Turning your business idea into reality in California begins with officially registering it. The registration process in California involves several steps, from choosing a business structure, selecting a business name, obtaining necessary licenses and permits, and registering for state taxes. Each of these steps requires knowing the right sequence and which agencies to file the forms with.
Follow along with our step-by-step breakdown to simplify this process and help you confidently navigate the California business registration requirements.
Related: Starting A Business In California Checklist
Step 1: Choose a Business Structure
When registering a business, the first step is to choose the right type of business structure (also referred to as a business entity). A business structure is how a business is organized to conduct business, and this decision determines how a business is taxed and its owner’s or shareholders’ liability for debts and other obligations.
The most common forms of business structures in California are the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type has its own advantages and disadvantages, so it’s important to consider all options before deciding which one best suits your needs.
Related: Comparison of Business Structures
Sole proprietorship
A sole proprietorship is a business owned by one person. It is the simplest and least expensive form of business structure, with no legal distinction between the owner and the business. The owner has complete control over the business but is also personally liable for all debts and obligations.
Related: How to Start a Sole Proprietorship in California
General Partnership
A general partnership is similar to a sole proprietorship, except two or more individuals operate the business together. No formal setup is needed, but a partnership agreement, but it’s a great idea to draw up a partnership agreement to outline operations and responsibilities.
Related: What is a General Partnership?
Corporation
A California corporation is a business structure that is separate from its owners, known as shareholders. It offers limited liability protection, meaning shareholders are not generally personally responsible for the corporation’s debts and liabilities. The downside is that corporations are the most complex structure to start and operate as they have administrative burdens such as holding annual meetings, issuing stock certificates, appointing a registered agent, and more.
Related: How to Form a California Corporation
Limited Liability Company (LLC):
A California LLC combines elements from both corporations and sole proprietorships as the LLC offers limited liability protection for owners similar to corporations but has fewer formalities, such as annual meetings, board members, etc.
Related: How to Form a California LLC
Step 2: Select a Business Name
Once the business structure is out of the way, choosing a business name is the next step in setting up a business in California.
Corporations and LLCs must register their chosen name when filing formation documents with the California Secretary of State. The name must be unique, so before filing, it’s important to verify its availability by doing a California business name search on the California Secretary of State’s website search tool.
Sole proprietorships and partnerships in California operating under a name different from the owner(s)’ full name(s) need to file a California Fictitious Business Name Statement (also known as “Doing Business As” or DBA) with their local County Clerk’s Office.
Step 3: Federal Employer Identification Number (FEIN)
An EIN, or Federal Tax Identification Number, is a unique nine-digit code issued by the Internal Revenue Service (IRS) for businesses in California. This number serves as your business’s identifier for tax purposes, much like a Social Security number does for individuals. Most businesses need an EIN, including:
- Corporations and LLCs
- Partnerships
- Sole proprietorships with employees
To obtain an EIN:
- Online: Apply for an EIN through the IRS website for immediate processing
- By mail: Submit Form SS-4 to the IRS
Step 4: California Seller’s Permit
Even though there isn’t a state business license, many businesses will need to obtain a California Seller’s Permit from the California Department of Tax & Fee Administration (CDTFA). You’ll need this permit if your business:
- Sells or leases physical products
- Operates in California, even temporarily
- Makes sales subject to state sales or use tax
This free permit allows you to collect sales tax on taxable transactions. To apply, you can:
- Register online through the CDTFA website
- Visit a CDTFA field office in person
Step 5: Resale Certificate
Once you’ve secured your Seller’s Permit, obtaining a California Resale Certificate is often the next step for a lot of businesses. This certificate allows businesses that resell goods to customers to purchase inventory without paying sales tax. The benefit of this is that it helps manage cash flow by deferring sales tax until the final sale to customers.
Step 6: City Business Licenses
Many cities have their own licensing requirements, and these rules vary based on your business location and type. Here’s an overview of licensing requirements in major California cities:
- Los Angeles: Businesses located in or with employees working within city limits must obtain a Business Tax Registration Certificate from the Office of Finance.
- San Diego: All businesses operating within city limits are required to obtain a Business Tax Certificate.
- San Jose: All businesses operating within city limits must obtain a Business Tax Certificate within 90 days of starting operations.
- San Francisco: Any business operating within city limits must obtain a Business Registration Certificate from the Office of the Treasurer & Tax Collector within 15 days of starting. Some businesses, such as food service establishments and tattoo artists, require additional registration with the City Clerk.
- Sacramento: The City of Sacramento requires all businesses to have a Business Operation Tax Permit.
Even with home-based businesses, it’s important to check with your local city government for specific requirements for operating legally in California.
Step 7: Occupational Licensing
The state of California regulates many occupations and requires specific licenses or permits before they can legally operate. Here’s an overview:
Professional Licensing: The California Department of Consumer Affairs (DCA) oversees licensing for a wide range of professions. Some common examples include:
- Auto repair shops
- Cosmetologists and barbers
- Pest control operators
- Real estate agents
- Contractors
- Accountants
- Nurses and other healthcare providers
To learn about specific requirements for your profession, visit the DCA website or contact the relevant licensing board.
Industry-Specific Licensing: Some businesses fall under the jurisdiction of other state agencies. Examples include:
- Food Establishments: Regulated by the California Department of Public Health. Requirements may include health permits, food safety certifications, and regular inspections.
- Daycares: Overseen by the California Department of Social Services. Licensing involves background checks, facility inspections, and adherence to strict safety and educational standards.
- Salvage Dealers: Regulated by the California Department of Motor Vehicles. Licensing requirements include background checks, bonds, and compliance with specific operational regulations.
Additional industries with specialized licensing include:
- Alcohol sales (California Department of Alcoholic Beverage Control)
- Cannabis businesses (Bureau of Cannabis Control)
- Financial services (Department of Financial Protection and Innovation)
Before starting your business, research the specific licensing requirements for your industry.
Step 8: Local Building & Zoning Permits
When establishing your business in California, you may need to navigate local building and zoning regulations. These rules ensure businesses operate in appropriate locations and maintain community standards.
Building Permits: Often required for construction, renovation, or significant changes to a building’s structure or systems. To apply, visit your local city or county building department. In Los Angeles, the Department of Building and Safety handles building permits that are needed for new construction or electrical, plumbing, or structural modifications.
Zoning Permits: Be sure to verify your intended location is zoned so that your type of business is in compliance with local land use regulations. Some areas have restrictions on business hours, signage, or parking, and even home-based businesses may need special permits to operate legally. The city of San Francisco’s Planning Department oversees zoning, and it provides a Property Information Map tool to check zoning designations and restrictions for specific addresses.
For only $99, you can save a lot of time and know your business complies with local, state, and federal requirements.
