Setting up a sole proprietorship in California is a relatively easy,
but rather time-consuming task in the state of California. There are a series of steps that you should follow before opening your new business. Plan on the entire process to take taking roughly six to eight weeks.
The first step is to decide what you want to call your business. Then you should search your County Clerk’s Fictitious Business Name database either online or in-person at your County Clerk’s office to make sure that no one else is currently using the name of your choice. You might also want to check the Patent & Trademark Office’s Electronic Search System online to make sure that there is not a conflict with your name on a national basis.
There have been several nasty lawsuits in the last couple of years as the result of a small business inadvertently choosing a trademarked name. If your business name is free and clear, you are ready to move on to the next step.
If your business name does not include your last name, you will need to file for a Fictitious Business Name. You can find the required forms for this either online at your County Clerk Recorder’s website or at the Clerk’s local office. Your County Clerk will require a fee for this service. You will be required to publish a legal notice in a newspaper for four weeks in a row within thirty days of filing the form.
This notice contains information including your name, John Doe, the address from which your business will be operating, “1232 Missing Person’s Lane,” and your new business name, Associated People Finders. You will then have an official D.B.A., or Doing Business As.
Most cities require business licenses as well. If you live in an unincorporated area, you will need to check with your county. Requirements and fees vary from city to city and from county to county. You can be hit with some uncomfortable fines if you choose to skip local licensing and are caught.
If you are selling a product, you will have to get a resale license under your name if you are using it as the title of your business, or your D.B.A. from the State Board of Equalization. The forms are available either online or at your local State Board office. This license will allow you to buy your materials and supplies without having to pay sales taxes. In return, you will have to charge sales tax to your customers and reimburse the State periodically. This license is, happily, free.
Assuming that you have already taken into account the legal and tax ramifications of having a sole proprietorship, you may want to consider changing your status as your business grows. Sole proprietors are responsible for any and all liabilities against their business.
Creditors can even go after community property. At a certain point, it might make more sense to incorporate for tax reasons. And, if you add a partner, you will automatically have to form a legal partnership. Make sure that you consult your attorney and your accountant as your needs, and the needs of your business grow and change.