Want to start a business in San Diego?
If you want to start a business in San Diego, there are several things you’ll need to know.
You want the process to go as smoothly as possible, but you also want to do it by the book. Here are the steps you’ll need to follow.
Figure Out a Name for Your Business
This could be the most significant thing you can do to get your startup off on the right foot. A business name that’s worth its salt will be catchy, descriptive and attractive to the public at large. It will also give people a clue as to the quality of service or product you provide. However, the name you choose must also make sense from a legal standpoint. Before jumping in, you must be sure to:
- Select a name that’s not only marketable but also unique and memorable.
- Conduct an exhaustive trademark search to avoid infringement of another company’s rights.
- Avoid including any terms that might flag your business as a credit risk.
- Verify that your business name complies with any local, state or federal rules based on the type of business you will be conducting.
Fictitious Business Name
In addition, unless your startup’s moniker clearly indicates its nature and includes the surname 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,” it’s a different story.
The same is true in cases where some relevant names are omitted. Although “Jones and Associates” does identify the owner, you’d have to register this one as fictitious. Furthermore, a corporation doing business under an appellation 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.
Decide on a Business Address
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.
Form Your Business Entity
When choosing an entity for your startup, you will have several from which to choose. These include:
For a business that’s owned only by you and perhaps your spouse, this arrangement not only affords tax advantages but also saves the trouble and expense of establishing and running it as a separate entity. One downside to operating your business as a Sole Proprietorship is that owners are personally liable for the any claims against the business.
A general partnership has two or more owners who share profits and losses and each owner has unlimited liability.
Limited partnership or LP.
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.
This setup provides for flexibility in determining the profits or losses of each owner or investor as a percentage of their ownership in the company through its operating agreement. In an LLC the owners or investors have limited liability. In California LLC’s are not available for doctors, accountants, lawyers and other similar service providers.
A corporation is a California 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. 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.
Eligible corporations or LLC’s may elect to be treated as an S-Corp, which allows each of a business’s owners to enjoy the flow-through of profits and losses and allows them to avoid double taxation.
An eligible company that expects to provide health benefits to its employees or to carry considerable amounts of revenue from one year to another can benefit from this choice.
This entity is structured, and run, similar to a regular corporation, however, California requires doctors, lawyers, dentists, CPA’s, psychologists, psychiatrists, and other professional to form a professional corporation.
This is just a brief overview of a complicated topic. A business attorney can elaborate on which entity type would suit your business best.
Obtain an Employer Identification Number (EIN)
The EIN is normally used by any business entity that is separate from its owner, and the sole proprietor who pays federal excise or payroll taxes must also have one by law. However, despite the implications of its name, sole proprietorships with no employees can also obtain an EIN, and it is often to their benefit to do so. Business owners who do not must use their social security numbers instead, and this tactic sets them up too well for identity theft. Filing for an EIN number can be done through the IRS’s website and is processed immediately.
Get Your Business License before you start a business in San Diego
Before you start a business in California, you’ll need to acquire a general business license or business tax certificate from the city in which you intend to locate it. 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 portions 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. Incorporated cities in San Diego include:
- Chula Vista
- Del Mar
- El Cajon
- Imperial Beach
- La Mesa
- Lemon Grove
- National City
- San Diego
- San Marcos
- Solana Beach
Every San Diego entrepreneur who needs a business tax certificate or license must apply for it within 15 days from the business’ start-up date. There is a $52 fee for the business license. This can be paid to the Business Tax Division of the Office of the City Treasurer. 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.
State of California Taxation
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, 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. In general, 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.
Starting a Home-Based Business
Many people who want to start a business in San Diego want to work from home. 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. Ventures 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.
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!