Thursday, May 23, 2013

Starting a Home-Based Business in Glendale, CA

Since I spend most of my time here in Glendale, I finally decided to get the ball rolling on setting up my sole-proprietorship, independent contractor, whathaveyou with the City of Glendale.  

Initially, I set up a sole proprietorship.  Because California's system for LLC's is a bit more difficult (and expensive) than some other states (namely, Colorado), I decided to cross that bridge another day.  Even though I wasn't forming an LLC, there were some specific requirements for registering a business in California (and specifically, Glendale), that I thought might be beneficial to cover.

The most surprising thing I came across was a City of Glendale law requiring all home-based businesses to obtain a "Home Occupation Permit."  Basically, anybody that performs a business activity from home is required to obtain this permit, even if it's just freelance work.  Now, I don't know how frequently they seek out offenders, or if they would be able to obtain state and federal tax information in order to find the offenders, but, in any case, that's the letter of the law.  And because I am overly cautious about following the letter of the law, I made sure I was in compliance.  Here is a quick run-down of the process for creating a legal sole proprietorship, home-based business in Glendale:

1. If you do not have your surname in your business name, you must register your "Fictitious Business Name" with the County in which you reside (this is a California State law).  This is also frequently known as filing a DBA, or 'Doing Business As.'  It is used to inform the public about who is running the business and what the business is called.  Along with this submission is a requirement that your filing be listed in a local newspaper.  If you plan to use your surname in your business name, ie, 'Fitzgerald's Auto Repair,' this county filing is not required.  Full details for Los Angeles County can be found here:

2. Once your name has been settled, you can file the "Home Occupation Permit" with the City of Glendale.  This permit application requires a signature from your residence's building owner (if you do not own your building).  The form can be found on the city's website, and should be taken to the permit office for submission.  No appointment is necessary to submit your application for the permit, just head in there during their general walk in hours and they'll help you out.  So long as your business isn't a type of regulated business, this is probably the only permit you need to file with the city.  More info about the permit, and a .pdf of the permit can be found here:

I received my Home Occupation Permit about 3 weeks after submitting the application.

Sole proprietorships do not require a filing with the California Secretary of State and the business is not seen as separate from the business owner from a tax standpoint, thus no initial filing is required with the IRS or the state tax board.  Because, of this, sole proprietorships are relatively easy to form, especially when it is a home-based business that isn't subject to other regulations.  The downside, of course, is that you haven't defined yourself as separate from the business, whereas you would be separate if you were an LLC.  With a sole proprietorship, since you and the business are one and the same, you are liable should you business get into legal or financial trouble.  This is why it is advised that sole proprietors also secure some sort of business insurance to protect the owner from being personal liable for business liabilities.

While researching and submitting these filings can be a pain in the neck, it feels good to know you have clearance to operate your business.  For me personally, despair set in as I started to research.  But once I knew what I needed to do, it was actually a pretty efficient process.  Obviously this info is pretty specific to my case and location, but I think it can also be instructive to new business owners generally. The lesson comes down to this: you should check with your local, county, state and federal agencies for registration and permitting requirements.  You may be violating a law without knowing it, and the only way to know, is to seek out the info.  To that end, I'll list some helpful links below.  Hopefully this will help you find the info you need, and faster than I did!

What has your experience been?  Did I miss a helpful site?  Let me know in the comments section!

Links: - General Info for U.S. Small Businesses and Self Employed Professionals - Tax Info for Small Businesses from the IRS - NOLO's small business resources.  The website has some good resources, but the articles will frequently refrain from spelling it all out for you in order to sell their publications.  I actually bought their "Small Business Start-Up Kit for California."  It mostly just confirms the information I had found on my own, but getting that extra confirmation was worth it for me. - CalGOLD Permit Assistance - The single most helpful site for determining California business permit needs - will return city, county, and state requirements for your business type. - California Governor's Office of Business/Economic Development (Has some good information). - California Franchise Tax Board FAQ for businesses - California Secretary of State's guide to starting a business (refers you to the above websites, but also offers some more info about different business entity types). - Info for Starting a Business in Glendale (Not very helpful. Also, the listed fictitious business name requirement is misleading if you are using your surname in your business name)

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