Orange County Small Business Legal Advice: How to Become a Sole Proprietor

SmallBusiness-California_Business_lawyerDo you want to start a business, but have questions about what to do first? Discover how to get a sole proprietorship up and running in Orange County, California. Learn what steps to take (and in what order you should take them) to get your business started the right way.

I recently met with a client named Susan who wanted to know how to set up a small business in Orange County. Susan is a marketing consultant. Her passion for small business led her to develop a website to offer subscription-based training for small business owners. Her affordable, step-by-step instructional videos would help them achieve success through their online marketing efforts.

Driven by her idea to help local business owners, Susan decided to start up a small business as a sole proprietorship, also known as a DBA (Doing Business As). But she wasn’t sure how to do it. She finally sought legal advice after receiving a notice from the city stating that she needed to get a business license.

Susan asked how she should proceed. Specifically, she wanted to know about getting a fictitious business name and a business license. She also wanted to know if there were other related legal requirements she wasn’t aware of. She needed to learn what to do (and in what order) to get her business started the right way.

Starting a DBA (Doing Business As) in Orange County

If you’ve been dreaming about starting your own small business but don’t know how to get started, you’re not alone. You probably have the same questions that clients like Susan have. There are regulations at the city, county, and state level. So it can be confusing if you haven’t set up a DBA before. Like Susan, you may need to know what steps to take first. Or you may wonder what legal documents to file and when.

Below you’ll find guidelines on how to start a DBA in Orange County. For information specific to your entrepreneurial venture, you should consult a qualified business attorney.

1. File a Fictitious Business Name Statement

RecordersOfficeOrangeCountyCAUnless your business name includes your surname, you must file a fictitious business name statement. File it with the recorder’s office of the county seat in which you will do business. In Orange County, it should be filed within forty (40) days from the start of your business. Once the document is stamped, you can publish it in a newspaper of general circulation (see below).

Note: Some counties in California have new requirements (as of January 1, 2014) that require submission of an affidavit of identity along with your fictitious business name statement. Orange County does not require this document, but Los Angeles County does.

What should your name be?

It should be whatever name you ask your customers or clients to write checks to when they pay you.

Publishing Your Fictitious Business Name Statement

You must publish the statement in a newspaper of general circulation within thirty (30) days after filing the fictitious business name. The Orange County Recorder’s office provides a list of qualified publications on their website. The newspaper you choose will provide you with proof of your published fictitious business name.

What is a Fictitious Business Name?

A fictitious business name is a name that doesn’t include the business owner’s surname. It may also be a name that suggests multiple owners of a business. It’s important to check that the name you want isn’t already being used. The Orange County Recorder’s website offers a free online tool to search available names. It’s also important to note a fictitious business name is a public record.

The Purpose of a Fictitious Business Name Statement

Fictitious business names protect your business name from being used by other businesses in the same county. If you want to protect your business name from use elsewhere, you must have it trademarked. If you’re not sure how to do that, contact a business lawyer in Orange County for help.

IRS-Apply-for-Federal-Tax-ID2. Get a Federal Tax ID Number from the IRS

A Federal Tax ID Number, also called an Employer Identification Number (EIN), is not a requirement. But you should get one. Otherwise you must use your Social Security number for documents or public records related to your business. Because of identity theft and privacy issues, that is not a good practice.

How to Get an EIN

You can apply for your EIN online, by fax, by mail, or by phone. See the IRS website for more information. Simply search for “apply for EIN” on their website.

3. Get a Banking Account From a Bank That Specializes in Business

Open an account for your business at a bank that specializes in business. They could prove to be a key member of your team. To open an account, you’ll need proof of your fictitious business name and your Federal Tax ID Number from the IRS.

4. Apply For City Business License

Business-License-Division_1699-(700x638)You must obtain a business license in the city where your business is located. You can expect to pay between $200 – $500 for a business license. You need to renew it annually in most cases. Some cities charge a percentage of gross receipts. Some cities may charge additional fees for a home-based business.

The instructions above are enough to get a DBA started. But in some cases it may be advisable to incorporate your business. A California business attorney can work with you to help you decide which option is right for your business. Generally, you should incorporate when:

  • Your business earns over $50,000 a year – Why? There are tax benefits to incorporating once your business reaches this level of income.
  • You might face liability issues – Incorporating offers protection of your personal assets in the event of a lawsuit.
  • You want to improve perception of your business with the public –You want customers and clients to see your business as serious and substantial. Incorporating it can make your business look more professional to current and potential clients and customers.

Following the four steps outlined above can help you if you’re planning to start a sole proprietorship (DBA) in Orange County, California. What are the four steps again?

  1. File a fictitious business name statement.
  2. Obtain a Federal Tax ID number, also called an Employer ID Number (EIN), from the IRS.
  3. Open a business bank account from a bank specializing in business.
  4. Obtain a business license from the city in which you operate your business.

If you’re still not sure what’s required to start your small business or you have other questions, contact an expert California business attorney to get the advice you need today.