Want to start a business in San Diego?
So, you are tired of making someone else money and have decided to start a business in San Diego. We understand. In order for the business to take off, you will need for the process to go smoothly.
In order for it to go smoothly, you should start on the right foot. Here are the steps you will need to follow to start a business in San Diego.
Tip: You can search for California LLC, Corporation, and Limited Partnership names by clicking here.
Unless your startup’s name clearly indicates its nature and includes the last name of the owner and each of its partners, the County of San Diego will insist that you register it as a fictitious business name. If you operate as “Johnson’s Lawn Service,” or “Murphy’s Bar and Grill,” this will not be necessary. If, however, you do business under a name like “Granny’s Attic” or “Forever Yours,” you will need to file for a fictitious business name because your last name and nature of business are not included.
The same is true in cases where some relevant names are omitted. Although “Jones and Associates” does identify the one owner, you’d have to register this one as fictitious. Furthermore, a corporation doing business under a name that differs in any respect from its entry in the company’s articles of incorporation must register the outlier in the same way. Before you register, it will pay to check California’s index of fictitious business names to ensure that your name of choice is not already taken. Although you can record a fictitious name online or by mail, San Diego strongly recommends that you do so in person.
The initial registration, which does not guarantee exclusive use of your chosen designation, will cost you $42.
Tip* After you register your fictitious business name with the county of San Diego, you are required to publish notice of the registration in a local newspaper. If you file in person, ask the clerk who files FBN application for an instruction sheet on publication. This will tell you everything you need to know about the publication process. Read More: How to Choose a Business Name
Whether you’re opening a brick-and-mortar or operating from your attached garage, you’ll need to declare a business address on your applications. Keep in mind that many of the applications require a physical address and will not accept a PO Box. Your startup’s physical location will dictate its licensing requirements, and it’s important to get this right from the start.
Changing it at any time down the road could set you up for later approval problems. If you are working from home, you can use your home address for your business. In addition, for tax and legal purposes, identifying a business address will let people know where to send you important documents. If you use an address that you do not have access to, you will likely miss these important documents.
When choosing an entity for your startup, you have several options. Some tasks can be done without the help of an attorney, such as filing for a local business license or filing a fictitious business name. We do, however, recommend that you use an attorney for setting up your entity. The main benefit of forming an entity is shielding your personal assets from the liabilities of your business. Thus, if your entity is not properly set up you will lose that protection. There are six major types of business entities that you should be aware of when looking to start a business in San Diego. These include:
For a business that’s owned only by you, a sole proprietorship saves the trouble and expense of establishing and running a separate entity. However, the downside is that all owners are personally liable for any claims that are brought against the business. Some types of businesses that operate as a sole proprietorship are bloggers, consultants, or people who have a job with very little potential for being sued.
A general partnership has two or more owners who share profits and losses. Similar to a sole proprietorship, each of the general partners has unlimited personal liability for claims against the business When setting up a general partnership, it is a wise decision to have each of the partners create an LLC or a Corporation to hold their partnership interest. This will limit the partner’s personal liability. Dentists, Physicians, Lawyers, and Accountants, are just a few of the professions where General Partnerships are common.
This is a setup under which the general partners bear unlimited liability for all obligations and debts while the limited or “silent” associates are liable for nothing more than what they have invested in the company. Dentists, Physicians, Lawyers, and Accountants, are just a few of the professions where General Partnerships are common.
Recently, the limited liability company has become one of the most popular forms of business ownership. LLC’s offer limited liability to their owners and have many benefits in how they choose to be taxed. The biggest benefit of setting up a San Diego LLC is its flexibility. LLC’s are allowed to determine the profits and losses of each owner or investor as a percentage of their ownership in the company. In addition, the owners can draft custom rules for running the LLC through their operating agreement. In California LLC’s are not available for “professionals” which include doctors, accountants, lawyers, and other similar service providers.
A California corporation is an entity that is set up to be distinct (separate) from its owners. Corporations are the least flexible for management but provide the most liability protection. When you have a corporation, you will be required to follow annual corporate formalities. If you neglect these corporate formalities, you run the risk of losing your corporate protection from creditors through a process called “piercing the corporate veil“. Corporations may elect to be taxed under Subchapter S, or Subchapter C. If the incorporator does not elect to be taxed as an S Corp the corporation will be taxed as a C-Corp by default.
In this type of corporation, the profits and losses flow through the shareholders while still affording protections to shareholders from being personally liable for the entity’s debts. Additionally, LLC’s may elect to be treated as an S Corporation in order to have the relaxed formalities of an LLC and the tax benefits of an S corporation.
By default, a San Diego corporation will be treated as a C-Corporation by the IRS. This means that the company will be taxed a corporate tax, then each shareholder will have to pay their own income tax. In effect causing double taxation. There are some benefits to operating as a C-Corp. One benefit being that if you plan on taking your company public or brining on large investors C-Corps usually attract more reliable investment.
Simply put, a San Diego professional corporation is a regular corporation that is owned and operated solely by professionals. California requires doctors, lawyers, dentists, CPA’s, psychologists, psychiatrists, and other professionals to form a professional corporation if they want to limit their liability.
While many states allow professionals to form a Professional LLC, California does not. This is just a brief overview of a complicated topic. Feel free to reach out to us for a free consultation on which entity type would suit your business best.
An EIN is required by any business entity that is separate from its owner (LLC, Corp, LP, Etc.). It is also required by sole proprietors who pay federal excise or payroll taxes. Sole proprietorship’s with no employees also benefit from setting up an EIN. Business owners who do not obtain an EIN must use their social security numbers instead. Doing so increases their risk for identity theft. Filing for an EIN number can be done through the IRS’s website and is processed immediately.
Before you start a business in San Diego, you’ll need to acquire a general business license or business tax certificate. You will apply for the certificate or license in the city your business is located. The application for this license must include the names and addresses of the business, its owners and any additional contacts. You will also have to state your company’s structure, number of employees, EIN number and expected annual sales.
Although it may come as a surprise, those who intend to start a business in one of San Diego’s unincorporated areas will not need a county license. For any of San Diego’s 18 incorporated cities, however, it’s a different matter, and you will have to learn the location’s specific rules and regulations as they pertain to business licensing.
For convenience we have included links to local business license applications in San Diego:
Remember to apply under your company’s name, not your own, and be sure to spell it out in its entirety. If you leave off even one comma, you’re sure to have some trouble down the road. Helpful tool: Database of business permits and licenses required based on the type of business you wish to engage in and your location.
Everyone agrees taxation is a complicated matter and subject to frequent changes. Interested parties can get current business tax information from the Internal Revenue Service. You can find state tax information through the California Tax Information Center and the Office of the City Treasurer. The state also offers a publication, “Striking Gold in California,” which provides small business owners.
The book provides basic information from each of California’s three taxation agencies and the Internal Revenue Service. Also, those who sell merchandise must register with California’s State Board of Equalization. If you pay wages amounting to more than $100 in any calendar quarter, then you must also register with California’s Employment Development Department within 15 days of having done so.
Many people who want to start a business in San Diego want to work from home. Thus, If you choose to run your company out of your home, you might want to investigate the purchase of business insurance to protect your personal assets.
Small Businesses that operate in this manner often benefit from tax deductions that include such things as telephone and Internet service, the cost of office supplies and a portion of your home’s mortgage and utility costs. Keep in mind, you will still need to follow the formalities listed above.
Many small business owners decide to bootstrap the funding of their small business. This means they use their own resources and run the business as cost-efficient as possible. This is an excellent method while you are working out the kinks of a new business. Once your small business is up and running, you can then look to financing your small business from outside sources.
If you’ve gotten this far without hitting any snags, congratulations are in order. It’s time to hoist the “Grand Opening” flags and welcome in the customers. You are now a business owner, and we wish you the best of luck in your endeavors. Now you can spread the word on how easy it was to start a business in San Diego!