ULTIMATE GUIDE TO FORMING A SOLE PROPRIETORSHIP IN CALIFORNIA
Thinking about starting a new business or conducting sustained business in California? The most common way ventures are started are as sole proprietorships (“SP”).
The good news is that in California, you can establish a sole proprietorship without having to file anything with the California Secretary of State.
To establish an SP, there are four basic steps:
1. Choose a business name;
2. File a Fictitious Business Name Statement with your County;
3. Obtain any necessary licenses, permits, and/or zoning; and
4. Obtain an Employer Identification Number.
Pick a Name for Your Business
In California, a company may choose any name that is not the same or very similar to another business in the California. The name also can’t be misleading to the public.
To make sure your business name is available, it is important to search for your chosen business name with the Secretary of State and/or your County recorder’s office. You should be able to do both these searches online, depending on where you live.
File a Fictitious Business Name Statement
A Fictitious Business Name (“FBN”) is the name you will be running your business under. This is required under California Law, unless your business is operating under your own real name, i.e. Sarah Jones Firm, if your name was in fact Sarah Jones.
California requires you to file an FBN Statement in the county recorder’s office where your primary place of business will be located. You are given a 40-day grace period from the business start date to file this statement.
The process is fairly simple and the application can usually be done online (depending on your County). Once your application is filed, you must publish the statement in a newspaper in the county for four weeks straight. There are typically lists of newspapers who will do this for you at various prices.
Obtain Licenses, Permits, and Zoning Clearance
Your business may need various licenses and permits depending on the type of business you will be conducting.
California provides a comprehensive database of the various licenses and permits that may be required for your business. This information can be found at California’s CalGold website.
Register for an Employer Identification Number
Sole proprietors who will have employees need to get an Employer Identification Number (“EIN”). This is a number issued by the IRS for your business’s taxes.
Registering for an EIN can be done for free online at the IRS website.
Sole proprietors without employees do not necessarily need an EIN because they can use their Social Security number to report taxes. However, some banks may require one to open a business bank account.
Some other things to consider once you are up and running as a SP:
1. Open a business bank account;
2. Create a website;
3. Find a good CPA or bookkeeper, I know several throughout Southern California, please contact me if you would like a referral; and
4. Find a local business attorney to ensure you are legally compliant as well as to help you with contracts, licensing, and other legal needs.
Dennaoui Law is able to help you through this process as well as prepare any and all of these documents at a moments notice.
We are agile and tech friendly meaning most documents can be provided with a quick turnaround, 100% electronically to give you instant peace of mind.
Feel free to call Dennaoui Law Firm with any questions or contact us via email: [email protected].
Frank Dennaoui, Esq
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