California is by far the largest state economy in the US, with $3.9 trillion in gross domestic product as of the third quarter of 2023. The Golden State’s economy is so large that if California were a separate country it would have the fifth-largest economy in the world.
If you’re looking to become one of the 4.2 million small businesses in the state, you may be wondering where to get started—and whether you need to get a California business license.
Do you need a California business license?
There is no state-level general business license in California. But many businesses must register with the California Secretary of State’s office. If you sell goods that are typically subject to sales tax, you’ll also need a California seller’s permit.
California businesses often do need certain licenses and permits based on their location and business type. On the local level, many California cities and counties mandate a business license to operate—in addition to zoning permits, building permits, and other licenses and considerations on the municipal level.
Certain regulated professions like food service and health care, as well as those dealing with regulated products like alcohol and firearms, also require an additional business operating license. These could be on the municipal, state, or federal level.
The state’s Office of Business and Economic Development created a database called CalGold to assist business owners in identifying the type of California state business license and permits they may need.
“You may not need a business license if you live in an unincorporated area and the county does not require it,” says California-based small business attorney Elizabeth Potts Weinstein, who adds that “many counties only license certain types of businesses, like those selling alcohol or food.”
Types of business licenses in California
- State registration and seller’s permit
- City and county requirements
- Specialized state and federal requirements
State registration and seller’s permit
When starting a business in California, you’ll first choose the appropriate business structure and register your company with the California Secretary of State office (sole proprietorships don’t need to register, though they do need to file with their county if they choose an assumed business name). Note this is not a general business license; it’s a registration that establishes your business entity.
If your company sells or rents tangible goods that are typically subject to sales tax when sold at retail, you’ll need to obtain a California seller’s permit.
This document, called a sales and use permit, is regulated by the California Department of Tax and Fee Administration (CDTFA). This requirement applies to wholesalers and manufacturers in addition to retailers, as well as any temporary or seasonal businesses like a fireworks booth or Christmas tree lot.
City and county requirements
Many cities and counties in California require general business licenses. Several other local business licenses or permits may be mandated depending on the jurisdiction: fire inspections, environmental compliance with rules for waste disposal, any building permit, and more. Check CalGold for details on locale and type of business.
Specialized state and federal requirements
Both state and federal laws may require specific business licenses and permits for certain regulated industries. Bars must obtain an alcoholic beverage license and tax permits, for example, while restaurants undergo public health inspections. Many industries and professions like lawyers, contractors, and health care require occupational licenses.
CalGold includes information about state requirements, while the US Small Business Administration (SBA) maintains a list of regulated professions that need federal business licenses. If you’re unsure, seek advice from expert resources like small business associations, municipal employees, chambers of commerce, and lawyers.
How to get a business license in California
- Determine your business structure
- Register your company
- Research local requirements
- Obtain seller’s permit and business tax certificate
- Meet other specialized state and federal requirements
- Renew registration and licenses
Although licensing requirements vary depending on the type of business and the laws in your jurisdiction, here are the general steps to apply for a business license in California:
1. Determine your business structure
Start by identifying the appropriate structure for your business:
- Sole proprietorship. In a sole proprietorship, a single individual owns the business and is legally responsible for everything related to it, including debts, losses, and liabilities. This business entity is the simplest structure and, unlike other business structures, may not require registration with the state depending on the business activity.
- Partnership. Partnerships come in several different forms. A general partnership (GP) involves two or more parties who share responsibility for the company’s profits and liabilities. In a limited liability partnership (LLP), all partners are responsible for their own conduct; they have limited liability for the wider business, and only their contributions to the partnership are at risk, not their personal assets. Limited partnerships (LPs) have a general partner with unlimited liability, while all other partners have limited liability.
- Limited liability company (LLC). A limited liability company (LLC), is a more complicated legal structure than a sole proprietorship or partnership, providing the owners with personal liability protection.
- Corporation. A corporation is a complex structure that often requires outside legal counsel to establish. As a separate legal entity, the owners are shielded from the corporation’s debts and any legal actions against it.
2. Register your company
Next, you must register the business with California’s Secretary of State office (unless you’re a sole proprietor). Forms and filing fees vary depending on your business’s structure, but you can expect to provide basic information about your business and pay about $70 to $100.
Any business that is a partnership or corporation, or that pays employees, also needs an employer identification number (EIN). It’s easy and quick to obtain one from the Internal Revenue Service.
3. Research local requirements
Next, find out if you need a general license in your jurisdiction. Check your city’s municipal website first, or your local county if you live in an unincorporated area, Elizabeth says.
“In some places a business license is called a ‘tax certificate’ or ‘business registration,’ so keep an eye out for that language,” she says. “The application can usually be done online or via email, but if you are confused, the best solution is to go down to the city hall business department and get help in person. Typically they will also have an email address and phone number that you can use to get questions answered.”
CalGold is another valuable resource, and you need only answer two questions: the city or county where you’re located, and the type of business you run. The site will not only list necessary permits and any business operating license, but also provide the contact information for the relevant agencies.
Local mandates may include general requirements for any business in the jurisdiction, such as zoning compliance and building permits—and fees can vary widely.
“It very much depends on the town; the fees range from tens to hundreds of dollars, and the paperwork can range from just filing out some online forms to multiple pages of detailed requirements, including floor plans,” Elizabeth says.
4. Obtain seller’s permit and business tax certificate
If you sell or lease tangible goods typically subject to sales tax, you’ll apply for that California seller’s permit through the CDTFA. Municipalities also require a business tax certificate that lets you operate in that jurisdiction.
A seller’s permit doesn’t cost anything, but some business activities require the owner to place a security deposit, according to the state’s tax office.
5. Meet other specialized state and federal requirements
Several occupations and business activities do require a business operating license, permits, or certifications from state agencies or industry boards. Restaurants, for example, need health permits and may seek liquor licenses, and certain business activities like health care and cosmetology require industry licensing.
The US Small Business Administration provides a list of federally regulated professions and the entities that issue the appropriate business license.
Additionally, all businesses must post the state’s anti-harassment and discrimination notice, and those with five or more employees must maintain all personnel records for a minimum of two years.
Note that business activities regulated by a US federal agency require a federal business license or permit, as listed by the SBA. If you work in an industry that isn’t regulated by the federal government, this step does not apply.
6. Renew registration and licenses
California business licenses, registrations, and permits typically must be periodically renewed. Many of these may be annual, but check specifics with the appropriate licensing office to ensure you remain in compliance.
California business license FAQ
How often do you need to renew your business license in California?
There is no statewide California business license, but many cities and counties do require a local business license. This type of business license often must be renewed annually, but your local government office is the best source for specific information.
How do you start a business in California?
In terms of licensing and permits, do the following: After you determine your business structure, name your company and register it with the state. Then obtain any necessary city or county business license or permit. You also will need a state seller’s permit if you sell goods subject to sales tax. Finally, secure any other specific state or federal business license and permit, if applicable.
Do you need a business license in California to sell online?
Typically, yes. Many California cities and most California counties require a business license to operate regardless of brick-and-mortar or online status. Even if your company is primarily or fully online, you must obtain a business license and seller permit, and meet any other requirements.
