1. Choose a business name for your sole proprietorship and check for availability.
- Please see our section on choosing and checking the availability of a name for your small business, as well as our section on the trademark law aspects of choosing a name.
2. Register the business name with local, state, and/or federal authorities.
- If you will be operating your sole proprietorship under a name that is different from your own name, then you will need file a Fictitious Business Name Statement in the county in which your primary place of business is located.
- Although you are not required to do so, you should consider registering your business name as a federal and/or state trademark. Please see the Trademark for Business Naming section for details.
3. Obtain any required local licenses.
- Please see the general section for details.
4. Determine what tax and other regulatory obligations your sole proprietorship has, and take care of any necessary registrations.
- If you have an employee or employees, you need to apply for an Employment Identification Number from the IRS. You can apply for an EIN online. You may apply for an EIN even if you have no employees. Doing so may make it easier to open a bank account and reduce your risk of identity theft. There is no filing fee.
- If you will be paying at least $100 to employees in a quarter, you are subject to California employment taxes and must register for a California employer account number within 15 days of paying that $100. You can register for employment taxes and get an account number online using the Employment Development Department's website. You must pay these taxes quarterly. For more information on being an employer, including tax information, see the California Employer's Guide.
- Whenever you hire an employee in California, you must inform both the IRS and the State of California. The IRS details all of the necessary steps, including verifying work eligibility and withholding allowances certificates, on its page entitled Hiring Employees. You can find information for the state level in the California Employer's Guide and on the website for California's New Hire Reporting Program.
- If you have any employees in California, you must carry workers' compensation insurance. The Division of Workers' Compensation administers this program.
- There may be other informational returns that you will have to file annually or semi-annually with either the IRS or the state. For more information, check out the IRS Guide To Information Returns and California Franchise Tax Board's Information Returns page.
5. Open a bank account for your business.
- It is a good idea to keep your business's finances separate from your personal accounts. A good way to do this early on is by opening a bank account for your business. The bank will probably require your Social Security Number or EIN and a copy of your business name filing or local business license, although you may not need any supporting documents if the sole proprietorship's name includes your surname. (Here is an example of what banks may require.)