Essential License And Permits For Starting A Business In California
Starting a new business in California takes multiple steps to achieve. These steps vary based upon the type of business and their location. While it is important to check specific rules and regulations in the county and city where you wish to conduct business, here is an overview of the license and permits required. For more information on different business, formations check out LLC vs LLP
Tax Registration
Employer Identification Number (EIN): All employers who have employees, including business partnerships and corporations, must be assigned an Employer Identification Number (EIN) or Employer Tax ID from the United States Internal Revenue Service, sometimes referred to as a Form SS-4.
California Tax Registration
Those businesses operating within the state of California are required to register for more specific identification numbers, licenses or permits for different tax purposes. Examples of these include income tax withholding, sellers' permits for sales and use tax, and unemployment insurance tax. Contact the California Tax Service Center for more specific information regarding business owner tax obligations and registration procedures.
Business Licenses
General Business Licenses: The CalGold database provides business-specific information regarding the permit, license, and registration requirements through an extensive collection of links and contact information.
Local Permits
The local government in your area, such as that of your city or county, may require specific permits and licenses. Each municipality may have unique regulations. Here are some of the most common licenses and permits you may need.
Alarm Permit
Building Permit
Business License and/or Tax Permit
Health Permit
Occupational Permit
Signage Permit
Zoning Permit
Incorporation Filing
Businesses that operate as corporations, limited liability companies (LLC), a partnership (either limited or limited liability), or a non-profit organization need to register with the state. The proper forms and applications are located on the California Secretary of State's website.
Businesses that claim sole proprietorship do not need to register with the state. However, in California, sole proprietors wishing to do business under a name that is different from the proprietor's legal name will have to file a DBA.
Doing Business As (DBA)
Filing for a Doing Business As, or DBA allows the creation of a business name, which is then separate from your legal name. Sole proprietors wishing to do business under a business or company name, which is different from the proprietor's legal name, will have to file a fictitious name with their county registrar at the county clerk's office. Partnerships, corporations, or LLCs may also choose to file a DBA.
Employer Requirements
There are several registration requirements for businesses which have employees:
Withholding Income Taxes: The IRS requires that records of employment taxes be kept for at least four years. An overview of employer responsibilities regarding the withholding of federal taxes is provided in the IRS Employer's Tax Guide publication.
Federal Income Tax Withholding (Form W-4)
All employees must fill out an exemption certificate for their employer (Form W-4) either on or before their start date. The employer is then responsible for submitting the W-4 to the IRS for verification.
Federal Wage and Tax Statement (Form W-2)
Employers must report annually to the IRS on the wage and tax information withheld for all employees. This report is filed using Form W-2, Wage, and Tax Statement. A W-2 must be completed for each employee by January 31 each year. Copy A of the W-2 Form is sent to the Social Security Administration (SSA) to report employee wages for the preceding year. The Social Security Administration provides additional Employer, W-2 Filing Instructions, and Information.
State Taxes
The requirement of state tax withholding varies depending on where employees are located. Visit your state tax agency for further information. California businesses are required to register with the Employment Development Department (EDD) to file reports and pay taxes.
Employee Eligibility Verification (I-9 Form)
Federal law requires that employers verify work eligibility in all employees hired after November 6, 1986. Proof of eligibility to work in the United States, must be completed within three days of hire by completing the Employment Eligibility Verification Form, commonly referred to as an I-9 form. Form I-9 must be completed for both citizens and non-citizens.
New Hire Reporting
Employers must declare all newly and re-hired employees within 20 days of hire. This information should be submitted via the State of California New Hire Reporting Program.
Insurance Requirements
The State of California requires businesses to carry certain kinds of insurance. The Employment Development Department (EDD) administers California's Unemployment Insurance and State Disability Insurance (including Paid Family Leave), payroll, and income tax withholding.
Disability Insurance
Temporary disability insurance benefits provide payment to workers, if needed, due to a non-work related illness or injury. Employers are responsible for deducting this tax from employee wages and reporting taxes to the state. More information regarding various kinds of disability insurance can be found at the State Disability Insurance web page.
Unemployment Insurance Tax
Businesses are required to pay unemployment benefits to eligible employees. More information regarding unemployment benefits can be located on the Unemployment page of the State of California Employment Development Department.
Workers' Compensation Insurance
A Worker's Compensation claim can be filed by employees who are injured while being on the job. The California Department of Industrial Relations provides a list of frequently asked questions regarding Workers' Compensation coverage for employers.
The blog posts provided on this website do not, and are not intended to, constitute legal advice; instead, all information, content, and materials available on this blog are for general informational purposes only.