California has the largest economy in the United States and the fifth largest economy in the world, making The Golden State one of the best places to start a new business. The exact California business licenses and permits you will need to obtain depend on several different factors, including the type of business you’re starting, as well as the city and county where it will be located. In addition, there may also be any number of specific city, county, regional, state, or federal business licenses or certificates required. In order to launch your business successfully and stay in compliance with the law, you need to know exactly which business licenses and permits you need.
General California Business Licenses
No matter what type of business you’re starting or where it is located, there are certain general business licenses and permits you will probably need. If you buy and sell tangible goods, for example, you will need a California Seller’s Permit as well as a supply of California Resale Certificates to give to your suppliers. If your business will have any employees, you will also need to acquire a Federal Tax ID Number or Employer Identification Number, and establish a tax account to pay Unemployment Insurance tax. For more information, check with the Governor’s Office of Business and Economic Development.
A California Seller’s Permit is required to sell goods, whether your business is a retail store or you sell directly to your customers. Even if you have a mostly service-based business, if you sell any kind of tangible goods to your customers, you will need a Seller’s Permit. To obtain a California Seller’s Permit, you can visit a local California Department of Tax and Fee Administration (CDTFA) office in person, or you can register online.
At the time of your application, you will be expected to provide:
- Social security number
- Date of birth
- Driver license number, state ID number, or other ID (e.g. passport or military ID)
- Email address
- Names and locations of any banks you use
- Names and addresses of suppliers
- Name and address of accountant or bookkeeper
- Name and address of personal references
- Expected average total monthly sales and taxable sales
- Information about partners, corporate officers, or limited liability company managers/members/officers
If you’re starting a new business, you will need to obtain a new Seller’s Permit. But if you are purchasing an existing business, you will also be required to provide information about the previous owner’s permit.
If you only sell goods for a limited time at special events, and not as an ongoing part of your business, then you can instead obtain a Special Event Seller’s Permit from the state of California.
Also, remember that you must register your business with the state of California in order to collect sales or use tax. All taxes that you collect from customers must be reported to the state government on a monthly, quarterly, or annual basis.
Ordinarily, every time you purchase merchandise, you will be expected to pay sales tax. But if you’re planning to resell an item dear customers, you don’t have to pay sales tax as long as you can provide the seller with a California Resale Certificate. You can download an official California Resale Certificate for your business use. Optionally, California state law also allows you to provide your own certificates to sellers, as long as they contain all of the required information.
Employer Identification Number
An Employer Identification Number (EIN), also known as a federal tax ID number, is essentially the business equivalent of a Social Security number. If your business will have any employees, you will be required to pay state and federal taxes, so you will need to obtain an Employer Identification Number or Employer Tax ID directly from the IRS.
California Unemployment Insurance Tax
California groups unemployment insurance (UI) tax, employment training tax (ETT), withholding taxes, and other employer taxes all together under the collective label of “payroll taxes.” If your business pays more than $100 per quarter to any employee in wages, you must establish a California payroll tax account with the California Employment Development Department (EDD). Your business must also pay federal UI tax, as well as state and federal withholding taxes. For more information on the steps you need to take to establish a payroll tax account, visit the Employment Development Department of the State of California.
Regististration of Your Business Entity
Officially registering a business entity in the state of California requires Articles of Organization if forming an LLC or Articles of Incorporation (if forming a corporation). Here are some of the most common types of business entitites to consider:
- Sole Proprietorship – If you’re planning to own and operate a business as an individual (or a married couple), you will have total control over the business. You will receive all profits and will be responsible for all taxes and liabilities. You don’t need to file any formation documents with the California Secretary of State’s Office to form a sole proprietorship, but you may need to file a Fictitious Business Name Statement with your local county (as described above). Remember that other state and county filings may also be required, depending on the type of business you are starting.
- C Corp or S Corp – A corporation is a legal entity that is completely separate from its owners, and must pay taxes separately. To form a C Corp or S Corp in California, you must file Articles of Incorporation with the California Secretary of State’s office. The state of California provides standard forms for your use, but you are also allowed to prepare your own forms as long as they are compliant and contain all of the necessary information.
- Limited Liability Company (LLC) – A Limited Liability Company (LLC) provides liability protection much like a corporation, but an LLC’s taxes are calculated differently. To form an LLC in California, you must file Articles of Organization (Form LLC–1) with the California Secretary of State’s office. In addition to filing those articles, you must also keep an operating agreement about the conduct of the LLC’s business and its affairs. The operating agreement is not submitted to the government, but is instead kept in your own records.
- General Partnership (GP) – To form a General Partnership (GP), your business must have at least two people involved. Any profits from the business are taxed as personal income. You must check with your local county to see whether you are required to register a GP. In California, registering a GP at the state level is optional, but not required. If you do register, you must file a Statement of Partnership Authority (Form GP–1) with the California Secretary of State’s office.
- Limited Partnership (LP) – A Limited Partnership (LP) can provide limited liability protection for some partners. This business structure requires at least one general partner to act as a controlling partner, as well as a limited partner whose liability is limited to the extent of their control or participation. In order to form an LP in California, you must file a Certificate of Limited Partnership (Form LP–1) with the California Secretary of State’s office.
- Limited Liability Partnership (LLP) – An LLP is a specialized kind of partnership that practices law, architecture, engineering, land surveying, public accountancy, or else provides services or facilities to another LLP. By law, an LLP is required to maintain certain levels of insurance. To register an LLP in California, you must file an Application to Register a Limited Liability Partnership (Form LLP–1) with the California Secretary of State’s office.
Doing Business As (DBA)
As a sole proprietor, partnership, corporation, or LLC, you can choose to do business under your own name, or you can create a fictitious business name. When you create a business name that is separate from your legal name, you’ll need to file a Fictitious Business Name Statement, or Doing Business As (DBA) with your county registrar at the County Clerk’s office.
Location Specific Requirements
California is divided into 58 counties and contains 482 different municipalities. Each one of these municipalities or incorporated cities has a different set of licensing requirements, so the exact location of your business makes an important difference. If your business will have multiple locations, you will need to be in compliance with the requirements of every location. To find out the specific business licensing requirements that apply to your business, contact your local city and county.
Below, here’s what you need to know to open a business in some of the biggest cities in California:
- Fresno – Prior to opening a business in Fresno, the city requires you to obtain a completed and approved zone clearance from the City of Fresno Planning Division. You must also make sure that your business is in compliance with state and municipal fire and building safety requirements. It’s important to note that the City of Fresno requires you to arrange for garbage pickup service with an approved service contracted with the city. For more information, contact the city of Fresno.
- Los Angeles – In the city of Los Angeles, in addition to a business license, you may also need to obtain a Police Alarm Permit, Police Non-Alarm Permit, Fire Permit, or Tobacco Retailers Permit, depending on the nature of your business. The County of Los Angeles, on the other hand, has different requirements than the City of Los Angeles. In the unincorporated areas of the county (outside Malibu, Santa Clarita, or Westlake Village), only certain businesses need to apply for a license to operate. Generally, this is applicable only to businesses that are subject to County health or safety regulations. For more information, contact Los Angeles County.
- Sacramento – Home-based businesses, or any business based in a commercial location, must obtain a General Business License from the City of Sacramento. If your business will be located in the unincorporated area surrounding Sacramento, you must instead obtain a General Business License from the County. It’s important to note that certain types of businesses are exempt from this requirement, including: financial institutions, residential facilities, churches, libraries, and agricultural businesses. Certain types of businesses may also require a Special Business License approved by the Sheriff’s Department. For more information, contact the city of Sacramento.
- San Francisco – Any business operating in San Francisco must obtain a Business Registration Certificate from the city. Certain additional permits, business licenses and registrations will be required, depending on the type of business you’re starting. All of the necessary forms can be accessed through the official San Francisco Business Portal, which is operated by the city government. For more information, check the San Francisco Business Portal.
These licenses and permits are required at the state level, and must be filed with various departments of the State of California:
- Business Entity – If you are forming a corporation, limited liability company or partnership, you must file a business entity with the California Secretary of State.
- State Income Tax – Income from the sale of goods, providing services, rental income, and interest or dividend income is often (but not always) taxable. Regardless, all income that your business earns during a tax year must be reported, whether or not it is taxable. Once you have filed your federal taxable income, you must report income on your state return, including adjustments based on the type of your business. For more information, visit the State of California Franchise Tax Board.
- Seller’s Permit – If you are selling tangible goods, your business will need a seller’s permit from the California Department of Tax and Fee Administration.
- Employer Requirements – If your business will have any employees, you will need to comply with minimum standards for wages, hours and working conditions, as established by the California Department of Industrial Relations. Your business must also maintain Worker’s Compensation Insurance coverage, and register with the Employment Development Department.
- Importing or Exporting Goods – If your business is involved in shipping and receiving goods overseas, there are certain state requirements that you must meet, depending on the nature of the goods being shipped. To learn the requirements that apply to your business, consult these state departments: California Department of Tax and Fee, Administration, California Department of Public Health, and California Department of Food and Agriculture.
The federal government also has requirements that may or may not apply to your business:
- Employee Identification Number (EIN) – If your business is a partnership, corporation, or any type of business with employees, you must obtain a Federal Employee Identification Number from the IRS.
- Importing or Exporting Goods – In addition to the state requirements listed above, there are also special federal requirements for shipping and receiving certain kinds of goods overseas. To learn the requirements that apply to your business, consult these federal departments: U.S. Customs and Border Protection, U.S. Department of Commerce, U.S. Department of Agriculture, and U.S. Food and Drug Administration.
For more information about California business licenses, applications and fee information at the city, county, and state level, visit CalGold.
California Licenses and Permits by Industry and Profession
Depending on the type of business you plan to launch, you may be required to obtain any number of different business licenses and permits. Below are the requirements for starting some of the most popular types of new businesses in California.
How to Obtain Professional Licenses
The California Department of Consumer Affairs issues professional licenses for nearly 250 different classifications, including:
For information about how to obtain the professional licenses needed for your specific business classification (including where to apply and what information is required), visit the California Business Portal Professional Licensure Guide.
How to Obtain Environmental Permits
Because certain business operations can have a considerable impact on the environment, they are regulated by the state of California. Your business must show that it complies with all environmental guidelines to protect wildlife habitats, air quality, water quality, and public health.
- Businesses that use paints, solvents, and other toxic chemicals may need an air quality impact permit. For more information, consult the California Air Resources Board.
- Businesses that handle, store, or transport hazardous materials may need a permit from the California Department of Toxic Substances and Control.
- Businesses that discharge water must comply with all regulations of the local regional water quality control board. For more information consult the State Water Resources Control Board. There may also be permits required at the federal level from the U.S. Army Corps of engineers. For more information, consult the U.S. Army Corps of Engineers.
- Businesses that treat, handle, store, or dispose of solid waste or any discarded solid materials (in a word, trash) may need a Solid Waste Facility Permit. For more information, consult CalRecycle.
- Businesses that sell or use pesticides or other chemical contaminants that could affect food and consumer products are regulated by the local County Agriculture/Weights & Measures Department.
- Businesses that interact with fish, wildlife, or plant habitats may need permits from the California Department of Fish and Wildlife and/or the U.S. Fish and Wildlife Service (USFWS).
- Businesses that build, construct, develop or harvest within the coastal zone (which can extend inland up to five miles from the shore in some areas) must obtain a Coastal Development Permit from either the Coastal Commission or the local city or county.
For more information on obtaining California environmental permits, visit the California Business Environmental Permitting Guide.
How to Obtain California Business Licenses and Permits
The State of California issues permits and licenses to all new businesses. In addition to state requirements, you will likely be required to obtain other business licenses and permits at the regional, county, and city level. If your business will have multiple locations, you will need to fill all requirements for every location.
Before starting your business, check with your local city and county governments about required business licenses, permits and registrations. Information about specific local requirements is also available from the State of California’s CalGold database.
For example, if you decide to open a restaurant in the city and county of Los Angeles, you will need to obtain all of the permits and business licenses at the state level (listed above), along with an Authority to Construct/Permit to Operate at the regional level. Additionally, you must have these permits and business licenses from the City of Los Angeles:
- Building and Construction Permit
- Burglar Alarm Permit
- Business License – Business Tax Certificate
- Hazardous Materials / Waste Management Program
- Industrial Wastewater Discharge Permit
- Zoning Approval
- Business Personal Property
- Fictitious Business Name – Doing Business As Statement
- Hazardous Materials / Waste Management Program
- Public Health Operating License
- Weights and Measures Inspection
5 Steps to Registering a New Business
No matter what kind of business you’re starting in California, there are several important steps you need to take to make sure that your business is compliant.
- Unless you are doing business under your own real name, you must file a Fictitious Business Name (FBN) statement with your local County Clerk Recorder office.
- Choose a business structure (Sole Proprietorship, General Partnership, Limited Partnership, Limited Liability Partnership, C Corporation, S Corporation, or Limited Liability Company) and form the legal entity with the California Secretary of State’s Office, if required.
- File any necessary tax forms at the local, state, and federal level. For more information, visit the California Tax Service Center.
- If you will have any employees, you must register as an employer with the State of California and the IRS.
- Obtain the necessary business licenses, permits and certifications from your city, county, and the State of California. For more information, visit the State of California’s CalGold database.
CorpNet Makes It Easy
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