Are you looking to start a business in California, and you aren’t sure what kind of business license you will need? First you will have to form a California business. Once you’ve come up with a name, chosen a registered agent, and filed all essential forms to establish your business, then you will need to acquire the right business licenses in order to operate.
What is a Business License?
A business license (or a business tax certificate) is a permit or license issued to a business by a government entity in order for that business to operate legally. They can be issued by local, state, or federal governments. Different types of businesses will have a variety of licensing requirements based on the type of business and the location of operation. In California, chances are your business will need some sort of California business license. A majority of counties and cities will require your business to have a local license and a seller’s permit. It’s important to know also, that a business license and an LLC are two separate things.
Why Are Business Licenses Required?
Business licenses help to ensure that businesses maintain a certain threshold of safety measures, keeping members of the public safe. If a new product or service becomes available, we want to feel reassured knowing they are meeting minimum safety standards. Business licenses are how the government enforces these standards.
In California, if you operate any type of business, you will need a general California city business license. This is true even if you have a small business, a home-based business, or a business that doesn’t generate a lot of profits. You will need to apply for business licenses in the city you are doing business in, no matter how small, since there is no state business license.
How to Get a Business License
Obtaining the correct license(s) takes a little bit of planning and effort. A good first step would be to start by calling your mayor's office, county administrator, and state's secretary of state to learn which licenses you will need. You can also use tools such as CalGold to help you search online. Here are the steps you should take to get started:
1. Form your LLC
You’ll start by forming an LLC in California. Afterwards you should be able to apply for licenses under your business’s name. It doesn’t matter how large or small your business is. The same is true if you form a single member LLC in California. You can follow our step-by-step process or purchase a California company through us.
2. Apply for statewide license(s)
There are some occupations in California which require a special license in order to operate. Because different government agencies issue licenses for different services, it’s important to contact your state and local government offices to know what is required. California’s online resource CalGold can also help provide guidance for what types of permits you will need for your business.
You may also need specific permits, such as a seller’s permit if you sell multiple goods to your customers, health license permits, or building permits. The process to apply can change depending on the city, but for most you can just apply online.
3. Determine required local licenses
Licensing requirements may vary from each city and county and each have their own procedure to follow. If you’re within city limits you will need to meet that city’s requirements. outside city limits you will need to check the county government. If your business spans across multiple cities and/or counties, then you may need a license for each one you plan to do business in.
Each California city and county establishes its own licensing requirements and procedures. That’s why it’s such a crucial first step to check with your local government to determine which permits you will need. If you have an online business or work from home, then your home address is your business location.
4. Apply for your California business license(s)
In most cases you can apply online for a business license in California. The following is the information you will need in order to apply for county or city business licenses in California:
- A Social Security Number or Federal Employment Identification Number.
- Your legal business name and any fictitious name associated with it.
- Business start date.
- The amount of employees and your expected annual sales number
- The business address and contact information.
- Each additional business owner’s contact information.
- A description of your business activities.
- Your business sales tax number (if any).
- Your industry code under the North American Industrial Classification System (NAICS).
- Evidence of required commercial or professional certifications.
5. Apply for federal licenses and tax treatment (if required)
Just like the state of California, the U.S. government does not offer a general, nationwide business license. Certain government agencies may regulate specific industries. If you’ve structured your business as an LLC or corporation, you can elect corporate federal tax treatment with the IRS. This is typically done as an S Corp or a C Corp.
How Much Do Business Licenses Cost?
Normally you must pay a fee in order to obtain a local business license in California. Some cities exempt small businesses from these fees. It varies by locality and reach of operations from as low as $15 to as high as a few hundred dollars. Your projected gross revenue might also adjust the cost by 10 cents per $1000 of projected revenue. You will have to renew the license and pay a new fee every year.
If you are running as an LLC or a corporation, you will have to pay the fees associated with filing to the Secretary of State. If you choose a sole proprietorship as your business entity, then there are no additional fees.
Different Types of Business Licenses
There are several types of industries, each requiring a different business license. It’s important to call your local government agency to understand exactly which license your business is required to have. Below are a few examples of different types of business licenses companies can qualify for:
- Business operating license
- DBA (doing business as) license or permit
- Planning and zoning permits
- Building permits
- Fire department permits
- Tax regulations
- Health licenses and permits
- Environmental licenses
- Sign permits
What Happens if You Fail to Get a License?
Depending on which county you do business in, there may be different rules and regulations to follow. Failure to comply with these rules and failure to obtain a business license will result in a penalty or fine depending on the location. These may include late fees or fines, penalties, or even the inability to operate. This is why it is imperative that you obtain the licenses and permits you need before you operate in your area.
Do I Need a Business License if I Have an LLC?
Paying to establish an LLC is not the same as acquiring a business license. First, you will need to establish your business and then, once formed, you will be able to apply for licenses in your business’s name. This is because the license will require the legal name of your business.