Follow these simple steps to get your business registered correctly:
- First, decide what type of entity you wish to form. This affects your tax obligations, ability to transfer assets and ownership, how you manage and run your business, and the licenses you will need to obtain. This is the first step and is critical. It would be wise to consult with some experts if you’re forming a new business.
- The second step is to file the documents in accordance with the type of entity you are registering with the California Secretary of State and pay the appropriate fees. You can find all the forms including samples and instructions for most entity types on the California State Secretary website. The types of businesses that are required to register with the Secretary of State’s office are as follows:
Business that are required to register: Corporations (including for profit and nonprofit); LLCs; LPs and LLPs. Beginning January 1, 2018, Cannabis Cooperative Associations (CCA).
Businesses that may register: General Partnerships are not required to register with the California Secretary of State, but may choose to if desired.
Businesses not required to register: Sole Proprietorships
Steps Following Registration
- Once you’ve registered, the next step is to register a business name. It is also important to register a fictitious business name at this point. The reason for this is that, in some instances, a business may choose to use a different name than its legal name, or it may be required to do business under a different name to obtain business licenses and permits. File for this alternate name with the county clerk/recorder where your business is located.
- Once you’ve filed organizational documents with the Secretary of State (step 2), you still need to get the appropriate licenses to operate a cannabis business in California. Not only will you need state-level licenses, but you also need city, county, city AND county, and other permits before operating legally. Start with an overview on seller’s permits and then check with your local city and county for their permit and license requirements.
- If you’re planning on hiring, register for a federal Employer Identification Number (EIN). This will help you be compliant with payroll taxes, wage withholding requirements, matching employer withholding requirements, worker’s compensation, insurance, and more. Here are some quick resources to help you learn more:
- IRS – How to Apply for an EIN
- The Internal Revenue Service (IRS) for federal taxes.
- California Franchise Tax Board – Business Filing Information
- The Franchise Tax Board (FTB) for California’s personal income tax and corporation tax
- California Employment Development Department – About Payroll Taxes
- The Employment Development Department (EDD) administers four state payroll taxes
- The California Department of Tax and Fee Administration (CDTFA) is responsible for all business permits and taxes
- The California Board of Equalization (BOE) reviews and adjusts assessments for property taxes
- The California Tax Service Center is a partnership of tax agencies aiming to improve taxpayer resources and educational programs.
- IRS – How to Apply for an EIN
- Every corporation and LLC is required to file a Statement of Information with the Secretary of State within the first 90 days of registering and every year after.
- Last, but not least, register your trademark with the California Secretary of State’s office. This helps identify and distinguish the source of the goods or services of one party from those of another. This helps with any branding or marketing that will be done by your company.
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About the Author
Brett Furst has over 10 years of experience covering all aspects of the industry, including cultivation, manufacturing, consumables, retail, and more. He has also worked as a teacher for 5 years allowing him to educate prospective clients in a way that helps them retain the information.