If you've started selling your homemade jewelry online or running personal training sessions out of your garage, you've likely formed a sole proprietorship already—and you're not alone. When an individual starts a business (sells goods or services) and they haven't filed any legal documents with their state officially registering the business, then they've automatically created a sole proprietorship.
A sole proprietorship is low maintenance. It doesn't typically require you to file any creation documents or submit renewal filings or fees, and you can usually report your income on your personal tax return. But sole proprietors are personally liable for the business's debts and obligations, so you might need to dip into your personal funds to satisfy any debts your business can't pay.
In California, you can establish a sole proprietorship without filing any legal documents with the California state government. Though no action is required to legally create a sole proprietorship, you should follow four simple steps to start your business:
For more information, read our article on how to start a business in California.
In California, a sole proprietor can use their own legal name or a trade name—also sometimes known as a "fictitious business name" (FBN) or "doing business as" (DBA)—to conduct business. If you plan to use an FBN or trade name for your business, it can't be the same name as any other company currently registered with the state.
It's also a good idea to choose a name that's not too similar to another registered business to avoid trademark infringement. Under trademark law, your trade name can't be used by someone else in a way that would cause confusion among consumers. So, if you use a name that's the same as or too similar to someone else's trademark and you both provide similar goods or services, then you could be infringing on their trademark. If you find a competitor company already exists with a similar name, then it's best to choose another name.
For example, suppose you want to operate a dude ranch under the business name Gold Dig Ranch. But across town another dude ranch is operating under the name Gold Digging Ranch Vacations. Because the dude ranches have such similar names, you'll probably cause some confusion if you start using your name. In that case, you'll probably need to find another name.
To make sure your business name is available, you should run a search in the following government databases:
For more information, read our FAQ on how to choose and register a business name.
If you use a business name that's different from your legal name, California requires you to register your FBN with the county recorder's office where the business is located.
For example, suppose Ben Matlock has a hotdog shop called Mustard and Ketchup. Because Ben's business name isn't the same as his legal name, he needs to register his business name, Mustard and Ketchup, in his business's county.
Many FBN Statements are downloadable from the county website. Business owners have 40 days from the business start date to file an FBN Statement (Cal. Bus. & Prof. Code § 17910 (2023).)
As of 2023, the filing fee generally is $40 but can vary from county to county. In order to complete the application process for registering an FBN, the business owner must publish the FBN Statement in a well-known newspaper within the county for four consecutive weeks. (Cal. Bus. & Prof. Code § 17917 (2023).)
Depending on your business activities, you could need to apply for business or professional licenses. California provides a comprehensive database of every license and permit a business might need. You can search for the required licenses and permits for your business activity on the California Governor's Office of Business and Economic Development (CalGold) website.
You can also type in your county or city name and business type to get information about licenses and permits that might apply to you. For instance, if you have a restaurant in Los Angeles County, you can find information on the following topics:
You might also need to comply with local regulations, building permits, and zoning laws. Check with your city and county governments for more information.
Sole proprietors who wish to have employees need to obtain an EIN. This is a nine-digit number issued by the IRS for tax reporting purposes. All businesses with employees are required to report wages to the IRS using their EIN. You can register for an EIN online with the IRS.
Sole proprietors without employees aren't required to have an EIN. Instead, you can use your Social Security number to report taxes. Nevertheless, you might want to obtain an EIN. Some banks require an EIN to open a bank account, and having an EIN can reduce the risk of identity theft.
In California, businesses that pay at least $100 to employees in a given quarter are also required to register for a California employer account number. You can register online with the California Employment Development Department (EDD) website.
You should consider taking the following additional steps once you've started your sole proprietorship:
To find out how to form a sole proprietorship in any other state, see our 50-state guide to establishing a sole proprietorship.
You might not need to submit paperwork to start a sole proprietorship in California. But your specific circumstances could require you to file forms at the state and local level and comply with various rules and regulations. As a business owner, it's important to understand what steps you need to take to legally start and operate your sole proprietorship.
If you have business experience and only need to meet a few requirements to establish your sole proprietorship, you can probably do the work yourself. But if you need specific guidance or run into a complicated issue when starting your business, you should talk to a small business lawyer. They can help you register your business name, file your taxes, and obtain licenses and permits.