Small Business Week Day 2: Most Common Licenses & Permits For Small Business

Ready to start your small business? Don't forget the licenses and permits! They can make or break your success. In this video, I'll show how to navigate the red tape with valuable tips and get on the fast track to entrepreneurship.

Path to Startup

Biggest issue when talking with clients about the licenses and permits they need to start up is the order to do them in. Let’s go over the order of operations before diving into each one:

Business entity Formation

When you start a business, you have to choose a business entity formation. This is how your business will be legally recognized. The most common types of business entity formation are sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. Each of these options has its own advantages and disadvantages.

Sole proprietorships are the easiest to form, but you will not have liability protection.
Partnerships are similar to sole proprietorships, but they involve multiple owners.
LLCs offer liability protection, but they require more maintenance and have more fees.
Corporations provide the most liability protection, but they are also the most complicated to maintain with tax obligations and compliance filings.

It is important to choose the right entity formation for your business based on your unique needs and goals.

Register EIN

In simpler terms, an EIN is like a social security number for businesses. It is used by the IRS to identify a business and file taxes accordingly. Sole proprietors and certain other entities may use their social security number, but an EIN is necessary for LLCs, corporations, and other legal business structures. It's important to have an EIN to keep your personal and business finances separate and to avoid any potential issues with the IRS. Applying for an EIN is free and easy, and can be done online through the IRS website in just a few minutes.

Apply for Permits

It is important to research and understand the specific permits and licenses required for your type of business and location. This can be done by contacting the local government agencies or visiting their websites. Additionally, some free online tools can help you determine the licenses and permits necessary for your business. Once you have identified the required permits and licenses, be sure to apply for them in a timely manner to avoid any legal issues or penalties. Keeping your permits and licenses up to date and in compliance with regulations is crucial for the long-term success of your business.

Apply for Licenses

When starting a business, it's important to ensure that you have all the necessary permits and licenses. If your business involves selling products, you will need to obtain a seller's permit. However, there may be additional specialty licenses required for specific industries. For example, if you run a restaurant, you may need to obtain an alcohol license. Additionally, certain occupations such as cosmetologists and barbers require occupational licenses.

Apply for Business License

Business licenses are also necessary to operate a business in a specific city or region. It's important to research and understand the necessary permits and licenses for your specific industry and location to ensure that you are operating legally and avoid any penalties.

Most Common Licenses & Permits

There are certain licenses that come up more than others when working with small business clients. Let's take a look at the 5 most common:

Fictitious Business Name

When starting a small business as a sole proprietor, you may want to choose a business name that is different from your own name. In this case, you will need to file for a Fictitious Business Name (FBN) or Doing Business As (DBA) registration.

This will allow you to use a business name instead of your personal name. However, if you are forming an LLC or corporation, you don't need to file for an FBN or DBA unless you want to do business under a different name than your LLC or corporation.

It's important to check with your state's requirements for filing an FBN or DBA as it can vary by state. Once you have your FBN or DBA, you can use it to open a business bank account, obtain licenses and permits, and conduct business under your chosen name.

Employer Identification Number

Applying for an EIN is a simple process that can be done online through the IRS website. However, before you apply, there are a few things you need to have in order. You will need to have completed the formation of your business, whether it's a sole proprietorship, LLC, or corporation. You will also need to have registered your business name and have a physical address for the business.

Once you have all this information, you can start the application process on the IRS website by going to the "File" section and then selecting "Apply for EIN Online." This unique identifier is important for your business and is required in certain situations like hiring employees, opening a bank account, or filing certain taxes.

Sellers Permit

For businesses that plan to sell products, a seller’s permit is required in California. You can apply for the permit on the California Department of Tax and Fee Administration (CDTFA) website by registering for a new business activity and filling out the application. Make sure to have your business name registered and entity formed, as well as your EIN or SSN for taxes.

After obtaining a seller's permit, you can use the permit number to create a resale certificate to purchase inventory tax-free. This can save your business money and help you stay competitive. For more information and a step-by-step guide, check out our videos on obtaining a seller’s permit and resale certificate.

Tax registration and Payroll Withholding

When you start a business in California, you may need to register for state tax purposes. This registration will give you a state tax ID number, which you will need to file state tax returns and pay state taxes. You can register online at the CDFTFA.ca.gov

Additionally, if you have employees, you will need to withhold state payroll taxes from their paychecks. These taxes are used to fund programs like unemployment insurance, disability insurance, and state income tax. You can register for a state withholding account online at the same website mentioned above.

It’s important to stay up to date on your state tax obligations to avoid penalties and interest charges. Keep accurate records of all state tax payments and filings to ensure you’re in compliance with state laws.

Business License

Obtaining a city business license is an important step in starting a business as it allows you to legally operate within the city limits. This license is typically obtained after you have obtained other necessary licenses such as the seller's permit and any specialty licenses required for your business.

To obtain a city business license, you can typically find the application on your city's website or by visiting the city hall. If you are running a home-based business, you may also need to obtain a home occupation permit.

It's important to note that if your business is located in an incorporated city, you will need to file for the city business license with the city government. However, if your business is located in an unincorporated area, you will need to file for the license with the county government. Filing for a city business license is a simple step that can save you from potential fines and legal issues down the road.

CalGold

CalGold is a license and permit tool provided by the State of California at CalGold.ca.gov. This tool helps businesses and industries to identify the state, federal, and local permits and licenses required for their business type and location.

Users can search by industry and location, and the tool will provide a list of required permits and licenses, along with the necessary forms, fees, and contacts for each. The tool also provides information on additional requirements such as zoning, permits, and environmental permits. CalGold Demo is a useful resource for businesses looking to ensure compliance with all necessary regulations and avoid potential penalties or fines.

CalOSBA Resources & How to Start Guides

The California office of small business advocate has a resource that you may want to look at. The office of the small business advocate has several start up guides for different kinds of industries. The start up guides help with over 20 kinds of business from aquaculture to consulting and software development.

We have carried that mindset into our blog and have created practical start up guides that go beyond just licenses and permits but address the different aspect of starting that business:

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