Business Licensing in California: From Application to Approval

Do you need a business license in California?

To make your business ‘official’ in the eyes of the state, you need at least one business license issued in California. The most common of these for small businesses is a ‘general operating business license’ for tax approval and documentation. Thankfully, this is usually simplified to a ‘business license’. (A General operating business license is a mouthful.)

However, getting a business license in California isn’t as straightforward as obtaining a state-wide license and going on your way. The system separates licensing into local areas and operating regulations for those cities and counties, and specific sectors, such as health, agriculture and construction, require additional permits in conjunction with a business license.

Each industry has its standards surrounding permits. This means you can get the best fit for your business, but it requires more upfront work.

Types of business licenses

With this kind of flexibility and options, getting tripped up about which license is best for your field service business is easy. Having a one-size-fits-all state business license is a dream, but it's a nightmare for the regulators. Getting the proper licenses and permits is essential for smooth tax applications and avoiding violations.

The range of licenses and choices is why a search for a business license in California can result in different answers, tips and advice. Requirements shift depending on your industry and your scope of operation.

So, what business licenses are available in California, and which is the best fit for your field service business?

Local Licence

Local business licenses or ‘general licenses’ are issued by cities and counties and carry their submission standards and requirements. Almost every business in California will require a general operating business license as standard.

As every incorporated locality has its own submission/issuing process, you must contact your local government directly to ensure you have accurate information to apply.

Industry Permits

Some industries require specific permits based on regulatory requirements and a general license.

• Building Permits: likely required for your field service business. These permits are issued for any business involved in building construction or renovation. Altering buildings in any way requires this permit.
• Zoning/Land Permits: necessary if the land you’re building/establishing your business on isn’t zoned for commercial use. Obtaining a permit from the local county keeps your business compliant.
• Public Health Permits: these are necessary for businesses serving the public, such as restaurants, cafes, spas and gyms.

Seller’s Permit

California does not have a specific state business license; however, if your business sells or rents tangible goods, such as machinery or worksite equipment, you will require a ‘seller’s permit.’

This distinction is made because selling and renting physical goods is regulated on a state level and occasionally controlled on the country level.

If your field service business includes selling goods directly to consumers, you’ll need to apply for a seller’s license.

Federal Licence

Federal licenses are typically not required for businesses operating in California. However, you will need a federal license for tax purposes if your field service business is classified as a corporation, such as an S-Corp or C-Corp.

Some federally regulated industries require a license, most due to their stringent standards and laws. These include transport, aviation, nuclear energy, firearms, liquor sales, etc.

How to get a business license in California

There are many options regarding California business licenses, but the core process is the same.

There are plenty of ins and outs when it comes to anything bureaucratic. Red tape is simply a part of a business owner’s life, but with the proper preparation, you can avoid getting tangled.

Follow these steps, and you’ll quickly have the necessary licenses and permits.

1. Determine your business structure, entity, and location

First things first, your business needs to be created.

There are many things to consider when setting up your field service business, and taking the time to lay the foundation is essential for success. Forming your business isn’t just about the name! This is the step where you decide on the form of your business, such as a partnership, LLC or corporation. Sole proprietors can simply use their Social Security number for tax purposes.

The following dot points are necessary to form your new business officially:

• Choose your business name.
• Obtain an Employer Identification Number (EIN), unless you’re a sole proprietor.
• Business structure type: sole proprietor, partnership, LLC or corporation.
• Business plan: Outlining your expected revenue, operations and services. A detailed plan provides the groundwork for your documents and business direction. Comparing your business growth to your projections is an excellent method of analyzing business performance.
• Business contact details: phone number and address. This can be your own address, as you need one for contact and location purposes.
• Obtain relevant business insurance

2. Register your business name

Have you chosen the perfect name for your business, or are you a sole proprietor looking to operate your own business? Once you’ve chosen your name, register it with the state to make it official. You can’t share the same name as another company in your state, so double-check that it won’t infringe on another business’s name.

Business name vs DBA

If you want to do business under a different name than your official business name, or you’re a sole proprietor wanting to operate under a business name, you can register for a DBA.

Doing business as, or DBA, is a ‘fictitious’ business name: it’s not the name registered with the state but is recognized as your business for all legal purposes. For example, your official business name could be ‘Quick Spark Electrical’, but you also operate under the name ‘Quick Spark’.

3. Apply for the business license

Once you’ve determined your business details, outlined your plan and obtained insurance, you can apply for a business license in California.

Your business plan and address will outline the locality in which your field service business operates. You must apply for a business license directly from the county/city, which usually includes a business tax document.

4. Pay the required costs for business licenses in California

Next, the costs of acquiring a business license in California vary depending on the locality in which your business operates, its size, and the relevant industry-specific fees.

What are the costs of business licenses in California?

Business licenses have different costs, and the type and amount will vary depending on the business's size and location.

Local licensing fees

Licensing costs will be lower for small or very small businesses than for large businesses. Localities/counties vary in their fee structure. Some charge a flat fee, while others charge a percentage of projected or gross business revenue. (Note: revenue, not profit.)

Flat fees:

Small businesses: $15 - $30, depending on location. Very small businesses in some areas, such as around LA, can obtain a Californian business license at no cost, thanks to initiatives to encourage entrepreneurship.

Depending on their size, larger businesses can pay hundreds of dollars to renew their California business license.

Percentage of projected/gross revenue:

A business license fee may instead be a percentage of your business's gross revenue or projected revenue, and the number you provide is the calculation. Your business plan is invaluable for small businesses starting up in producing a reasonable number for projected revenue.

Industry-specific fees

Some industries charge additional fees or taxes, so it’s important to check the local requirements to ensure your business has met all the conditions.

Check out the CalGold website for information specific to your location and business type.

5. Tracking your application status

In the case of city and county applications, you can check on their website using dedicated search functions to track your application. To see the status of your application and business license, visit here and use the advanced search for inactive or in-progress applications.

Should I follow the same process for applying for a Los Angeles business license?

Yes, and the license in LA is known as a ‘Business Tax Registration Certificate.’ Several areas in Los Angeles are unincorporated in the wider area, so you’ll need to go to those county offices directly.

Business license examples based on your business

To familiarize ourselves with the various situations and licensing requirements, we’ll cover two examples from some of Simpro’s covered industries.

Outlining the kinds of operations your field service business will cover is important to get the correct licenses. Establishing your business plan is a vital step in forming your business, as it provides the groundwork for these considerations.

Plumbing:

Plumbers will require the standard business license from their business location.

Building Permit: As plumbers are involved in altering/renovating and constructing buildings, your business will require a building permit.

Zoning Permit: If you run a business from your residence, you may require a permit to ensure compliance with your neighborhood's zoning.

Security:

Security businesses fill the requirements for several permits and a standard business license.

• Building Permit: field service security businesses that install and maintain security systems require a building permit, as this falls under improvement and altering a building.
• Seller’s Permit: If you sell security systems in addition to installation and maintenance, your business will also require a seller's permit.

Common pitfalls to avoid when applying

Business licensing is the bridge between your business on paper, getting out there, and making revenue, so you want your application process to be smooth sailing. There are a few common issues field service businesses encounter that you’ll want to avoid so you can get working sooner.

Incomplete or inaccurate applications

Easy to do and frustrating to deal with. Everyone makes mistakes, but your license and permit applications are the last place you want to make one.

Triple-check your applications before submitting them, and ensure all information matches your business details. In addition, make a checklist for all the necessary forms/permits and check them off before you’re ready to send.

A good trick is to get a second set of eyes on the form to help you check (because after filling out those long-winded applications, everything can start to look the same!)

Not understanding zoning laws

If you’re establishing a business address at your residence, you may need to apply for a zoning permit to operate out of a residential zone.

Zoning laws are also vital to understand when constructing or modifying buildings that are not suited to their current zoning. They could also apply to the types of plumbing, depth, waste management and chemicals that can be used in that zone.

Missing renewal deadlines

California business licenses don’t renew automatically, and it can be easy for the renewal date to slip by with the rest of your work. Most areas require annual renewal, and some offer biennial renewal. If your business license has expired, renew it as soon as possible.

Rectifying the situation quickly can help you avoid fees and fines. The last thing you want is to have to stop business operations and interrupt all-important cash flow.

Of course, the best option is to be prepared for the renewal period and avoid expiry altogether.

Ready to Get Your Business License in California?

Obtaining your business license in California can be challenging, but the tools are there to ensure you get the right license and permits for your business to start earning. We hope this guide has helped you understand the ins and outs of the process and what to expect.

Running your business means juggling admin, job costing, red tape and your team, but thanks to digital tools and technology, many work processes can be streamlined. Check out Simpro’s guide to inventory management to see how manual processes can be transformed into cloud-based solutions.

Frequently Asked Questions on Business Licensing in California

What happens if I operate without a business license in California?

If you’re operating without a business license in an unincorporated rural area of California with an exception to the state laws, you’ll be fine.

Every business or sole proprietor outside those circumstances must have a business license. If you miss the renewal deadline, renew as soon as possible to restore your status.

Operating your business without a license can result in misdemeanor charges, jail time and hefty revenue-based fines. It can also open up legal challenges from former clients.

In addition, your business won’t be able to bid on the same projects and opportunities as a fully licensed business. The application time and costs are well-spent investments in future business growth and legal protection.

How long does it take to get a business license in California since the application?

There’s no set time, but getting your business license investigated and approved typically takes several weeks. The wait time in California can be up to 45 days.

Can I transfer my license to another location?

Unfortunately, no. As the application, permits, licensing and fees are specific to the location in which your business operates, you’ll need to re-apply for a new business license in the new location to ensure compliance.