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How to start a home-based business in California?

In the digitally connected world of today, there is a higher engagement of home-based businesses with technology and online e-commerce platforms. There are a variety of industries where you can start a home-based business in California right from computer-based consulting to food delivery services. This is a guide specifically created to help you understand how to start a home business in California including business registration, tax registration, licenses and permits, and zoning laws and regulations.

Home Based Business in California

There are 4 million small businesses in California and a majority of such businesses are startups from home. There are almost 15 million home-based businesses in the U.S and it is not surprising that 69 percent of startups have sprung from home-based business ideas.

A home-based business also known as “HBB” is basically a type of small business, which operates from the residence of a business owner or entrepreneur. It is no hidden fact that some of the industry and global leaders like Apple Computer, Hallmark cards, Baskin-Robbins, Amazon, Disney, Microsoft, Google, Harley Davidson, Hewlett-Packard, and Nike were initially home-based businesses and some of them have their roots in California.

Your startup idea can also be started from a garage, home, or even the kitchen including California’s famous meal delivery kits, which has turned into a trend that entrepreneurs in other states are planning to follow. You will need to apply and obtain home business licenses or permits and ensure compliance with zoning laws for your home-based business to become operational.

Why start a home-based business in California?

If you are planning to start a home-based business in California then it is certainly a good decision as the state itself promises opportunities, infrastructure, and a robust platform for any form or type of business. The GDP of California is $3.09 trillion and much of it can be owed to the 4.1 million or more small businesses that are currently operational in the state. It has the second-highest number of small businesses in the nation and its economy has been growing at an annual rate of 3.5%, which is more than the U.S economy. If you are wondering how to start a home business in California then there is a process for the same but first it is important to understand what makes California one of the first choices for entrepreneurs and home based startups. There are several aspects that make California popular and this includes:

  • Networking: One of the biggest benefits of a home-based startup is the availability of networking opportunities. When you start a home-based business in California, you can join any of the networking groups and participate in meetups, conferences, and events. The important aspect of becoming a part of such groups is that you will be able to meet and communicate your business ideas to industry experts, investors, and probable customers or retailers. The networking groups provide a platform for showcasing your business ideas.
  • Diverse industries: If you have home-based business ideas then California offers you the platform to set up a new business in a variety of industries. The fastest growing industries include construction, hospitality, healthcare, agriculture, and technology although the biggest industries in the state are the services sector including tourism, film industry, and agriculture. The industries also vary from one city to another like the largest industry in San Francisco is tourism while the largest industry in Los Angeles is the high-tech industry and then there is the Silicon Valley. You can choose your industry in accordance with your startup idea, obtain home business licenses, and make your enterprise operational.
  • Robust Business Infrastructure: California, nicknamed the Golden State has a robust and strong economy, is ranked 5th largest in the world, and represents 15 percent of the U.S economy ($22.68 trillion). The clean and efficient economy along with innovative policies have helped change the industrial landscape thus helping new-age entrepreneurs to start a home-based business in California successfully. At the heart of the economy is the robust business infrastructure, which includes logistics infrastructure like railroads, ports, airports, trucking companies, and warehouses. The supply chain in California runs deep and is one of the key drivers of the economy.

Popular home-based business ideas

California is home to small and medium sized enterprises (SME’s) and a majority of such entities have grown from home-based business ideas. In order to understand how to start a home business in California, you need to first identify the type of home business that will bring you growth and success. There are several industries or areas where you can form a startup but if you are looking for trending ideas then here are some:

  • Online Consulting Business: You can start a home-based business in California as an online consultant. The type of consulting will vary according to the knowledge and skills acquired over the years. Some of the key areas of online consulting include career consulting, leadership and team building, green living consulting, organization and efficiency, digital marketing, virtual assistant, social media consultant, and stress management among others.
  • Online Services: This is a wide area and the type of work you offer will determine the home business licenses and permits required. The scope and opportunity is huge and encompasses several areas right from blogging to affiliate marketing, publishing ebooks, graphic designing, information research, and selling home-made products through ecommerce websites.
  • Handmade Crafts: One of the areas that have gained popularity in recent times is handmade crafts. Entrepreneurs are actually converting their hobbies into serious businesses like jewelry designing, T-shirt designing, ceramics making, Wood DIY, handmade cards, pour paintings, stone or rock painting etc.
  • Home-based food services: This is an area where you can start a home-based business in California. Food services have always been a high-growth area and there are a variety of niches that you can experiment with. Some of the popular ideas in this category include creating and selling baked goods, specialty items like gourmet chocolate, cooking instructor, nutrition coach, food blogger, home-based cookie business, food photographer, and home chefs or home cooked meals.
  • Computer based businesses: There are different areas within this category that you can focus on depending on your strength and skills. It is important to understand that most businesses in this category will require home business licenses or permits. Some of the most popular areas include computer trainer or tutor, computer repair, desktop publishing, IT consulting, Tech blogging, technical writer, website design, App development, software development, and game development.

Steps to Start Home Based Business in California

If you are wondering how to start a home business in California then it is important to understand that there are certain aspects within the entire process that you will need to consider. There are specific elements that will drive your home-based business ideas from their conception stage to implementation and finally operational stage. Starting a business from home will provide you with greater flexibility in terms of time spent and initial startup expenses. So, let’s take a look at the key areas that you need to focus in order to start your home business successfully.

1. Create a business plan

Before you can start a home-based business in California, it is necessary to create a business plan. A business plan is considered to be a strategic tool for business owners and entrepreneurs. This type of strategic plan takes into consideration several aspects related to the conception phase, the operational phase, and the sustenance phase of a business. It helps entrepreneurs to focus on areas crucial to the overall success of the business like market research, need for home business licenses, short-term and long-term objectives. Some of the key areas of a business plan for home-based startup are:

  • An executive summary of your home-based business ideas
  • Research of the market you plan to launch in
  • Existing and expected competition
  • Marketing, Advertising, and Sales strategy
  • Ideal customer identification
  • Financial planning
  • Operating plan
  • Startup Expenses

2. Check zoning laws and regulations

Anyone can start a home-based business in California but it is always important to check local zoning laws and regulations first. It is important because if you start a home business without checking zoning regulations then your business can be red flagged by zoning officials and this can even lead to penalties. You are probably wondering what are zoning laws and how you can check out the laws in your area. Let’s look at an example.

You are planning to form a home-based startup in Los Angeles city and want to obtain home business licenses for the same. Your residence is situated at WILCO – 2525 Wilshire Blvd, Los Angeles, CA 90057. Now, you will need to visit the Los Angeles city Planning website and check what the zone classification for your residence is. If the zone classification is C-2 then it means that certain types of businesses will be restricted in that zone based on the City’s Zoning Code. You can also visit the public counter at Los Angeles City Planning’s Development Services Centers (DSCs) for consultation on the applicable zoning laws and the regulations you need to meet to start a home-based business in California.

3. Register Your Business

A business can have different forms or structures and if you are planning to start a home-based business in California then identifying the structure is important. When you choose a structure like a partnership, sole proprietorship, or LLC then the business registration requirements will be in accordance to the structure. If you form a domestic limited liability company then you will be required to file “Articles of Organization” to register the business. If you form a General Partnership (GP) then a “Statement of Partnership Authority” has to be submitted. If you are planning to form a sole proprietorship then you will be required to obtain home business licenses, permits, and zoning clearance. We at IncParadise can provide guidance on choosing the right business structure and also help you register your new business.

Start a California home-based business with ease!

4. Get Mail Forwarding

If you are someone who travels a lot or if you are residing outside California and want to start a business in the state then a mail forwarding service can be quite convenient and helpful. The service is also helpful if after you start a home-based business in California there is a permanent or temporary change of address. In such a scenario, all your important mail may get lost, stolen, or returned to the sender.

A mail forwarding service ensures all your important mails are not lost or stolen and instead are sent to a physical location in the state where your home business has been registered. Mails can include anything from business registration documents to annual report notices, health care information, and tax notice from IRS, bills, renewal notices for home business licenses and checks among others.

5. Check if you need to obtain EIN

Home-based business ideas can be transformed into a startup in California but the business structure will determine whether you need to apply for and obtain an EIN (Employer Identification Number). Normally, if you start a sole proprietorship business then you will be required to file taxes using your social security number (SSN). Simultaneously, if you were to hire employees or form a partnership or a limited liability company, then you will need to apply for an Employer Identification Number from the IRS. You can also obtain an Employer Identification Number even if you don’t require one as it has several benefits like it helps avoiding identity theft.

6. Register for taxes

If you start a home-based business in California then you will be required to register for taxes in the state. Whether your business is an LLC, corporation, or sole proprietorship, you will need to file franchise taxes or income tax return. Once you have formed your business and obtained home business licenses and permits, you will have to report all your income or losses from the business through individual income tax return using Form 540. According to the Franchise Tax Board, California, you may be required to report your business income as well as expenses on the IRS Form 1040 Schedule C.

7. Obtain necessary licenses and permits

Once you have applied for formation of a home-based startup, the next important step would be to look up home business licenses and permits you may require. In the state of California, there are primarily two types of licenses:

  • General Business License: This type of license is applicable for any business owner including those planning to start a home-based business in California. The general business license will be issued by the city in which your home-based startup is located. This type of license is also known as a business tax certificate in some of the cities like the City of San Diego and City/County of San Francisco. You can find more information on the type of license or permits required from California’s CalGOLD website.
  • Regulated Professions and Industries Licensing: The “Professions and Industries Licensing” is required by businesses only if they fall under specific categories and this is apart from your general business license. If your startup falls under categories or professions mentioned in the California professional licensure guide then you will have to apply for home business licenses and permits with the Department of Consumer Affairs (DCA) and the Department of Industrial Relations (DIR). If you start a home-based business in California like a real estate salesperson or broker, acupuncture services, Manicurists (nail care), and veterinarians among others will require this type of licensing.

Identify business licenses and permits required by your California Startup

Ready to Start Your Home Based Business in California?

A home-based business is quite different from the medium sized enterprises in terms of business structure, operations, and market although there are several examples of California home-based startups becoming big corporations with time. If you start a home-based business in California, you can leverage the state’s economy, the business infrastructure, and small business incentives. The first step though is to form or register your startup in the state. If you have been wondering how to go about registering your home-based startup then IncParadise can provide you with valuable assistance. We are a reputed California registered agent and our team of experts can guide you with the process and filing for starting your business in California.

We are one of the top new business formation service providers in California and can also provide additional services to help start a home-based business in California like filing of annual reports, and EIN assistance among others.

Start a California home-based business with IncParadise!