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Home Based Businesses in CA: What You Need to Know

Rokita Law

More than 50% of businesses in the United States are home-based businesses. While operating a business out of your home in California has many advantages, there are many considerations to keep in mind. As with any business venture, it is important to consult with an experienced business lawyer in Los Angeles who understands the complexities of business law in California. This blog post will discuss some of the key points you should consider before launching your own home-based business in California. With this information and guidance from a knowledgeable business attorney, you’ll be well on your way to success as an entrepreneur.

Confirm Whether Your Type of Business Is Permitted | Home Based Businesses

Some local municipalities have restrictions on what type of businesses may be operated from home and how much commercial activity you can conduct. Because of this, the best types of home-based businesses are smaller enterprises with a small number of employees and a limited number of customers needing to visit your home. A business lawyer is experienced in guiding clients on restrictions related to specific localities.

In the City of Los Angeles, the following regulations apply to home-based businesses:

  • Commercial activity associated with a home based business cannot be visible from outside, including no outside signs, windows, or displays.
  • The number of employees that do not live at the house cannot exceed one.
  • Only two deliveries and pickups can be made to the business per day.
  • Commercial vehicles cannot be parked or stored on site.
  • Mechanized equipment that wouldn’t normally be used in a residential neighborhood are not permitted.
  • Finally, only one client may visit the business per day between the hours of 8:00 A.M. and 8:00 P.M.

Decide the Structure of Your Business Entity | Home Based Businesses

Determine whether you would like to register your business as a corporation, limited liability company, or remain a sole proprietor.

Obtain an Ein

You must obtain an EIN from the IRS for your business. An EIN is similar to a social security number, but it is used for your business. If you are operating as a sole proprietor, you may use your social security number instead of obtaining an EIN, however, obtaining an EIN is free and allows you to disclose your business information without compromising your social security number.

Obtain an Address

Unless you prefer to use your home address as the public address for your business, it is best to obtain a separate address for your business. While some owners prefer the convenience of a P.O. Box, those looking for a more sophisticated impression may obtain a virtual address.

Obtain the Necessary Permits

Business Permit

Some cities and towns require a local permit, sometimes known as a “home-based business permit”. Such permits may be subject to a local tax.

Seller’s Permit

Determine whether you need a seller’s permit.

Service-Only Businesses-If your business only provides services, you do not require a seller’s permit. 

Sale of Goods-Unless exempt, all retail sales and tangible personal property are subject to a sales or use tax. Persons making three or more sales in a 12-month period are generally required to obtain a seller’s permit. You must register your business with the California Department of Tax and Fee Administration (CDTFA) for a seller’s permit and file and pay sales tax on your taxable sales. This also includes property or goods sold through the the phone, mail order, internet via a third party website, auction website, or your own website. You are responsible for collecting and paying the tax on your internet sales, unless the shopping platform the item is sold on is owned or operated by a marketplace facilitator, which is responsible for collecting and paying the tax on your internet sales.

6015 Retailers-Persons or entities that receive an order for merchandise from a consumer and then places the order with a supplier and requires the supplier to ship directly to the consumer would qualify as a Section 6015 retailer. The seller must be without a storefront and only sell from such suppliers. Examples of such retailers would be Mary Kay, Avon, Tupperware, etc. 

If you’re thinking about starting a home-based business in California, there are a few things you need to keep in mind. But don’t let that stop you – with the right planning and preparation, you can set yourself up for success. Our guide covers all the basics of getting your business off the ground here in California. And if you need any assistance along the way, a business lawyer at Rokita Law is always here to help. So what are you waiting for? Contact our office to get started on your new home-based business today!

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