*The following information was taken from East Bay SCORE’s manual, “How to Start and Manage Your Small Business”. All references lead to the full copy of the guide which is free to download.
Regulation Requirements at the Local, State, and Federal Levels
There are numerous federal, state and local regulations that affect every business. Up front and before you do anything else, take time to research the applicable regulations and build your business so that it will be in compliance from Day One. Below is a checklist of the most common requirements that affect small business, but it is by no means all-inclusive. Bear in mind that regulations vary by industry. If you are in the food business, you will have to deal with the health department. If you use chemical solvents, you will have environmental compliances to meet, and so on. Being out of compliance in any aspect of your business:
One of the first decisions you have to make is the legal structure of your business. The choice is influenced by the type of your business, tax considerations, state regulations, sharing of ownership, and your need to limit your liability as a business owner. For more information please refer to Chapter 5 – Legal Aspects.
Here is a list of the most common legal structures of business organizations:
To operate a business you will require various types of licenses and permits from the City/Town and/or the County the business is going to be located in, as well as State, Federal and Professional licenses.
You can also contact your City’s Finance or Planning Department, or, if you are locating in an unincorporated area, your county’s Treasurer or Business License office. Most communities have their application forms and license fees available from their websites.
Fictitious Business Name
If you plan to conduct your business under a fictitious name, you must file a DBA (doing
business as) or Fictitious Name Statement with the County Clerk/Recorder in the county in which your business is going to be located. A fictitious name is any business name that does not contain your full legal name. Some counties require filing a DBA even if you are using your legal name. The purpose of this filing is to avoid confusion with other business names and to let the public know who is behind a business. The County will require that the proposed name be published in four consecutive issues of a newspaper in the county where your business will be located. During this time anyone can challenge your right to do business under that name. There is a publication fee collected by the county at time of filing. If no objections are raised you will be notified and can use your DBA.
Building Codes, Permits & Zoning
When choosing a site for your business, it is essential to check out the zoning regulations for that location. For example, you may not be allowed to conduct certain types of businesses out of your home or engage in certain industrial activities in a retail district. Contact the planning department in the town/city in which the business is going to be located.
Workers Compensation & Disability Insurance
You are required to carry Worker’s Compensation insurance if you have employees. If an
employee is injured on the job, this insurance will cover his or her medical bills and any
potential disability compensation, for which you would otherwise be liable. You can obtain a policy from many private insurance companies as well as the California Department of Industrial Relations – Division of Worker’s Compensation. For more information, refer to Chapter 8 – Risk Management.
Federal Taxes – For more information, refer to Chapter 11 – Business Taxes.
To report the income from your business you must file once a year with the Internal
Revenue Service an Income Tax Return. If your annual tax is estimated to be $1000 and up you also have to make estimated tax payments every quarter.
Self-employment tax (SE) is the Social Security and Medicare tax for individuals who
work for themselves.
If you have employees, you must obtain a federal Employer (Taxpayer) Identification Number (EIN), from the IRS.
Federal law requires you, as an employer, to withhold, report, and pay over to the
federal government certain deductions from your employees’ wages.
You must also report, and pay as an employer, a matching contribution to Social
Security and Medicare Tax (FICA).
This tax is used to administer your state’s unemployment programs.
State Taxes – For more information, refer to Chapter 11 – Business Taxes
If your business is based in a state which has an income tax you must report the income from your business on the state income tax return to the appropriate state offices and pay the applicable tax.
In most states, if you have employees, you have to register with the Employment
Development Department (EDD).
You must withhold, report and pay applicable employment taxes to the EDD, e.g.
You must also report and pay other employment taxes, where applicable, to the EDD, e.g.
If your business is based in a state which has a sales tax you need to get a sellers permit from the appropriate State Board and collect the sales tax due on all taxable items. You must report to the state the amount of taxes due on the sales recorded (regardless of whether you collected them or not) and submit payments. The seller’s permit allows you to purchase inventory for resale from suppliers without paying sales tax.
U.S. Citizenship and Immigration Services (USCIS)
The Federal Immigration Reform and Control Act of 1986 requires that all employers determine the employment eligibility of new employees (citizens and non-citizens). The law obligates an employer to process Employment Eligibility Verification Form I-9. The employer must keep the completed forms for three years after the date of hire or one year after the employee is terminated, whichever is later, and have it available for inspection. For details visit uscis.gov.
The Americans with Disabilities Act (ADA) is a Federal civil rights law that prohibits
discrimination against people with disabilities. Your business must comply with the ADA
requirements. Contact the U.S. Department of Justice for ADA information –
Safety & Health Regulations
All Businesses are required to comply with state and federal regulations regarding the
protection of employees. The Occupational Safety and Health Administration (OSHA) outlines specific health and safety standards adopted by the U.S. Department of Labor. Contact OSHA for specifics – osha.gov.
Hazardous Substance Compliance
If your business uses hazardous substances, you must determine the local regulations and make certain that you comply to avoid heavy fines.
Many stores require bar coding on the packaged goods they sell. The Uniform Code Council Inc. (not a government agency) assigns a manufacturer’s ID code for the purposes of bar coding. For additional information contact the Uniform Code Council Inc. – uc-council.org.
Use this schedule to record all the licenses, permits and all regulatory requirements for your business for the location you are planning to start in and your cost for the plan years.
Do not include taxes covered in chapter 11.
|Organization||Type of Cost||Amounts due in|
|Pre-startup||Year 1||Year 2||Year 3|
Fictitious Business Name Filing
Most state laws require that every person, partnership, corporation, or other association, who regularly transacts business in the State for profit under a fictitious business name, shall file a statement with the County Clerk. Corporate entities are required to file if the name they use is different from the one registered with the State.
Before settling on the name for your business check with your county clerk and your secretary of state to make sure it is not already in use by another entity.
This was extracted from East Bay SCORE’s "How to Start and Manage Your Small Business." The full reference manual can be downloaded by clicking here.
*This blog is intended to provide information to support startups and existing small businesses. A sincere effort is made to ensure accuracy, but no warranty, express or implied, is provided in that regard and East Bay SCORE and the author will not be liable for any errors or omissions in this blog.