How to get a business license in California
Owning and operating your own business is a dream come true for many—but it doesn’t come without hard work and dedication. You might find that your initial to-do list is surprisingly long, with tasks that range from creating your business name to determining your business address. Yet they’re all critical to your success.
One of the most important steps when forming a new business is making sure you have a business license. Before you open your doors to any customers, you need the authorization to conduct business. Let’s review what obtaining these credentials entails so you can start doing business in California.
- What is a business license?
- When do you need a business license in California?
- How much does a California business license cost?
- 4 steps to get your California business license
What is a business license?
A business license is a set of documents that allows a California business owner to operate legally within the state. A business license might include a seller’s permit or an operating license, depending on your business activity. Some cities in California, like San Diego, refer to this document as a business tax certificate.
When do you need a business license in California?
All types of businesses are required to obtain a business license in California, no matter the industry you’re in or how much revenue you generate. This documentation serves multiple purposes and works to protect both you and the city or municipality in which you operate. Home-based businesses and brick and mortar operations must submit a business license application before they begin working.
How exactly does this paperwork benefit your company? A business license identifies your company and lets others know how you plan to make money. This is particularly important if you’re using a fictitious business name (i.e., not your full legal name!) so that the government has the contact information for whoever operates your organization.
Even if you run a sole proprietorship, you’ll need a business license before you start working, as the Internal Revenue Service will need to know how you’re generating income. When it comes time to file your taxes, sole proprietors will be able to use their Social Security Number, while other types of organizations will need to use an Employer Identification Number.
Some types of license requirements also help protect the public and ensure that you’re adhering to industry regulations. Restaurants, in particular, are required to obtain a business license and a health permit so city officials can perform regular safety checks. Other types of companies may be subject to specific stipulations based on their industry.
Lastly, the application fees and franchise tax associated with business licenses also help to aid the economic development of your area. The funds from each business license application often help fund schools, libraries, or other types of community development initiatives.
Do I need a business license to sell online in California?
In short, yes, but a business license is only part of the equation if you want to sell goods online in California. While a general business license is required before you make any money, you’ll also need to obtain a seller’s permit so you can charge your customers sales tax.
If your company’s business model includes purchasing goods to sell online, it’s important to also apply for a resale license. This grants you an exemption from paying additional taxes when buying inventory and can save you a great deal of money when making large purchases.
How much does a California business license cost?
How much does a California business license cost? Pricing for business licenses isn’t uniform across the state of California, so it’s best to inquire with your county clerk about the cost of local licenses. In general, most CA small businesses will pay between $50 and $100 for a general business license. Larger corporations may be subject to charges based on their projected revenue.
4 steps to get your California business license
Getting your business license may feel like one more hoop to jump through before you can open your doors, but it’s essential to take your time when going through this process. Acquiring this documentation isn’t a “one and done” task, so you’ll want to follow all 4 of these steps:
- Do your research. Starting a company requires you to become an organizational expert, and you’ll undoubtedly want to exercise your skills in this area. Business owners need to determine the types of licenses they’ll need for their given industry, the costs associated with each document, and how often they need to be renewed. Individuals can get permit assistance through CalGOLD, an informative site that helps you find licensing information.
- Submit your business license application to the California Department of Tax and Fee Administration. You must complete this paperwork as accurately as possible and include details like your DBA, federal tax ID number (which can be obtained for free from the IRS), and all other information related to your business entity.
- Wait patiently until you are approved. This can be the most trying part of the process, as you cannot legally conduct business until your license has been issued. You’ll receive a license number from the California Secretary of State and may be required to display your document in your place of business.
- Renew your licenses as needed. Remember the information you found in step one regarding the renewal process? Business owners will want to periodically track the renewal dates of all of their licenses and permits to ensure they don’t expire. If you aren’t sure of these dates, you can contact your local city hall for assistance.
Obtaining your business license in California may take some time, but it’s a step on the path to business ownership that absolutely cannot be overlooked.
While you’re in the process of compiling documents and jumping through regulatory hoops, take a moment to consider getting small business insurance. Huckleberry makes it easy with an online application that only takes about 5 minutes to complete.