Starting a Sole Proprietorship in California: A Practical Guide

Introduction on what is sole proprietorship and how to establish it in California.

Updated on
Apr 9, 2024
min read
Starting a Company
Jump to sections
Share this article

Imagine running a business without the need to debate every decision in endless meetings. That’s the beauty of a sole proprietorship. You’re the boss, the worker, and the coffee maker, all rolled into one.

How to Establish a California Sole Proprietorship

Becoming a sole proprietor in California is a straightforward process with no formal setup requirements or associated fees. To operate as a California sole proprietor, you simply need to begin your business activities. Nevertheless, while "setting up" is easy, there are additional steps that many sole proprietors find beneficial.

Step 1: Deciding if you need a DBA for your Sole Proprietorship

Most entrepreneurs prefer not to use their personal first and last names for their business, which a sole proprietorship uses by default.

And here’s where a DBA (Doing Business As) application steps in, like a superhero cape for your business, allowing you to operate under a name that might just be catchier than your own.

Deciding on a business name is like naming a baby — it’s fun but requires some thought. Opt for a name that resonates with your brand, but don’t get too attached before checking if it’s already taken. Swing by our DBA guide for the A to Z on getting your alias sorted.

Why Bother with a DBA? What's In a Name?

A DBA is your business’s stage name — it’s how you introduce your business to the world, even if the paperwork behind the scenes tells a different story. Plus, banking becomes a breeze when you and your business aren’t sharing a name. It’s like keeping your Spotify playlists separate; everyone stays happy.

To Tax, or Not to Tax?

As a sole proprietor, your business taxes are a waltz with your personal taxes. It is simple as they are managed together.

Think of it like filing your personal Form 1040 tax return each year, with a little extra twirl. You'll also need to submit a Schedule C, which outlines your business profits or losses. This dance may sound complicated, but believe me, it's simpler than busting out the Macarena at a wedding.

Step 2: Decide if your Sole Proprietorship needs an EIN

Perhaps you've been toying with the idea of getting an Employer Identification Number (EIN). It might seem like an extra pocket— useful, but not a necessity.

But consider this...

You know that uncomfortable feeling when you've to share your Social Security Number with say, vendors or clients? An EIN is like a well-tailored pocket square. It adds a layer of security and style to your business dealings. No more revealing your Social Security Number. It's also crucial if you're dreaming of expanding your solo dance to a group performance— hiring employees. So while acquiring an EIN may look like a fancy dance step, we often recommend applying for one.

Stellar can help you with all of these, DBA Application, EIN Applications and many more - Contact us today.

Step 3: Applying For A Sole Proprietorship Business License

Your business might not need a state-wide license, but depending on your hustle, local permits might give you the green light to operate. Think of it as needing a ticket to enter the concert. Check what kind of ticket you need, so you’re not left outside.

While California does not mandate general business licenses for sole proprietors, depending on your hustle local permits might be first need to give you the green light to operate. California has a wide range of permits and licenses tailored to specific industries.

Use the state's CalGold permit and license search to determine whether your business requires any permits or licenses to operate legally in California.

Are there any other registrations for a sole proprietorship?

Registering your sole proprietorship - It’s like RSVPing to your own party. California doesn’t need a formal nod from you to start a sole proprietorship, but if you’ve picked a DBA, it’s time to make it official. Head back to our DBA guide to ensure you’re not stepping on any toes with your chosen name and begin your first official application.

Prefer to skip the reading? Book a call with Stellar today!

Conclusion: You’ve Got This!

Starting a sole proprietorship in California is less like climbing Mount Everest and more like hiking your local hill. It’s manageable, rewarding, and yes, a bit of a workout. But with this guide, you’re ready to take the first step. And remember, the view at the top is worth it.

‍Disclaimer: The content on this page is for informational purposes only and does not constitute legal, tax, or accounting advice. Seek the counsel of a licensed professional for specific questions related to these topics.

Launch Your Business with Confidence

We're here for you every step of the journey. From company formation to compliance, we've got your back. Let’s get it right, from the start.

Frequently Asked Questions

Have other questions? Contact us now

No items found.
Try the Stellar Company Assistant Now
Click here
Stellar Company Assistant (AI)
Stellar helps business owner to manage corporate services such as incorporation, tax filing and more.