It’s been over two years since I first opened my business on Etsy as a sole proprietor. I was intent on starting the sole prop legally by filing all the right forms and paying for all the right fees, but the resources online can be very confusing if you have no idea where to start.
First step was to get an Employer Identification Number (EIN) from the IRS. This allows you to use an EIN instead of your personal social security number (SSN) whenever a site asks for an identifier for your business for tax purposes. An EIN is free, but you can only ever get one no matter how many sole prop businesses you run.
Then, I filed for a seller’s permit from the California State Board of Equalization for free. This allows me to collect sales tax for any sales to customers in California as well as buy products wholesale without sales tax. You should be able to decide when you want to file your state taxes — I decided to file annually for the fiscal year, which starts and ends in July instead of the normal year in January.
Next, I filed for a fictitious business name from my county, Santa Clara County. It cost $40 to file the form and $22 to publish a notification in the San Jose Post Record using DBAstore.com as per the filing instructions. A fictitious business name, also know as a DBA (doing business as), is required to ensure that consumers have access to the true name and address of the owners of a business. A filed fictitious business name is good for five years and must be filed before you begin your business or within 40 days of your first transaction. Generally, if your first or last name is not in the business name you choose, you will need to file for a fictitious business name. It is your responsibility to ensure that your chosen name does not duplicate any current registrations in the county or violate any trademark protocols.
Lastly, I filled out a Cupertino business license application to register my business with the city. In Cupertino, it costs $132 a year to maintain the license. Other cities in Santa Clara County may vary.
With all these steps done, I was now legally allowed to operate my business and use the information to open a business checking account at a local credit union, Keypoint Credit Union. In total, it cost me almost $200 to file all the forms and costs about $130 every year to maintain my home business license with the city.
Hopefully this helps other eager entrepreneurs in the area to start and run their businesses legally! Feel free to write in the comments if you have any other questions.