly held corporations, with base rates ranging from 7 to 13 percent depending on the ratio of CEO pay to median employee wages. Financial institutions would face slightly higher rates, from 9 to 15 percent. Companies that reduce their U.S. full-time workforce by more than 10 percent while simultaneously increasing offshore or contract labor could face a 50 percent increase on their applicable tax rate. Under those specific conditions, the top rate could reach 19.5 percent for general corporations or 22.5 percent for financial institutions.
Although the bill is aimed at large public companies, it could indirectly affect small businesses through changes in vendor pricing, delayed payments, or altered supply chain dynamics. SB 573 remains under review in the Senate Revenue and Taxation Committee as of June 2025.
Subscription-Based Businesses Face New Compliance Requirements
AB 2863, effective July 1, 2025, imposes new requirements on subscription-based services. The law mandates clear consumer consent and easy cancellation processes, including a new category called “free-to-pay conversions” that applies when a free trial converts to a paid plan.
Additionally, the law extends liability for deceptive marketing beyond the subscription itself to include the underlying product or service. Businesses and third-party marketers that operate on a recurring billing model will need to review and update their compliance procedures to avoid fines or litigation.
Retirement Plan Mandate Reaches Final Phase
California’s CalSavers Retirement Program enters its final implementation phase in 2025. By December 31, 2025, all employers with at least one employee must either offer a qualified retirement plan or enroll in the state’s auto-IRA program.
This expansion affects the smallest employers, including those with 1 to 4 employees who have not previously been subject to the mandate. Businesses must notify eligible employees, facilitate payroll deductions, and meet registration deadlines to remain compliant.
Paid Family Leave Changes Underway
As part of the implementation of SB 951, California has expanded wage replacement under Paid Family Leave. Workers earning lower incomes may now receive up to 90 percent of their wages while on leave. The law also removes certain access barriers to increase participation rates.
While the program is state-administered, small businesses should be aware of increased employee eligibility and the administrative responsibilities associated with leave tracking and notifications. The state is expected to continue refining employer guidance throughout 2025.
Local Contracting Opportunities May Expand
SB 781 authorizes local agencies to establish Small Business Utilization Programs (SBUPs) that promote contract awards to small firms. The measure aims to improve small business participation in local procurement processes and could create new revenue opportunities for businesses prepared to compete for public contracts.
Implementation will vary by jurisdiction, so small business owners are encouraged to monitor procurement updates in their cities and counties.
Action Steps for Small Business Owners
- Review recurring billing practices in light of AB 2863
- Confirm CalSavers registration or offer an alternative retirement plan
- Make final PTET election and payment before June 15
- Monitor Senate action on AB 265 and local procurement updates under SB 781
- Prepare for additional ownership disclosure if SB 1201 reemerges
- Stay informed on Paid Family Leave responsibilities
Conclusion
Small businesses across California still face critical decisions as new laws move forward and key deadlines approach. Early preparation can help business owners stay compliant, access funding, and adjust to changing requirements. For ongoing updates and guidance, business owners are encouraged to consult legal and tax advisors or visit resources such as the California Chamber of Commerce for policy alerts and compliance support.