How to Establish a Sole Proprietorship in California

The sole proprietorship is among the simplest forms of businesses to set up.

Nevertheless, they have a lot of risks to them. Which means that at first, you should have a neat business plan which identifies the weaknesses, opportunities of your enterprise.

As the owner of a sole proprietorship, you will have to follow necessary California and federal regulations.

In California establishing a sole proprietorship does not require any document hustle with the California Secretary of State. Here is what you have to do instead.

Decide Your Business Name

What should you do if your name does not become the name of the business?  You have to file a Fictitious Business Name Statement with the county where your business will operate. For that, you will also have to file an application and pay a fee. It is important for you to do so otherwise, it will prevent you from engaging is the next step of the process.

In California, you can give your business a name which is not the same or too reminiscent of another registered business. Also, the name should not be confusing for the public. If you wonder how can you find which names are available, the following government databases are to your help – California Secretary of State, U.S. Patent & Trademark Office and your county recorder’s office.

In terms of time, you have 40 days from the business start to file the statement. And it will cost you $26. To complete the process, you will have to publish the statement in a famous newspaper in your county for four weeks in a row.

Licenses and Permits

Be aware, that most counties in California will require you to have a business license and pay an initial fee for it. You will need to collect many licenses and permits based on the kind of business you operate. You can check with California Governor’s Office of Business and Economic Development CalGold website. Fill all the necessary information to find out what type of licenses and permits you will need and what laws will affect you. Meanwhile, projected and actual sales will determine the taxes.

Occupancy Permits

If you do reside where you plan your business to be, you will have to file an occupancy permit. A government inspector will check if your business complies with ordinances, planning and zoning laws. For this, you will also have to pay a fee.

If you plan to operate your business out of your hometown, then you will have to file a home occupation permit. This permit has some restrictions that do not apply to businesses in residential areas. For instance, a sole proprietorship might acquire a home occupation permit but will not be allowed to meet with his clients out of that area.

Licenses You Might Need, Or Not

It depends on professions and industries. Specific licenses are required from California Department of Consumer Affairs and other agencies. Check the CalGold website for licensing requirements for various industries.

Employer Identification Number

If your sole proprietorship will have employees, then you will need an Employee Identification number or EIN. You can register it online at the IRS website. If you are a business with employees you also have to report wages to IRS with the number you receive.

If you have no employees, you will use your Social Security number for reporting taxes. Moreover, if you pay your employees at least $100 you need to register for California employer account number and can do it at California Employment Development Department (EDD).

What Else?

If you have successfully completed those steps, here what is left. Open a bank account with your EIN and the fictitious business name. Then get general liability insurance. As you will be the sole responsible for your business, getting an insurance is the only protection for you when it comes to finances. And do not forget about reporting and paying taxes.

While the process of establishing a sole proprietorship is a relatively easy one, it still requires a lot of knowledge and experience in the legal industry. It is better to consult an experienced business law attorney in the first place to ensure the best results.

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