The state of California is one of the most entrepreneur-rich places in the United States. In fact, many people consider the Golden State to be a Gold Standard when it comes to setting up a new business. For business consultants, California is an excellent place to find all types of clients and provide their expertise and consultant services.
In this guide, we consider whether you need to have a specific license to become a business consultant and key things to do before getting started.
Do you need to get a license to practice as a business consultant in California?
When it comes to consultancy, California does not have any specific requirements for professionals to be certified and licensed to become business consultants. For example, unlike a medical consultant or a legal consultant (who must have a license to practice their profession), there is no such regulatory requirement for a business consultant in California.
But this doesn’t mean that you don’t need any license at all to open a business consultancy in CA and practice.
What types of licenses do you require to open a business consultancy in CA?
The licenses you do need include:
- Business license
Every small business – this includes business consultancies – must obtain a business license to operate out of California. These business licenses are county-specific. This means, you will need to apply for a separate business license every time you open your consultancy in a separate county/city in CA. You can verify which county you belong to, at the California State Association of Counties.
The licensing authority is typically the council or public office of the city you want to start your business consultancy in. You can visit their website, fill in the form for a business license, make the registration payment and send in your business details.
- Zoning license
The Zoning license is important because it permits you to use certain types of land for your consultancy business. Your zoning license will depend on whether you use your own home as a business space or you rent a commercial office space for your business consulting projects.
Additionally, if you do rent an outside office space for your consultancy, you will also need to check if the building is on an incorporated or unincorporated area. All of these will affect the type of zoning taxes you will need to pay and what deductions and exemptions you can claim.
- Fictitious Business Name license
If you are using a business name that is not your own name, you will need a Fictitious Business Name (FBN) license. For example, your name is Eric/Sheila and instead of naming your business consultancy after yourself, you use the name “Champion Consultants”. In this case, you would need an FBN license. This license is also called a Doing-business-as (DBA) license. It is a sign that your business name is registered with your respective county office and you are now a recognized business consultant company in the state of California.
These three licenses are the key licenses every California business consultant needs to have. To learn about additional city/county respective licenses that you need to get, visit the State of California’s CalGOLD website.
Other important prerequisites before starting your California consulting business
In addition to licenses, business consultants hoping to start their consultancy in California will also need to get the following:
- Employer Identification Number
The Employer Identification Number (EIN) is a unique identifier of your business. The EIN is necessary to get the business license, pay your taxes, hire employees and make their 401(K) and other payments.
You can apply for the EIN directly with the IRS and once you complete and submit your application form, the EIN will be automatically generated immediately.
- Professional liability insurance for consultants
Another key requirement before offering your services as a business consultant in CA is professional liability insurance.
The job of a business consultant is to offer expert advice, tips and recommendations on how other businesses can create/run profitable companies. As part of your job, you will offer suggestions that are in the best interests of your clients. But, a variety of factors can prevent the company from applying these recommendations correctly.
In such situations, if your client has experienced any damage to the business, they may sue you on grounds of providing erroneous and harmful advice. This can include damage to brand name, business operations, company earning capability, office property or employees.
Whether there is any basis for these allegations or not, claims of misrepresentation, negligence, failure of performance and bad advice, can land you in an expensive legal problem. Without professional liability insurance, you may find it difficult to pay up the legal expenses, court fees and settlement, if any. The Professional liability insurance will offer you complete protection and indemnity against any expenses and liabilities arising out of such professional disputes.
In addition to this, consider getting a General Liability policy. While you may not intend to hurt your client’s business, accidents can occur. This insurance offers you coverage if your client experiences property damage or bodily harm to employees or libel as a result of implementing your business advice.
Finally, consider purchasing a Business Owner’s Policy as well, which will indemnify your personal assets. This way, your personal property will not be seized and used to pay settlements and your business consultancy won’t be disrupted.
As seen above, the state of California doesn’t have any requirements for business consultants to be officially certified and licensed to run their consultancy. But there are other licenses and liability insurance policies that are essential to have, to ensure you run a smooth and risk-free consulting business.