In general, businesses are required to obtain California business licenses or seller’s permits if they make three or more sales in a 12-month period. This rule applies even if the sales are made through Internet websites or auctions that offer online classified advertisements or online advertisers.
In California, all businesses that sell goods and products have to obtain a California Sales Tax Certificate Number or seller’s permit. This enables businesses to charge and submit sales taxes for the items that they sell.
An individual must obtain a seller’s permit if they:
- Are engaged in business in California;
- Intend to lease or sell personal property that would normally be subject to sales tax if sold at retail.
This requirement to obtain a seller’s permit applies to:
- Individuals;
- Corporations;
- Partnerships; and
- Limited liability companies, or LLCs.
Wholesales, as well as retailers, have to apply for this permit. A business might not hold a seller’s permit but will make sales during temporary periods, for example, for Christmas tree sales. In that case, they must apply for a temporary seller’s permit.
These permits are typically issued to businesses that have operations lasting less than 90 days at one location. In the State of California, each county and city establishes its own licensing procedures and requirements, meaning that the rules vary by location.
By requiring businesses to obtain licenses, it allows states, counties, and cities to ensure that:
- The business complies with all applicable regulations;
- Is correctly taxed;
- An individual operating a business that requires specific training has the correct qualifications to do so.
If a business is required to have a business license to operate legally and fails to obtain one, it may face:
- Hefty fines;
- Lawsuits;
- A damaged reputation;
- Most likely being forced to close the business.
If an individual is unsure if their business requires a seller’s permit, they should consult with a California attorney to avoid any liability issues.
What Are the Steps to Starting an Online Business From Home?
Starting an online business in California can be a great way to sell, market, and advertise a business’s goods and services. The following are the steps for starting an online business in California:
- Choose a business structure for the business to operate under, such as:
- A sole proprietorship;
- Corporation; or
- LLC;
- File the Formation documents with the California Secretary of State;
- Choose a unique business name;
- Get a domain name after a search if the domain name is available;
- Obtain a Federal Tax ID from the Internal Revenue Service website; and
- Set up the business website.
Do I Need a Seller’s Permit to Sell Online?
Even if a business is online, all of the regulations that apply to a regular business will also apply to the online business. In the State of California, a business needs a General Business License if they are based in an unincorporated area.
As noted above, if a business is selling goods in their online business in California, they have to obtain a California Seller’s Permit. In order to obtain this type of permit, the California business, corporation, or LLC has to complete and file a California Seller’s Permit Application with the California State Board of Equalization.
If a business’ sales will be ongoing, an individual should apply for a regular sales permit.
What Kind of Taxes Will I Pay?
An online business in California may be selling goods online, and some of its customers are located in California. If so, there will be Internet sales taxes that they should be aware of and collect from their customers.
In California, if an online retailer located in California makes sales through its website to customers in California, it is required to collect sales tax from the California Customer.
Does My Home Need to Be Zoned for Business?
If an individual has an online business in California but not a physical location that they do business out of, their home does not have to be zoned for business. If, however, an individual does business out of their home as well as online, their home-based business will need to be zoned.
An individual will need to search their county’s zoning maps in order to determine what zoning ordinances apply.
Who Needs a Business License in California?
Although certain states require every business to obtain a state business license in addition to local required licenses, the State of California does not. Usually, the owner of a business will be required to obtain a general business license in the city where the business is located.
Businesses that have multiple locations will need to obtain a business license in each location where it operates. There may be certification and license requirements in California for several business activities and occupations that require extensive training or that have the potential to expose the public to hazards, including:
- Medical professionals;
- Lawyers;
- Accountants;
- Hairdressers, barbers, and cosmetologists;
- Providers of security services;
- Construction-related occupations;
- Architects
- Engineers; and
- Realtors.
Even if a professional is licensed to practice in a different state, they may still be required to obtain a license issued in California in order to operate the business legally. Licensing requirements are specific to each of the processions.
Many licenses are issued by the California Department of Consumer Affairs. The methods by which an individual can obtain their business license will vary depending on the county or city.
An individual can typically obtain a business license online, by mail, or in person. One place to start looking to determine what type of license a business may need to operate in California is the CalGold permit assistance website.
This website will allow an individual to search for which licenses or permits a business may need based on the location and business type. There might be useful information on the website. However, an individual will likely still need an attorney for assistance with the overall licensing process to ensure that no steps or requirements are missed.
How Much Is a Business License in California?
Depending upon the profession and the jurisdiction, the cost of a California business license may be:
- A flat rate;
- A percentage of gross sales;
- A combination of the two.
Typically, flat fee licenses cost between $50 to $100 but rarely cost more than a few hundred dollars. Another issue to consider is that an individual may plan to use a “doing business as” (DBA) name that differs from the actual name of the business. If so, it must be registered within 40 days of the opening of the business.
Similar to a business license, the filing fees for a DBA application may also vary by city. Typically, however, the cost is around $40.
How Long Does It Take To Get a Business License in California?
Typically, a business license application and any necessary investigation take around 45 days or less. This means that if an individual is planning to start their own business in California, they should plan accordingly and file the application far enough in advance to account for this processing time so that the opening of the business is not delayed.
Should I Hire a Lawyer?
If you are interested in starting an online business in California, it is essential to have the assistance of a California business lawyer. Your lawyer can advise you of any business licensing requirements, rules for selling products online, and tax liabilities.
Your business lawyer can also advise you regarding the different management forms, for example, corporations, LLCs, or partnerships when you are forming your online business in California. Having an attorney help you from the start of your business will help ensure its success.
