California is a very suitable place to start your business because of its large economy that is strengthened by the presence of a lot of innovative small businesses in the state. When you start a business in California, you would have access to a lot of resources that would help your business grow such as tax reductions and access to business funding.
However, you have to meet up with some legal requirements before you can start a business in California. These requirements can be fulfilled in few weeks and you don’t necessarily need a legal practitioner to help you out. With this guide, you can easily start a legally recognized and accredited business in California.
First, you need to have a business plan. It is not a legal requirement per se but you would find it very helpful when you eventually start your business. A business plan would give you a clear idea of the resources you would need to start your business, how you would market and promote your products and services, your sales strategy and expansion plan amongst other things.
Writing a business plan is easy and you would also find useful resources on the California secretary of State website sos.ca.gov to help you write a good business plan. Without wasting time, below are the top 10 legal requirements for starting a business in California, USA:
Top 10 Legal Requirements of Starting a Business in California
1. Register your business-: You would be required to register your business and file the necessary paper work at the Secretary of State’s office. Before you register your business however, you would be expected to choose a business structure. You can choose either of the following structures-:
- Sole proprietorship-: This means that your business would be owned, financed and operated solely by you. Also, any liabilities or debts of the business would be paid by you and in the event that you are unable to pay off these debts, your personal assets may be used to pay off the debts.
- Partnership-: Partnership involves the coming together of about two to twenty people to form a business. Just like sole proprietorship, the owners are liable for business debts which may be paid off with their personal assets.
- Limited Liability Company-: Under this ownership structure, your business becomes separated from you the owner. It becomes a separate legal entity with its own name and identity and all assets and liabilities of the business are treated as that of the business and not of its owners or directors.
- Corporation-: A corporation has some of the features of a limited liability company except that it is allowed to list and trade its stocks on the floors of the stock exchange market.
These are the most popular forms of business ownerships in California but you can also check sos.ca.gov for other forms of business ownerships and select the most suitable option for you.
2. Fictitious business name filing-: If you want to use a fictitious business name, you would have to register the name at the office of the County Clerk of Court. You would have to select three different names which would be checked to ensure that it has not been taken by another business, if the name is available, you would be asked to pay some fees to register the name.
3. Federal and State Employer Identification Number-: If you would be employing people to manage your business for you, you would be expected to file tax returns on their behalf and you would need a unique tax identification number to be able to do this.
4. Sales Tax Permit-: If you would be selling some products that are taxable, you would also be required to obtain a sales tax permit so that you can file appropriate tax returns.
5. Business Permits-: The type of business permit you need would also depend on the type of business you want to be running. For instance, if you want to run a catering business or a business that has to do with preparation and handling of food items, you would need to obtain a health permit. To find out the type of permit you need for your specific type of business, you should visit the website mentioned above.
6. Zoning laws-: This is very important when selecting a location for your business or if you decide to operate your business from home. You should find out if the area where you want to site your business is zoned for such business. Also, if you are going to operate a home-based business, zoning laws are applicable to your business and it is important that you find out if you are allowed to operate such a business from your home.
7. Employee discrimination laws-: The state of California has some set of rules and guidelines to be followed when you want to employ staffs. These are meant to protect people with disabilities or peculiar cases from unfair discrimination by prospective employers. You would be required to fill a form known as w-2 and comply with all employee hiring laws of the state of California.
8. Alcohol permits-: If your business involves handling or selling alcohol, you would need a license that permits you to sell alcohol. This permit is especially important for night club, caterers, hotels and restaurants.
9. Fire inspection and prevention-: Depending on the type of business you operate, you may need a permit from the fire department. They would visit the premises of your business to ensure that all safety equipment are put in place and all safety guidelines are being followed in order to prevent fire break outs. If they are satisfied that your business is not at risk, then you would be given a permit.
10. Advertising and signage permits-: You would also need permits to put up billboards or sign posts advertising your business.
The legal requirements for starting a business in California is largely dependent on the type of business you want to start but the general legal requirements are what you have listed above. To find out more, you should visit the sos.ca.gov.