Everything You Need to Know About Setting Up a CA Sole Prop in 5 Simple Steps
Before starting a new business in California, you first need to decide what type of business entity you want to form. In general, a Sole Proprietorship is easy to establish in CA. In fact, you don’t even need to register with the California Secretary of State to set it up.
Be aware though. Sole Proprietorships are risky. This type of business does not provide the owner with any protection against business liabilities. This means that you will be personally liable for all of your business’s debts.
Here are the five simple steps you should take to start a Sole Proprietorship in California.
Step 1: Choose a Name for Your CA Sole Prop
In California, you can choose any name for your Sole Proprietorship as long as it is not the same or similar to an already registered business name, providing it isn’t misleading to the public. For example, you cannot choose a business name that contains the word government. To check the availability of a name, check the California Secretary of State website.
That having been said, the default name of a Sole Prop is the legal name of the owner. In most cases, however, business owners choose to use a different business name. (Obviously a good business name can help your customers understand the type of product or service your Sole Prop provides.) In order to change the name you need to file a dba. How do you do it? Read number 2.
Step 2: File a Fictitious Business Name Statement
This process is also called filing for a DBA or “doing business as”. The owner of a Sole Proprietorship must file for a DBA if they do not intend on using their surname. In California, you can file a Fictitious Business Name Statement in the county recorder’s office where your business is located.
The filing fees are $26. From the start date of your business, you will have 40 days to file a DBA statement. To complete the process, you must follow the county’s requirements for publicizing your new business name. This often involves a predetermined list of local papers where you have to publish the information. Just ask the clerk for some info on this and they’ll provide it.
Step 3: Obtain Required Licenses, Permits, and Zoning Clearance
This step depends on the nature of your Sole Proprietorship. Some businesses need to obtain one or more licenses or permits from the state. Fortunately, California provides a comprehensive database of every license and permit required for any kind of Sole Prop. This will guide you through the process and help you better understand the required documents for your Sole Proprietorship.
Just visit the California Governor’s Office of Business and Economic Development CalGold website. Type in your county and city and you will get a list of all the required permits and licenses for your business activity. You will also find useful information that will help you file and obtain these documents.
Step 4: Obtain an Employee Identification Number (If Necessary)
As a Sole Proprietorship owner, you will not automatically need an Employer Identification Number (EIN). However, under certain circumstances, you might need to obtain one. For example, if you want to hire employees, you’ll need to have an EIN.
You might also need this nine-digit number for tax reporting purposes or to open a bank account. Check with the tax authorities in California to learn if your Sole Proprietorship is required to take this step. Registering for an EIN is done through the IRS. This process can be completed online at the IRS website.
Step 5: Do the Things Any New Business Owner Should Do
Anyone starting a new business, regardless of if it is a sole prop or something else, should consider setting up a bank account, obtaining any necessary insurance, and potentially setting up a business credit card and or line of credit. These are basic for most businesses regardless of the type of entity or industry.
That’s it! Now, you’re ready to start your new business and will never ask yourself how do you setup a sole proprietorship in CA again! (Although if you do you can just come back and reread this article…) Want to learn even more about setting up a business in California? Check out this awesome blog post which breaks down everything you need to know about starting a business in CA, including the difference between all of the business types (Sole prop, LLC, etc.)
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Want to learn everything you could want to know about starting a business in CA? Watch the video below. It’s great, trust us we know, we made it. (We’re not biased, it really is great.)