Starting a Business in California: Licenses, Permits & Requirements (2026)

Last updated: October 5, 2026

Starting a California business means coordinating state filings, local permits and tax accounts. Use this checklist to decide which registrations apply, understand the recurring costs and choose any optional services before opening.

California Business Requirements at a Glance

Budget beyond the initial filing fee. An LLC can be useful, but its California tax and reporting obligations deserve a place in your startup budget. City permits, professional licenses and employer registrations remain separate steps.

Affiliate links may earn us a commission. Paid providers are optional; official filing routes are included.

Setup step	When it applies & what to budget	Your next step
Choose your business structureChoose first	An LLC is optional and can help separate business liabilities from personal assets. California charges $70 for Articles of Organization and $20 for the initial Statement of Information. An LLC generally also owes an $800 annual state tax; the broad first-year exemption ended after 2023. Provider charges are additional.	Understand California LLC costs and filing, or use the official state filing route. If an LLC fits your business, ZenBusiness can help prepare and submit the formation filing. Starter begins at $0 plus state filing fees. Review optional services and renewal terms before ordering; licenses and ongoing business obligations are separate. Form an LLC with ZenBusinessAffiliate · Optional provider
Check licenses & your locationDepends on your work	Check city or county business-license or business-tax-certificate rules, zoning and home-occupation limits. Food, childcare, construction and licensed professions have additional approvals. Filing an LLC does not authorize these activities.	Find your California industry guide. Use California’s permit assistance to identify agencies for your location and activity.
Register a trading nameIf using an assumed name	If you operate under a fictitious business name, check filing and publication requirements with the county clerk. A Secretary of State entity-name search or reservation does not replace the county’s fictitious-name process.	Check the name-registration route for your structure.
Get your federal tax IDIf an EIN is needed	An employer identification number (EIN) identifies your business for federal tax purposes. Whether you need one depends on your structure and activities. It is free from the IRS. If forming an LLC or corporation, form it before applying.	Check eligibility and get an EIN free. You do not need to buy an EIN service.
Register for sales taxIf making taxable sales	Selling or leasing taxable tangible goods generally requires a California seller’s permit. The permit itself is free. Check CDTFA rules for your products, services and locations, and keep income-tax obligations separate from sales-tax collection.	Check tax registration and filing requirements.
Arrange business insuranceRequired coverage varies	California generally requires workers’ compensation even with one employee; certain contractor-license rules can apply without employees. Separately assess liability, tools, property and vehicle coverage for your work and customer contracts. Forming an LLC does not replace insurance.	Check California workers’ compensation rules. Optional quote service: Simply Business can help you explore business insurance. Coverage and availability depend on your trade and underwriting. Get business insurance quotesAffiliate · Optional provider
Separate money & keep recordsPractical setup	Choose how you will separate business receipts and expenses, reconcile transactions and save tax records. Compare account fees, cash-deposit access and bookkeeping needs. Account-opening documents depend on the provider and business structure.	Prepare your formation or trading-name documents and tax ID, then compare business accounts. Set up a recordkeeping routine before your first payment.
Put customer agreements in writingDepends on your service	Agree on the work, price, payment dates, exclusions and cancellation terms before starting. A general service-agreement template may help with routine work; regulated or complex jobs can need specific contract terms or legal review.	Optional document service: use LawDepot to customize a service agreement, then check that it fits your work. Create a service agreementAffiliate · Optional provider
Set up invoices & paymentsChoose your payment method	Decide how customers will pay and when invoices are due. Compare transaction fees, hardware costs and payout timing. Buying a particular payment service is not a state requirement.	Optional payment service: explore Square for accepting customer payments and compare its fees with your expected sales. Explore Square paymentsAffiliate · Optional provider
Plan startup costs & cash reservesBorrowing is optional	Add filing costs, equipment, insurance and operating expenses before deciding whether to borrow. Financing options depend on revenue, time in business, credit and lender criteria. A new, pre-revenue business may not qualify.	Compare California business loans and local funding programs, including application routes and startup requirements. Optional comparison service: SuperMoney Business Financing lets you explore funding options, subject to eligibility. Compare total repayment cost and payment frequency. Compare business financingAffiliate · Optional provider
Prepare for employeesIf hiring	For an ordinary business, register with EDD within 15 days after paying more than $100 in wages in a calendar quarter. Household employment has a different threshold. Arrange payroll withholding, new-hire reporting, workers’ compensation and required workplace notices before growing the team.	Check EDD employer registration Review payroll-tax responsibilities
Calendar reports & renewalsFor your entity and licenses	For an LLC, file the $20 Statement of Information within 90 days, then every two years. Calendar the separate $800 annual tax and any additional LLC fee for California total income of $250,000 or more. Keep local permits and professional licenses current too.	Check the official reporting and renewal guidance. Paid filing help is optional and may cost extra.

Need the detailed instructions? Continue below for state filings, employer obligations and links to the licensing agencies.

How to Start a Business in California (Step by Step)

Step 1: Choose Your Structure and Register It

An LLC is one option, not a requirement for every business. Compare ownership, liability and ongoing obligations before choosing. If an LLC fits your plans, the filing instructions below apply; our California LLC guide explains the costs and options.

File Articles of Organization (Form LLC-1) online through the California Secretary of State’s bizfile Online portal. Paper LLC filings are no longer accepted. Filing fee: $70. Online filings are typically processed within 2-3 business days.

Your LLC name must include “LLC,” “L.L.C.,” or “Limited Liability Company” and must be distinguishable from existing entity names in the Secretary of State database. Run a name search through bizfile Online before filing.

Agent for Service of Process: Your LLC must designate a California resident with a physical street address (no P.O. boxes) or a registered corporate agent. You can serve as your own agent if you have a California street address.

Initial Statement of Information (Form LLC-12): Within 90 calendar days (not business days) of filing your Articles, you must file a Statement of Information with the Secretary of State for $20. After the initial filing, it is due every two years during the anniversary month of formation. Missing the deadline triggers a $250 penalty from the FTB and suspension of the LLC.

Fictitious Business Name (DBA): If you operate under a name different from your LLC’s legal name, file a Fictitious Business Name Statement with the county clerk where your principal place of business sits, then publish the statement in a local newspaper of general circulation within 30 days. County filing fees run $10-$100; publication adds $30-$200 depending on the paper. Renewal every five years.

Get your free federal EIN immediately at IRS.gov — you need it before opening a business bank account, registering with the EDD, or hiring employees.

Step 2: Plan for the $800 Minimum Franchise Tax (Plus the LLC Fee)

Every California LLC owes an $800 minimum annual franchise tax to the Franchise Tax Board — including year one.

• AB 85 first-year exemption has expired. The exemption applied only to LLCs organized between January 1, 2021 and December 31, 2023. Any LLC formed on or after January 1, 2024 owes the full $800 in its first year.
• First-year due date: The 15th day of the 4th month after formation. (An LLC formed June 1, 2026 pays by September 15, 2026.)
• Going forward: April 15 each year for calendar-year LLCs.
• Penalty for late or missed payment: Suspension of LLC rights, plus late-payment interest and penalties.

The LLC Fee — in addition to the $800 — kicks in once California-source income crosses $250,000:

• $0 for California income under $250,000
• $900 for California income $250,000-$499,999
• $2,500 for California income $500,000-$999,999
• $6,000 for California income $1,000,000-$4,999,999
• $11,790 for California income $5,000,000+

This two-layer structure — $800 guaranteed + gross-receipts fee on top — is unusual. Most states charge a flat annual report fee of $10-$100 regardless of revenue. A California LLC with $500,000 in state revenue owes $800 + $2,500 = $3,300 per year in FTB obligations before income tax.

California State Income Tax

California has a progressive personal income tax ranging from 1% to 12.3% across nine brackets, plus a 1% Mental Health Services Tax (Behavioral Health Services Tax) on taxable income over $1 million that brings the top effective rate to 13.3%. LLC members, S-corp shareholders, and partners report their share of pass-through income on their California personal returns at these rates. C-corporations are taxed at a flat 8.84% (or 10.84% for financial institutions) at the entity level.

Step 3: Register for Sales Tax (CDTFA) and Payroll Tax (EDD)

California Sales and Use Tax (CDTFA)

If your business sells taxable goods — or delivers taxable goods into California from out of state over certain thresholds — you must get a Seller’s Permit from the California Department of Tax and Fee Administration (CDTFA) before your first sale. Registration is free at cdtfa.ca.gov; most applicants get their permit immediately.

• Base statewide rate: 7.25% (6% state + 1.25% mandatory local).
• District taxes: 0.10% to 2.00% per district, with many locations stacking more than one.
• Combined rates: up to 10.25% in the highest-tax jurisdictions (parts of Alameda, Los Angeles, and other counties).
• Services are generally not taxable in California — but fabricated tangible personal property, labor tied to producing tangible goods, and certain installation work are taxable. Cleaning, HVAC repair labor, and landscaping design fees have nuanced treatment — check CDTFA publications for your industry.

California is a destination-sourcing state for most sales, meaning the rate charged depends on where the buyer takes delivery. If you sell across multiple districts, you collect the applicable rate at each delivery location.

EDD Payroll Taxes (UI + ETT + SDI)

Once you pay more than $100 in wages in any calendar quarter, you must register with the Employment Development Department (EDD) within 15 days. Californians pay four layered state payroll taxes:

Tax	2026 Rate	Wage Base	Who Pays
Unemployment Insurance (UI)	3.4% new employer (Schedule F+ in 2026; experienced range 1.5%-6.2%)	First $7,000 per employee	Employer
Employment Training Tax (ETT)	0.1%	First $7,000 per employee	Employer
State Disability Insurance (SDI)	1.3%	No wage cap (removed 2024)	Employee (withheld)
Personal Income Tax (PIT)	Variable; withheld per Form DE 4	All wages	Employee (withheld)

Why the SDI cap removal matters: Before 2024, SDI only applied to the first ~$153K of wages. Since January 1, 2024, every dollar of California wages is subject to the 1.3% SDI withholding, which funds both State Disability Insurance and Paid Family Leave. For an employee earning $300,000, the 2026 SDI withholding is $3,900 — compared with roughly $1,990 under the old cap. California is one of only a handful of states funding a state disability/paid-family-leave program; factor this into total compensation discussions with high-earning hires.

New hire reporting: Report every new or rehired employee to the EDD New Employee Registry within 20 days of their start date.

Step 4: Workers’ Comp from Day One, CalSavers for Every Employer

Workers’ Compensation — No Threshold

California requires workers’ compensation insurance for any employer with one or more employees. There is no headcount threshold, no small-employer exception, and no carve-out for part-time workers or family members on payroll.

Situation	California Requirement
1+ full-time or part-time employees	Workers’ comp required
Family members on payroll	Workers’ comp required
Domestic workers (nannies, housekeepers) working 52+ hours or earning $100+ in quarter	Workers’ comp required
Sole proprietor with no employees	Optional (may elect coverage)
LLC members / corporate officers	May elect out via written waiver
True independent contractors (passes ABC test)	Not covered — but misclassification is heavily audited

Where to buy: Any licensed commercial carrier or the State Compensation Insurance Fund (State Fund), California’s non-profit market of last resort.

Penalties for operating uninsured are among the steepest in the country:

• Criminal misdemeanor under Labor Code 3700.5 — fine of at least $10,000, up to one year in county jail, or both.
• Civil penalty — up to $100,000 from the Director of Industrial Relations.
• Stop-Work Order — the Division of Labor Standards Enforcement can shut down your operation immediately, with additional misdemeanor penalties for violating the stop order.
• Per-employee assessment — greater of $1,500 per employee or twice the unpaid premiums, plus personal liability for the full cost of any injury claim during the uninsured period.

CalSavers — Now Mandatory for Every Employer (Effective Jan 1, 2026)

The CalSavers Retirement Savings Program expanded on January 1, 2026 to cover every California employer with at least one W-2 employee. You must either:

• Offer a qualified private retirement plan (401(k), SEP-IRA, SIMPLE IRA, 403(b), etc.) and claim exemption, OR
• Register at employer.calsavers.com and facilitate automatic enrollment. Employers do not contribute; employees contribute to a state-administered Roth IRA via payroll deduction.

Deadlines: Employers that first have a W-2 employee in 2026 have until December 31, 2026 to register or claim an exemption. Penalties: $250 per eligible employee after 90 days of noncompliance following notice, plus an additional $500 per employee after 180 days.

Step 5: Get Your City Business License and Industry-Specific State License

City Business Licenses (Not County)

California has no statewide general business license. Local licensing is primarily city-level, not county-level — a structural difference from Florida and Texas. If you operate in multiple incorporated cities, you typically need a separate business tax certificate in each one. Use CalGold (calgold.ca.gov) to pull a customized permit list for your specific address and industry. See how California compares in our 51-state business license requirements table.

• Los Angeles: Business Tax Registration Certificate through the Office of Finance. Annual renewal. Fee structure is receipts-based and industry-coded.
• San Francisco: Business Registration Certificate through the SF Office of the Treasurer & Tax Collector (sftreasurer.org). Annual fee starts at $56 for small businesses and scales with gross receipts.
• San Diego: Business Tax Certificate through the City Treasurer’s Office.
• San Jose: Business Tax Certificate through the Office of the Treasurer.
• Sacramento: Business Operations Tax through the Office of Finance.
• Oakland: Business Tax Certificate through the Business Tax Office. Rates are receipts-based by industry.

Unincorporated areas of a county usually require a county-level license instead of a city one. If you operate from a home office in unincorporated Los Angeles County, check with the LA County Treasurer and Tax Collector.

Industry-Specific State Licensing

California has unusually broad state-level occupational licensing. Key agencies:

• Contractors State License Board (CSLB) — required for any construction work totaling $500+ in labor and materials. Covers HVAC (C-20), landscaping (C-27), general building (B), plumbing (C-36), electrical (C-10), and 40+ other classifications. Requires 4 years of journey-level experience, exam, $25,000 bond, and $250-$330 application/licensing fees.
• Board of Barbering and Cosmetology (BBC) — licenses cosmetologists, barbers, estheticians, electrologists, and nail technicians, plus salon establishments.
• Bureau of Security and Investigative Services (BSIS) — licenses private investigators, security guards, alarm companies, and locksmiths.
• CDSS Community Care Licensing Division (CCLD) — licenses child care centers, family child care homes, adult residential facilities, and other care facilities.
• Department of Real Estate (DRE) — real estate brokers and salespersons.
• California Department of Public Health (CDPH) — pharmacies, clinical labs, certain food facilities.
• County environmental health departments — food service, mobile food, pools/spas at the county level.

California’s Unique Employment and Labor Environment

California’s labor laws are the most employee-protective in the country. Four areas trip up first-time employers more than any other:

1. AB 5 / ABC test for worker classification. Under Labor Code section 2775, every worker is presumed to be an employee unless the hiring business can prove all three ABC conditions: (A) the worker is free from your control and direction, (B) the work is outside your usual course of business, and (C) the worker is customarily engaged in an independent trade of the same nature. If your cleaning business hires someone to clean client sites, condition (B) fails — they are an employee, not a contractor. AB 2257 carved out roughly 100 specific occupational exemptions (freelance writers, real estate agents, doctors, certain gig drivers under Prop 22, etc.), but for most industries the default is W-2 employment. Misclassification exposes you to unpaid wages, waiting-time penalties, UI/SDI/UI back taxes, and Labor Code class-action liability.

2. City- and county-level minimum wages. California’s state minimum wage is $16.90/hour as of January 1, 2026. But many cities and counties have higher local rates that apply to any hour worked inside their boundaries. Selected 2026 rates:

• San Jose — $18.45 (January 1, 2026)
• San Diego (City) — $17.75 (January 1, 2026)
• West Hollywood — $20.25 (January 1, 2026)
• San Francisco — $19.18 effective July 1, 2026
• Los Angeles (City) — $18.42 effective July 1, 2026
• Unincorporated Los Angeles County — $18.47 effective July 1, 2026

Dozens of other Bay Area and Southern California cities (Berkeley, Emeryville, Oakland, Santa Monica, Pasadena, Malibu, Milpitas, Sunnyvale, Cupertino, Mountain View, Palo Alto, Daly City, and more) maintain their own local minimum wages. The UC Berkeley Labor Center maintains the authoritative list. If you operate in multiple cities, the higher of (a) the rate at the employee’s work location, or (b) the state rate applies for each hour worked.

3. Industry-specific minimum wages. Two industries have their own statewide floors:

• Fast food workers (AB 1228): $20.00/hour since April 1, 2024. Applies to employees of fast food restaurants that are part of a chain of 60+ establishments nationwide. The Fast Food Council has authority to adjust annually.
• Health care workers (SB 525): Tiered rates from $18.63 to $25.00/hour depending on facility type, phasing in through June 2033.

4. New 2026 employment law stack. Several laws signed in 2025 take effect January 1, 2026:

• AB 692 (stay-or-pay): prohibits most “stay-or-pay” agreements that require employees to repay relocation, training, or sign-on bonus costs if they leave before an agreed tenure.
• SB 642 (Pay Equity Enforcement Act): broadens definitions, extends the statute of limitations to three years, and allows recovery for up to six years.
• SB 294 (Workplace Know Your Rights Act): effective February 1, 2026, employers must post/distribute a Labor Commissioner-issued notice covering workers’ comp, immigration inspections, organizing rights, and more.
• AB 671: Labor Commissioner may now investigate and cite tip-pooling violations under Labor Code 351.
• SB 809: clarifies that owning a truck does not, by itself, make a construction worker an independent contractor — the ABC test still governs.

California Market Context: Where the Demand Is

California is the largest U.S. state economy and the fourth-largest economy in the world if measured as a standalone country. That scale means most small business categories have demand — but pockets, timing, and competition vary sharply by region:

• Greater Los Angeles (10 counties, ~18 million people): Entertainment, logistics (Ports of LA/Long Beach), aerospace, healthcare. Enormous demand for cleaning, food service, landscaping, and childcare. Also the densest city-license environment — if you service multiple cities, each has its own fees and forms.
• San Francisco Bay Area (~7.7 million): Technology, biotech, finance. Highest household incomes in the country. Premium pricing available but cost of doing business (labor, rent, permits) is also the highest. Home to some of the strictest local labor ordinances in the country — paid sick leave, health care spending mandates (SF HCSO), fair scheduling requirements.
• San Diego County: Defense contracting, life sciences, tourism, and cross-border trade with Tijuana. Military bases (Marine Corps, Navy) generate steady service demand.
• Central Valley (Sacramento, Fresno, Bakersfield, Stockton): Agriculture, food processing, distribution. Lower cost of entry than coastal markets; also different seasonal patterns, especially for landscaping and food truck.
• Orange County and the Inland Empire: Massive suburban residential base and booming logistics (Riverside/San Bernardino warehouse corridor). Strong demand for HVAC, cleaning, and daycare.
• Coastal tourism corridors (Santa Barbara, Monterey, Napa/Sonoma, Lake Tahoe): Seasonal peaks for food truck, cleaning, and short-term rental services.

Demographically, California is majority-minority and home to the largest Spanish-speaking population of any state. Bilingual operations — service, marketing, staff training — are often a competitive advantage, particularly in cleaning, daycare, and food service.

California Business Guides by Industry

California plumbing business guide — CSLB C-36 licensing, bonds, insurance, permits and startup steps for plumbing companies.

California electrical business guide — C-10 licensing, worker certification, bonds and California contract rules.

Every industry has its own licensing, permit, insurance, and sales tax treatment in California. Select your business type:

• How to Start a Cleaning Service in California — Cal/OSHA IIPP, AB 5 classification for subcontract cleaners, bonding, local business licenses
• How to Start a Food Truck in California — CalCode/CRFC, MFF permit, commissary, county health, SB 972 street vendor reform, CDTFA taxability
• How to Start a Daycare in California — CDSS Community Care Licensing, Title 22 ratios, TrustLine, background checks, 90+ day timeline
• How to Start an HVAC Business in California — CSLB C-20 license, EPA 608, $25,000 bond, Title 24 energy code compliance
• How to Start a Hair Salon in California — BBC cosmetology license (1,000 hours post-SB 803), salon establishment license, booth-renter AB 5 implications
• How to Start a Landscaping Business in California — CSLB C-27 license ($500 threshold), DPR QAL pesticide license, WELO ordinance, drought context
• How to Start a Private Investigation Business in California — BSIS PI license, 6,000 hours experience, exam, $25K bond, background check
• How to Get a California Dealer License — DMV Occupational Licensing: $175 application, $50,000 bond, dealer education course and DMV written exam required BEFORE applying, Live Scan, and a 120-day investigation under CVC 11704(b)
• How to Get a California Arborist License – There is NO state arborist license — tree work runs through CSLB as C-49 or D-49, needs 4 years journey-level experience, and tree contractors cannot waive workers comp
• How to Get a California Liquor License – mandatory RBS certification for every server ($3 exam, 3-year term, 60 days from hire), quota-limited general licenses awarded by county priority drawing – 2026 window September 14-25
• California Massage License: It’s Actually CAMTC Certification – voluntary CAMTC certification ($300, 500 hours, no exam since 1/1/2026), statewide instead of city permits, AB 1504 sunset extension to 2030

Key California Business Resources

Resource	What It Covers
bizfile Online (California Secretary of State)	LLC/Corp formation, Statements of Information, entity search
Franchise Tax Board (FTB)	$800 franchise tax, LLC fee, personal and corporate income tax
CDTFA	Seller’s permits, sales and use tax, district tax lookup
Employment Development Department (EDD)	UI, ETT, SDI, new hire reporting, e-Services for Business
CalGold	Address-specific permit and license lookup across all agencies
Department of Industrial Relations (DIR)	Labor law, Cal/OSHA, workers’ comp, wage orders
State Compensation Insurance Fund	Workers’ comp insurance — market of last resort
CalSavers	Retirement savings program registration / private plan exemption
Contractors State License Board	C-20 HVAC, C-27 landscaping, and 40+ other construction licenses
Board of Barbering and Cosmetology	Cosmetology, barber, esthetician, nail tech licensing; salon establishments
Bureau of Security and Investigative Services	PI, security guard, alarm company, locksmith licensing
CDSS Community Care Licensing	Child care center and family child care licensing

How Long Do New Businesses Last in California?

The Bureau of Labor Statistics follows every private-sector establishment in California from the year it opens. Of the businesses opened in March 2024, 80.3% were still operating one year later. Among those opened in March 2020, 53.7% reached the five-year mark — 2.3 points above the national 51.4% — and 34.1% of the March 2015 cohort made it to ten years.

Two things keep those numbers from reading as grimly as they look. A closed establishment is not always a failed one: the BLS count includes owners who sold, merged, moved, or retired. And the businesses that last, grow — nationally, establishments reaching age ten average 11.7 employees, up from 4.4 when they opened. Rates for every state and 19 industries: business survival rates by state.

Frequently Asked Questions

How much does it cost to start an LLC in California?

The Articles of Organization filing fee with the California Secretary of State is $70 online through bizfile Online. Paper filings are no longer accepted. Within 90 days of formation you must file the initial Statement of Information (Form LLC-12) for $20; biennial thereafter. The big recurring cost is the $800 minimum annual franchise tax to the Franchise Tax Board — this applies from year one with no first-year exemption since AB 85 expired on January 1, 2024. Budget roughly $90 in startup filing fees plus $800/year in franchise tax, before any local city license or industry-specific licensing.

Is there a first-year exemption from the $800 California franchise tax?

No — not anymore. Assembly Bill 85 provided a one-time first-year exemption, but it only applied to LLCs, LPs, and LLPs formed between January 1, 2021 and December 31, 2023. Any California LLC formed on or after January 1, 2024 owes the full $800 in its first year, due by the 15th day of the 4th month after formation. Older blog posts and LLC-formation guides still mention the exemption — it has expired. Plan for the $800 from day one.

Does California require workers’ compensation for my first employee?

Yes. California requires workers’ compensation insurance the moment you have one employee — full-time, part-time, seasonal, or family. There is no small-employer exemption. Operating uninsured is a criminal misdemeanor under Labor Code 3700.5 with fines up to $100,000, potential stop-work orders, and personal liability for any injury that occurs while uninsured. Buy coverage from any licensed carrier or from the State Compensation Insurance Fund, which is required by law to insure any eligible California employer.

What is CalSavers and do I have to participate?

CalSavers is California’s state-administered Roth IRA program for workers whose employers do not sponsor a qualified private retirement plan. As of January 1, 2026, every California employer with at least one W-2 employee must either offer a qualified plan (401(k), SEP-IRA, SIMPLE IRA, 403(b), and others) or register with CalSavers and facilitate automatic employee enrollment. Employers do not contribute — you run the payroll deductions. New employers have until December 31 of the year they first have an employee to register. Penalties: $250 per eligible employee at 90 days of noncompliance, plus $500 per employee at 180 days. Register at employer.calsavers.com.

How does California’s ABC test for independent contractors work?

Under Labor Code 2775 (enacted by AB 5), every worker is presumed to be an employee unless the hiring business can demonstrate all three conditions: (A) the worker is free from the business’s control and direction, (B) the work performed is outside the usual course of the business, and (C) the worker is customarily engaged in an independently established trade of the same nature as the work performed. The (B) prong is the most common failure — if the work is your business’s core service (cleaning, landscaping, haircuts), the worker is almost always an employee. AB 2257 created limited exemptions for specific occupations (freelance writers, real estate agents, doctors, and others that revert to the older Borello test). For most small businesses outside those exemptions, expect to hire W-2 employees rather than 1099 contractors.

What California sales tax rate do I charge?

California’s base rate is 7.25% — 6% state plus a 1.25% mandatory local component — with additional district taxes between 0.10% and 2.00% depending on location. Combined rates reach up to 10.25% in the highest-tax areas. California uses destination-based sourcing for most sales, meaning the rate charged depends on where the customer takes delivery. Register for a free Seller’s Permit with the CDTFA before your first sale, use the CDTFA address-lookup tool for exact rates, and file returns through CDTFA online services. Most pure services are not subject to California sales tax, but fabrication labor, installation of tangible personal property, and certain mixed transactions can trigger tax — check the CDTFA publication for your industry.