California Business License

Starting a new business in California can be an exciting yet daunting task.

Since the state does not offer a one-size-fits all business operating license, business owners are required to individually identify which licenses and/or permits they will need to obtain at the local, state, and federal levels.

This article provides an overview of the California business license process, discussing the factors that are used to determine when a license is required, the steps you’ll need to take to get licensed, and the costs which are involved.

Do I Need a Business License in California

In California, businesses are required to obtain various licenses and permits at the local, state, and federal levels. Here’s a general breakdown:

Type of Business

Below, we’ve detailed common ways in which your business type can dictate the licenses you’ll be required to obtain, as well as specific examples of these:

• Seller’s Permit: If you are conducting business in California and intend to sell or lease tangible personal property that is subject to sales tax, you will need to have a seller’s permit (also known as a business tax certificate or sales tax license). Keep in mind that all retailers engaged in business in California are required to register with the California Department of Tax and Fee Administration (CDTFA)
• Professional Licenses: There are several professions that require additional licenses and/or permits in order to operate legitimately in California. Some of these include accountants, animal services, barbers, private investigators, medical professionals, lawyers, and building contractors, among others
• Environmental Permits: These ensure that your business activities comply with environmental regulations in order to safeguard public health. The California Department of Public Health (CDPH) issues all certificates, licenses, permits, and registrations relating to environmental safety and public health

However, this is not the only factor influencing the exact combination of licenses you’ll need — the location of your business within California plays an important role as well.

Location

In this section, we’ve provided a succinct overview of the potential licenses and permits that your business may need due to local, state, and federal requirements:

• Local: Local permits and licenses are often required by the city or county in which your business operates. These can include operating licenses, zoning permits, health department permits, and more. For example, in the City of Los Angeles, your business might need a Public Health License if it’s involved in activities such as food handling or tattooing
• State: At the state level, the seller’s permit is one of the most common licenses that you’ll need to get. Having said that, several industries are regulated at the state level, including insurance agents, real estate brokers, and notaries
• Federal: If your business’s niche is federally regulated, you’ll be required to obtain a federal license in order to continue operating. Examples of businesses that are federally regulated include those that relate to alcohol sales, aviation, broadcasting, and transportation

Since the exact permits and licenses your business will need are entirely unique to your situation, you’ll have to conduct thorough research into your own local, state, and federal regulations to smoothly launch your business.

Alternatively, many entrepreneurs opt to leverage the expertise of third-party services to handle this on their behalf.

How to Get a Business License in California

In order to get your business license(s) in California, you will need to complete the following steps:

• Form Your Business
• Obtain an Employer Identification Number (EIN)
• Apply for the Required Licenses and Permits

Let’s take a look at each step in more detail below.

Step 1: Form Your Business

Before setting out to obtain a business license in California, it’s pivotal that you first choose an appropriate structure for your business. Sole proprietorships, general partnerships, and corporations are all common choices, however it’s often seen as the most advantageous for small businesses in California to register as a Limited Liability Company (LLC). Here are a few reasons for why:

• Limited Liability: Members are protected from personal liability for business debts, safeguarding personal assets
• Tax Benefits: LLCs typically enjoy a pass-through tax treatment, avoiding the double taxation that corporations are subjected to
• Management Flexibility: LLCs allow for flexibility in management structure, either being member-managed or manager-managed based on the preferences outlined in the certificate of formation
• Ease of Formation: With the California Secretary of State providing forms that meet the minimum state law requirements and the option to file online, setting up an LLC is relatively straightforward

Many small business owners opt to avoid the tricky process of forming an LLC by instead leveraging the help of third-party LLC formation services.

Step 2: Obtain an EIN

The second step you’ll need to complete before applying for your business license is to obtain your EIN. This is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to businesses in the United States so that their financial transactions can be identified and tracked.

An EIN is often necessitated when applying for various permits and licenses as it allows local and state governments to ensure your business is operating within the confines of the law. You can obtain it in a number of ways:

• Online: You can apply for your EIN on the IRS’s official website by using the EIN Assistant. You should be granted your EIN shortly after completing this application
• By Fax/Mail: After completing Form SS-4, you can apply for an EIN by submitting it to the IRS via mail or fax
• By Phone: International applicants and businesses located outside US Territories are required to call the IRS at (267) 941-1099 to obtain their EIN — which they should receive during this call

Note: If you are a sole proprietor, you will be able to use your Social Security Number (SSN) instead (as long as you do not have employees).

Step 3: Apply for Licenses and Permits

After settling on the appropriate structure for your business and initiating the application for your EIN, the next step is to focus on securing the necessary licenses and permits to operate legally within your locale and industry.

• Local Licenses: Since this can vary largely depending on your exact location (e.g., city, county, etc.), we recommend reaching out to your local city clerk’s office for information that relates to your licensing process. For example, the City of Plymouth provides a Business License Application form that businesses can fill out and submit to obtain their license
• Statewide Licenses: If you’re applying for a seller’s permit, you will need to go to the CDTFA Online Services portal, create an account, and click on the “Register a New Business Activity.” If you’re planning to sell items for a temporary period, like Christmas tree sales or garage sales, you need to get a temporary seller’s permit. Additionally, the California Governor’s Office of Business and Economic Development (GO-Biz) provides assistance and information to businesses that need to obtain licenses from other agencies
• Federal Licenses: While the federal government doesn’t require licenses for general business operations, if your business falls under any government-regulated category, such as agriculture, fishing, firearms, and alcohol sales, it may be required to obtain an additional federal license or permit

Note: Visit the CalGold website — it’s a valuable resource that provides information on the specific permit office you need to contact based on your business type and location.

Step 4: Renewal of Licenses and Permits

In California, whether you need to get your license renewed will depend on the type of business license you hold and the specific regulations of the local jurisdiction where your business operates.

Note that renewal deadlines and requirements can vary across cities and counties. For example, in the City of Los Angeles, businesses that sell tobacco products must obtain a tobacco retailer’s permit. The renewal period of this permit is annually, due by the last day of February each year.

If you’re uncertain whether you need to renew any of your business’s licenses, make sure to reach out to the agency that issued your business license for clarification.

Alternatively, you can use a third-party service or a professional attorney for this process. This can be a good choice if you want to ensure that you avoid potential fines, as well as if you want to be as time-efficient as possible.

How Much is a Business License in California

How much you will need to pay for your business licensing will depend on several factors, such as your niche and location.

For example, if you are going to be operating as an attorney, insurance agent, or contractor, you will need to obtain a professional state license in addition to all local and federal requirements; these will include additional fees.

Your city or county can also significantly affect your total business license cost. Licensing fees in Tustin start at $25, and can scale up depending on your annual gross receipts, as well as on the type of business you are operating.

It’s always a good idea to check directly with your city’s official website for more information. Having said that, several business owners prefer to use third-party services when it comes to business licensing in order to save time and avoid mistakes.