One of the earliest steps that entrepreneurs must take is determining what licenses, permits and registrations are required for their new business. Although no discussion can provide an absolutely complete answer to this question, there are certain general requirements that can be readily reviewed.
The first thing to do is determine the full scope of what the new business intends to do and when. For example, if construction or renovation will be required, then permits for construction must be obtained on a timely basis. Another example is when the business will sell alcoholic beverages. A license from the Department of Alcoholic Beverage Control can take a long time to obtain so early planning is crucial. Businesses that will undertake land use development or manufacturing will likely need permits from various levels of government (local, state to federal). Zoning requirements must also be determined to make sure that any needed permits are available or a variance can be obtained. Keep in mind that if an ongoing business is to be acquired, not all licenses and permits can be transferred from the seller to buyer so proper due diligence will be necessary to determine what can or cannot be transferred.
The most widely applicable registrations, licenses and permits are generally easy to obtain and can be obtained at low or no cost. A new business will need to obtain a federal taxpayer’s identification number (also known as the EIN or employer identification number), which can be obtained with little effort. Every local jurisdiction, such as a city or county, will have a business license or permit requirement. It is easy to determine such local license or permit requirements by calling the city or county (or checking their website), but the fee can vary significantly from one jurisdiction to another and from one line of business to another. If wages are paid to employees, a registration with the California Employment Development Department will generally be necessary and compliance with employment tax reporting and payment is required. To sell goods to consumers requires obtaining a seller’s permit from the Board of Equalization (and also requires such seller to collect and pay sales tax).
Another important filing is a fictitious business name (i.e. dba) statement when the business will conduct business using a name other than the name of the individual owner or corporation, as the case may be. This is filed in the county where the business will operate and requires publication of the name in a qualified newspaper. When a business entity is formed outside of California (e.g. Delaware or Nevada), and such entity will operate in California, such business entity will need to qualify with the Secretary of State as a “foreign entity.” Such qualification may be a prerequisite to obtaining other licenses and permits so this must be addressed early in the start up process. The California Permit Assistance Unit of the Governor’s Office of Business and Economic Development is a good source of additional guidance on necessary licenses, permits and registrations.
This discussion is not legal advice, a solicitation of you as a client, nor the engaging in the practice of law in any jurisdiction. This discussion is merely for information/education and should not be relied upon for legal advice by anyone because the facts discussed may be different from your own situation. If you need legal advice, consult a qualified attorney. For more information please visit my website at http://www.palacioslawoffice.com.