Legal Requirements for Your Business in California

Before starting a business, the legal environment of your establishment should be researched.  There are many laws, rules, and regulations that must be followed to start and run your business.  Almost every aspect of your business is under some form of legal ruling.  Specific forms, licenses and other documentation must be filed with state and local government offices in order to begin.  Without this documentation, you may be prevented from opening.  It is important for you to take a close look at California's legal business requirements.


Aspects of Business under Legal Guidelines 

Major aspects of business governed by business law can be divided into the following areas: 
legal structure,
business name, 
trademarks and patents, 
licensing and permits, 
contracts and legal liability.


Legal Structure 

What legal structure will your business take?  This decision is of primary importance because laws governing many aspects of the business vary depending on its legal structure.  The four main categories are:  sole proprietorship, partnership, Limited Liability Company and corporation.  These four types of business entities are discussed under the section Business Entities


Business Name 

Even though a business name has no magic that will guarantee success, the name is nevertheless very important to a new business.  As a small business prospers and grows, the public will begin to recognize and associate the name with the product or service.

There is a body of law that specifically governs the business name.  For example, if a business contains anything other than the actual names of the owners, then it is classified as a "firm name" or a "fictitious name."   If the legal structure of the business is a corporation, then it must be incorporated and the business name must reflect this fact.

The Fictitious Business Name Statement must be filed within 30 days of the date you open your business.   The statement is valid for five years.  There is a fee for initial filing and a charge for renewal.  The chosen business name is valid in the county where you file, and must not be similar to any other business as to mislead the public.  It must not violate any federally protected names.  The fictitious name must also be printed in the newspaper for four consecutive weeks.  Your local newspaper may be willing to assist in this process.

To file your fictitious name or find out if the name you have chosen is still available, contact the County Recorder in your county


Trademarks and Patents

Trademarks and Patents A trademark is a symbol that identifies a specific product.  If your business sells services, then the trademark is the one that you use in advertising; it will enable the public to set you apart from your competition.  Both trademarks and service marks can be registered for your protection.   You can do this by going to

A patent grants a monopoly right to produce, use, sell, or gain profit from a specific invention.  Patents are extremely important in business.  There is a specific body of patent law that protects the rights of the registrant.
However, you should balance the need for a patent and the legal costs against the speed you need to get your product to the market, before someone else creates a similar product that would not encroach on your patent.

Sometimes people put thousand of dollars into the fees to get a patent, which is then promptly knocked off and all that the patent holder is left with is the right to sue the infringing party, who may be in China.

Always patent a great invention, but balance the real need to get a patent with the advantage of getting to market first with your product.


Licenses and Permits 

Several federal, state and local licenses and permits are required for starting a new business.  Before you even apply for a license, you must first find out the land use requirements, zoning requirements and detailed building code requirements for your type of business, and should do so before signing a rental, lease, or purchase agreement.  Requirements may vary for each incorporated city in the county, and the county itself.  For assistance call the appropriate number shown in the Resources chapter.

Permits required for new businesses are different depending on the type of business. The most common licenses and permits include: a business license, building permit, sales permit, State ID and sales tax schedule, and occupational license.


Business License

Business licenses are issued by individual cities within the county, or by the county in county areas.  These must be posted on the business premises for public inspection.  The fee varies depending on the type of business.  If you are going to locate your business in more than one city, a separate business license is required for each city and/or county.


Home Occupation Permit 

To set up a business in your home, you first need to make sure that the proposed use of the property is consistent with the zoning. To check the zoning, you first must know the Assessor's Parcel Number of the property.  If you are the property owner, this can be obtained from your property tax statement. If you are a renter or lessee, your landlord will have this number.  If this number is not readily available, contact (you will need the exact address of the property):

Once you have obtained the Assessor's Parcel Number, go to your local City or County Planning Department to 1) check the zoning and 2) to obtain information regarding allowable home occupations.


Sign Permit 

If you are planning to place a sign on the exterior of your business, you need a Sign Permit.  Regulations regarding the types of signs and placement depend on the zoning for the parcel and the type of business.  The Sign Permit application requires you (the business owner) or your sign contractor to submit drawings indicating the advertising message, location, dimensions, construction, electrical wiring and components and the method of attachment. The fee for the permit depends usually on the value of the sign.

Start your permit process with the planning people at the Planning Departments of the County or City in which you will be located.


Building Permit 

If you are planning to construct your place of business, or do any major remodeling, you must have a building permit.  Special permits may be required for parking, food preparation, fire safety, discharge of pollutants, etc.  If you are building within city limits, there are specific forms that must be filed.


Seller's Permit 

If you are planning to sell items that are subject to state sales tax, you must also apply for a seller's permit for each place of operation.  This "resale number" will eliminate the need to pay sales tax when you purchase items for resale in your business. 

A personal Statement of Financial Condition and estimations of monthly sales and expenses may be required with new applications.  There is no fee required for a sales permit; however, under certain conditions a security deposit may be required. When estimating your anticipated sales rather be extremely conservative in your projections than wildly optimistic. Your estimated sales will depend on the amount of the deposit that you will have to provide to State Board of Equalization.


Occupational Licenses 

There are many occupations that require licensing in California. For information on this subject, contact:

Department of Consumer Affairs

Sacramento CA
(800) 952-5210


Contracts & Legal Liability 

A contract creates legal rights and duties between people.  Business contracts can be divided into three groups:  commercial contracts, employment contracts, and real estate transactions.

  • Commercial Contracts: The laws of commercial contracts originate from many sources, but the most important law concerning commercial contracts is the Uniform Commercial Code.  It is a comprehensive commercial law adopted by every state, covering the sale and purchase of goods.  It does not apply to services.
  • Employment Contracts: Employment contracts are governed by labor laws.  An entire chapter of the legal profession specializes in this very complex and constantly changing arena.


Product Liability 

Product Liability is a business' responsibility to ensure that the product it sells is safe for the public to use.  It also covers warranties a business offers for its products.  You must make sure that you understand your responsibility, as a business owner, to the legal environment.  This is a constantly changing area of U.S. law.  You must become aware of its implications to your business before you start.  For information concerning the legal liability of your business, you should contact your attorney.

  • Legal Liability:  Legal liabilities are the obligations a business owes to the government, such as abiding by the business law, the contract law, the tax law, the permit and licensing requirements.  Legal liability also includes the protection against deceptive trade practices listed under the Uniform Deceptive Trade Practices Act.
  • Employment Liability:Employment liability is tied closely to employment contracts and labor laws.  There is an entire body of law which regulates the number of hours worked,  minimum wage, health benefits, discrimination, undocumented alien workers, termination of employment, retirement benefits, vacation, insurance, union contracts, etc.


Injury and Illness Prevention Program 

California's worker safety law requires businesses with 10 or more employees to have a written comprehensive safety program that identifies work place hazards.  Employers also must have a safety training program, a way for workers to identify hazards with no fear of reprisal and a person responsible to implement the plan.  Employers with fewer than 10 workers must comply with the law, but do not need all of the regulations in writing.  Penalties for violators range from fines, to closing down operations, to jail time.


Americans with Disabilities Act (ADA)  

This comprehensive legislation provides civil rights protection in employment, transportation, public accommodations, and more to individuals with disabilities.  Employers must comply with several provisions under this law.  For ADA technical assistance, information, referral, training, and consultation on complying with the Act, contact:


The Pacific Disability and Business Technical Assistance Center 


The Equal Employment Opportunities Commission

(800) 669-3362