Having to go through the process a couple of times, I often find myself assisting others on how to open a business in California. While there may be variances in the process based on the county you live in, it’s typically involves many of the same steps.

What you’ll need to consider:

• Type of business
  • Sole-Proprietor
  • General Partnership
• Will you have employees day one?
• Will you be selling a physical product or will you be providing a service?
• Will you have offices and/or a store front?
• Will you be working out of your home?

Fictitious Business Name

A Fictitious Business Name (FBN) or Doing Business As (Dba) statement is registered with the County where your company will conduct its primary business. An FBN or Dba statement is used to correlate a business with a respective owner(s). There is typically a fee associated with the filing. The filing fee is different between counties (last time I filed my local filing fee was $35, plus $7 for each additional business name and/or owner).

Once filed, you’ll then have 30 days to publish the statement in a local newspaper (or public circulation). The notice must appear at least once a week for a continuous 4 weeks. Newspapers will also charge a publication fee associated with the statement publication, and this too is dependent on the newspaper you choose. The last time I filed it cost me $58.

After the listing has completed, you’ll receive a Declaration (of 2015.5.C.C.P.), that you can then take back to the County Clerk/Recorders office to complete you FBN Statement listing.

This process may seem lengthy but goes by rather quickly and is likely the least painful part of the process. In most cases you can continue with the rest of the steps, simply showing that you’ve properly submitted the information. I’ll highlight examples below where this might be the case.

Federal Tax ID / Employer Identification Number (EIN)

As a Sole-Proprietor you are not required to have a Federal Tax ID or Employer Identification Number (EIN). Taxes for an individual are normally collected based on your Social Security Number (SSN). On any form that requires a Tax ID, you can supply your SSN in its place. However, if you plan on hiring employees, even as a Sole-Proprietor you’ll need to have a Federal Tax ID.

All other business types will need to apply for a Federal Tax ID/EIN. This can all be done via the internet by visiting irs.gov and applying online. The process is rather quick and most of the time you’ll receive your new EIN at the end of the process. I don’t recall getting an email confirmation, so you may want to print the confirmation page for your records.

In my experience, it’s almost always better to have a Federal Tax ID. This allows you to deal with your tax filings for your business separate from your personal tax filings. At the very least it is one less time you’ll have to give your personal Social Security Number to someone. Providing less surface for identity theft.

Partnership Agreement

This is only necessary when you have decided to go into business with a partner. This agreement is pretty important for several reasons. From a partnership perspective this outlines many of the responsibilities, obligations, and expectations that the partnership has. Banks will also need the partnership agreement when you opening a joint accounts.

Some important ideas to consider when drafting your partnership are the following:

• Percentage of Ownership for all parties
• Vesting Terms
  • This is a set of requirements where each partner qualifies his/her ownership in the partnership. This is a good way to protect all sides from having an absentee partner that no longer chooses to play an active role in the partnership, but, is legally entitled to his/her shares.
• Profits, Losses, and Salaries
  • Agreement on how of the finances will handled.
• Withdrawal
  • Agreement on how one is to withdrawal from the partnership and how it is handled. This section can also contain involuntary withdrawal (death of a partner).
• Disputes
  • Agreement on how disputes are handled. Typically the majority share-holder is the decider. There are a large number of articles on the internet explaining why 50/50 partnerships are rarely a good idea. Easiest solution, decide on who will be the majority shareholder and make it a 51/49 partnership.

While these are good topics to cover in your Partnership Agreement writing one can still be difficult. Consider starting with a template it will speed up the process of writing a partnership agreement everyone can be happy with.

Business License

Most cities and/or counties need your new company to file for a Business License/Business Permit. Where you file for your Business License will depend primarily on the place where you are doing your primary business from. Locations in unincorporated areas will need to file with their County for a Business License. Otherwise, check your city for how to apply. CalGold has a good site to help you find these offices. When filing for your Business Licenses there will be an application fee. This varies based on City/County. Last time I filed for a business licenses it cost me $166.

Once submitted the city will normally have a series of approvals that the application will undergo. This approval process will vary depending on the type of business you will be conducting. As a result you may need to undergo a fire inspection of your building, or some types of inspections.

Home Occupational Permit

Some of you will want to conduct business from your home, for one reason or another. In this case you’ll need to file for a Home Occupational Permit. This permit is allows a business owner to conduct business from a residential zoned place. There are many limitations here, so don’t be surprised if your business is not approved for a Home Occupational Permit. Many of these limitations are for safety or compliance with local ordinances. Examples might be, increased traffic in a residential area, business may generate noise not allowed in a residential area, etc.

In some cases, you will need to specify rooms within the residents that are used to perform business activities and how customers are to park, enter, and exit the residents. Where you file for your Home Occupational Permit will depend primarily on place of the residence, in which you plan on doing business from. Locations in unincorporated areas will need to file with their County for a Business License. Otherwise, check your city for how to apply. CalGold has a good site to help you find these offices.

Sellers Permit

When selling tangible/physical goods, a business must collect sales tax on those goods, on behalf of the state. For this purpose you will need to get a Sellers Permit via the California State Board of Equalization website. Many vendors/wholesalers will need this information before they will even do business with your company.

Bank Account

Hopefully your company’s business flourishes and you’ll need to find a place to hold your money. Banks have special benefits for businesses so open a business bank account might make a lot since. Many times business will want to open a bank account in the early stages of their business and some of the official documentation required will not be immediately available. Most of the time bringing your submitted documents will suffice to have your bank account opened. In my case I had not yet received my Fictitious Business Name certification, but, the bank wanted to make a copy of the submitted paperwork. Was able to open our company account that same day.

Below is a quick checklist of what you’ll need to bring with you.

• Partnerships
  • All partners must be present.
  • Partnership agreement
• Employer Identification Number (EIN)
  • Again, for Sole Proprietors, you can use your Social Security Number (SSN)
• Two forms of Identification
• Fictitious Business Name Certificate (or at least the submission forms, with county stamp)