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