Government is The Enemy of Small Business In California
Have you ever had a really great business idea? Maybe you even had the funds to get it going. But, for some reason you were discouraged. You’re not alone. In California there are many hoops to jump through to open and maintain a small business. Throughout this article you will discover that the bureaucracy of government in California is the enemy of small business.
Business Permits and Requirements
Obtaining a business license sounds simple right? Well, depending on the type of business you want to open you may find it’s not that simple.
For example: if you want to open a restaurant in the City of Eureka there are altogether 23 business permits and other requirements: 5 from the City, 4 from the county, 1 from the region, 11 from state, and 2 from the fed. Not to mention that chefs, cooks, baristas and servers are all required to obtain a food handlers certification to work in the food industry.
In an article by Forbes titles “How to Get a Business License in California” the author breaks down the step by step process:
Step 1. Name and form your company
The first step to get a California business license is to name and form your company if you have not already done so. Once you have begun a business, make sure you have your key business details in order and ready for beginning your application. You will need:
- A business name
- An EIN (Employer Identification Number) or SSN (if you’re a sole proprietor)
- A business entity type (LLC, partnership, corporation, etc.)
- A business address and phone number
- A business plan that includes anticipated revenue and expenses
- COI for your business insurance policy
Step 2. Apply for a California business license
Once you have gathered the necessary information, you’ll need to apply for a California business license and/or business tax certificate for your city or county. Visit the website of your city or, if you live in an unincorporated area, your county and fill out the appropriate forms to begin the process.
Step 3. Determine which other local licenses may be applicable
Using CalGold.ca.gov, you should determine which other licenses controlled on the local or statewide level may be applicable for your business and submit the appropriate information to apply for those licenses.
Step 4. Apply for any additional statewide license(s) you need
If your business is renting or selling tangible goods, you will need a seller’s permit, which is regulated on a statewide level, though it may be controlled by your local county. You may also need to apply for liquor licensing on the state level.
Step 5. Apply for federal licenses and tax treatment (as necessary)
Finally, though the federal government does not require or issue any general business operating licenses, you may be required to obtain licenses with specific government agencies depending on your business’ industry. Common industries requiring federal permitting include some farming, fishing, firearms, alcohol sales and transportation.
In an attempt to make the process seem less daunting the Governor’s Office of Business and Economic Development created a taxpayer funded website to look up business permits and requirements by business type and city/county: CalGold.ca.gov.
It’s truly ironic that the government had to create a tool with our money to “simplify” this process. That old saying comes to mind… “your tax dollars, hard at work”. Not trying to confuse the reader here, there is definitely a difference between taxes and fees. Of course, to the government, it all means revenue.
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Fees, Taxes, and Regulations
Using that very helpful taxpayer funded website CalGold.ca.gov we can follow those 23 links to see just what our fees, taxes, and regulations will be for that new restaurant we want to open in the city of Eureka. You’d think…
1. Business License – Business Tax Certificate (city): In the city of Eureka there is truly no flat fee for obtaining a business license. There is a standard fee of $55, if you need to change information or re-print there is another $8 fee, also add in $11.50 per employee or extra owner, plus the disability access and education revolving fund another $4.00, and the license review fee of $20 (because they need to charge you to have a taxpayer funded employee review your license application).
Of course, just for the business license, it can get even more costly. As stated on the business license application, “Depending on your address, you may be in the Business Improvement District (BID). See chart below. If your address falls within this district, please contact our office for help in calculating fees.”
2. Fire Prevention Information/Inspection (city): According to the City of Eureka Website, “The Eureka Fire Department conducts annual inspections of every business within the city limits. During the inspection, usually conducted by a three person engine company, the personnel are checking for fire hazards, proper exiting, and damage to buildings that may propagate fire travel.” Although there is no fee associated with this inspection, the taxpayer is funding the wages of three fire department employees to complete the inspection.
3. Industrial Wastewater Discharge Permit (city/regional): This permit application is completed online, must be completed in one sitting, and it takes about 30-45 minutes to complete. There is no fee transparency on the link provided by the CalGold.ca.gov website. After some digging we were able to locate the State Water Boards’ Fees home page! Where once again you will find NO fee transparency.
4. Land Use Permit/Zoning Clearance (city): The link on the CalGold.ca.gov website is broken, and if you go to the City of Eureka website click on How to Start or Expand a Business you will find a message that says “Sorry, this page has been moved! Please click here to go to the new location.” Then you get the fantastic message “This page is not active.” Per the CalGold.ca.gov website: “zone change, variance, conditional use permit. Required if business located within incorporated city limits.” There is no fee pricing online at this time.
5. Police Regulation/Public Safety Issues (city): According to the CalGold.ca.gov website “Some city police departments may issue a permit i.e. burglar alarm, massage/adult business, peddlers, places of entertainment, second-hand dealers, solicitors, pawnbrokers, taxi-cabs, etc.- requirements vary from city to city.” However, when you follow the link they’ve provided you get the lovely and always helpful “HTTP Error 404.0 – Not Found” message.
According to the City of Eureka, “All alarm holders within the city limits of Eureka will be required to obtain an alarm permit each year through Phoenix Group Information Services. The alarm registration permits ($20.00), annual permit renewal ($20.00) and false alarm billing can be done via the Phoenix website.” Check it out -> Welcome to the City of Eureka, CA – Alarm Prevention Site
6. Fictitious Business Name – Doing Business As Statement (county): According to the CalGold.ca.gov website, “A Fictitious Business Name (FBN) or Doing Business As (DBA) statement is required when the business name does not include the surname of the individual owner(s) and each of the partners; or the business name suggests the existence of additional owners; or the nature of the business in not clearly evident by the name of the business.” However, the link once again leads to a dead end.
Not to worry! By simply googling “Humboldt County Recorder’s Office Fictitious Business Name – Doing Business As Statement” we were able to locate the Fictitious Business Name Statement portion of the Humboldt county website. There we found the 2019 fee schedule. Yes, it is 2022. And no, we have not confirmed if the fees have changed.
7. Hazardous Materials / Waste Management Program (county): The link on the CalGold.ca.gov website, again takes you to Page not found. However, according to the Humboldt County website, “Permits are required for underground storage tank construction, removal, modification, and operation.” You will need to follow the link on the Humboldt County website for Licenses & Permits to figure out what Hazardous Materials permit you’ll need to apply for: Underground Storage Tank Construction Permit or the Well and Boring Permit. Neither one of these applications disclose the fee associated with the permit. However, there is a lovely PDF provided that does disclose the fees. It’s about 6 pages long, enjoy!
8. Health Permit – Food Service (county): Of course the health permit is required for all retail and wholesale food establishments/facilities. This is getting old… but the link provided, once again takes you to “We’re sorry, but there is not a web page matching your entry.” No worries, this author found the Permit to Operate a Food Facility (PDF). We are sorry to tell you, once again, that there are no fees disclosed on the application. However on page 34-37 of the PDF provided you may be able to make sense of the fees.
9. Weights and Measures (county): The link provided from the CalGold.ca.gov website for this section of requirements does not give any direction for restaurants specifically. Again after a little digging we were able to find the PDF showing the fees. The 4 page document breaks down the fees for Weighing Devices, Measuring Devices, and All other Commercial W/M Devices. It also breaks down the fees for non-commercial w/m devices as well as miscellaneous fees like inspector time (not to exceed $74.16 per hour or $112.00 for over time), provers (at $20 per hour), large weight truck ($45.85 per engine hr), pick up trucks, and special teste or service ($150 plus inspector time / mileage).
10. Authority to Construct/Permit to Operate (regional): According to the CalGold.ca.gov website, this permit is “Required if any person constructs, alters, replaces or operates any units that emit, may emit, or may reduce air emissions within the Region. An Authority to Construct must be obtained before building or installing a new emissions unit or modifying an existing emissions unit that requires a permit. A Permit to Operate is issued after all construction is completed and the emission unit is ready for operation.” This is truly getting old, but once again Sorry, we can’t find the page you’re looking for… We were able to find the PDF Application however, the fees are not disclosed on the application.
11. Alcoholic Beverage License (state): Per the CalGold.ca.gov website, “Any person or entity seeking to sell alcoholic beverages must be licensed. Apply for the license in person and allow a minimum of 45 to 50 days to process the application. The law precludes issuance in less than 30 days.” The link takes you to the home page for licensing abc. With a quick search on the website we were able to find the fee schedule. Here you will find the fees for general licenses, non-general licenses, transferring an existing license (person to person /premises to premises/ double transfers), as well as miscellaneous fees for operating and non-profit temporary licenses and catering and event permits.
12. Alcoholic Beverage Tax (state): This tax applies to entities selling, manufacturing, importing or distributing alcoholic beverages. The link provided takes you to the CA board of Equalization website providing information on the tax program. Just a few clicks away, we found the tax rate!
13. Corporation, Company or Partnership Filings (state): According to the CalGold.ca.gov website, “If you are considering becoming a corporation, (either stock or nonprofit), a limited liability company or a partnership (limited, or limited liability), you must file with the Secretary of State’s Office.” You can file online. And the fees do vary depending on how you file.
14. Discrimination Law (state): Regulated by the California Civil Rights Department the and according to the CalGold.ca.gov website “employers must post the Harassment or Discrimination in Employment notice (DFEH 162) and provide their employees with a copy of the DFEH’s information sheet on sexual harassment (DFEH 185) or a statement that contains equivalent information. Employers must also provide notice of an employee’s right to request pregnancy disability leave or transfer, as well as notice to request a family and medical care leave (CFRA). Employers with 5 or more employees must maintain all personnel records for a minimum of 2 years”. There are no fees associated with this regulation.
15. Industrial Activities Storm Water General Permit (state): Per the link provided on the CalGold.ca.gov website “The Industrial General Permit regulates industrial storm water discharges and authorized non-storm water discharges from industrial facilities in California.” According to the fee schedule, “Each person for whom waste discharge requirements have been prescribed pursuant to Section 13263 of the Water Code shall submit, to the state board, an annual fee.” The link to the PDF for the fee schedule is 24 pages long.
16. Registration Form for Employers (state): This is the California State payroll tax registration. The link provided on the CalGold.ca.gov website takes you to the Employment Development Departments (EDD) website. Per The EDD “If you operate a business and employ one or more employees, you must register as an employer with us when you pay more than $100 in wages in a calendar quarter. If you are a household employer of one or more household workers, you must register with us when you pay cash wages of $750 or more in a calendar quarter.”
17. Sales & Use Permit, Seller’s Permit (state): This permit is required so the business can pay sales tax in California. According to the CalGold.ca.gov website “All businesses selling or leasing tangible property must obtain a Seller’s Permit”. The link takes you to the California Department of Tax and Fee Administration website. You can register for free online. Sales in the city of Eureka are subject to 9.25% tax, by far the highest sales tax in Humboldt county.
18. State Income Tax Information (state): According to the CalGold.ca.gov website “Businesses should obtain the appropriate State income tax forms from the Franchise Tax Board. All businesses are required to submit a Business Income Tax statement annually.” The link provided takes you to the Business Filing information page on the Franchise Tax Board website. Here you will also find a link to the business tax rates.
19. Wage/Hour Laws (state): The CalGold.ca.gov website advises that “Businesses with employees must comply with laws establishing minimum standards for wages, hours and working conditions.” The link on the website takes you directly to the Department of Industrial Relations Labor Commission’s Office webpage.
20. Waste Discharge Requirements (WDR’s) (state): The CalGold.ca.gov website states that “Any facility or activity that discharges, or proposes to discharge, waste that may affect groundwater quality or from which waste may be discharged in a diffuse manner (e.g., erosion from soil disturbance) must first obtain waste discharge requirements.” The link takes us to the California Water Boards Waste Discharge Requirements Program landing page. According to the site a permit is needed “If your activities, discharges, or proposed activities or discharges from your property or business could affect California’s surface, coastal, or ground waters.” The Waste Discharge Application is accessible but the fees are not that straight forward.
21. Workers’ Compensation Information (state): As indicated on the CalGold.ca.gov website “Businesses with employees must maintain Workers’ Compensation Insurance coverage on either a self-insured basis, or provided through a commercial carrier, or the State Workers’ Compensation Insurance Fund.” The link takes you back to the Department of Industrial Relations Division of Workers’ Compensation webpage. Policy rates for workers compensation will be based on the insurer’s rate for the restaurant workers payroll and the modification factor assigned to the business.
22. Employer Identification Number (EIN or SSN) (federal): Federal Income Tax registration! As stated on the CalGold.ca.gov website “Employers with employees, business partnerships, and corporations, must obtain an Employer Identification Number from the I.R.S.”. The link takes you to the IRS website to Apply for an Employer Identification Number (EIN) Online. Each month, the IRS provides various prescribed rates for federal income tax purposes. In searching for the Federal Tax rates, we came across the Applicable Federal Rates (AFRs) Rulings. “These rates, known as Applicable Federal Rates (AFRs), are regularly published as revenue rulings.”
23. Proof of Residency Requirement (federal): The CalGold.ca.gov website advises that “Employees hired after November 6, 1986 must provide proof of eligibility to work in the United States.” Surprisingly the link on the page goes to another dead end. This time on the U.S. Citizenship and Immigration Services website. With a quick search on the website we found that this is referring to the Form I-9, Employment Eligibility Verification. There are no fees associated with this regulation.
Whew… 23 different fees, taxes, and regulations! Chains of broken links and missing information. When looking back on the research using the CalGold.ca.gov website, we once again are reminded of another old saying… “good enough for government work.” See, a private business could never survive with a website that constantly takes you to dead ends. However, the government competes with small businesses not by the quality of a product but by the wages and benefits it can offer to employees.