How to Start a Small Resale Business in California
Starting a small retail business in California requires several steps in order to stay in compliance with local and state ordinances. Also, the location of a resale business is important because your sales volume will depend on sufficient customer traffic to maintain sales. A resale business requires careful record-keeping from the start, since sales tax will have to be paid on the gross sales of the business, as well as state and federal income taxes on the net profits.
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Instructions
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Setting up the Business
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1
Choose the business location. Contact a real estate company that specializes in locating business property. Several large companies like Century 21 and Re Max also have commercial divisions that specialize in business property. The location is extremely important because in resale, sales are derived from customer traffic, which means high visibility. Sometimes the lowest rent isn't best, as a higher rent shop may be located in a better area.
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2
Verify with the city that the location is zoned for resale business. Your real estate agent should be aware of this, but you should also contact the local city offices to verify with them that a resale business is okay. All cities have different rules and regulations and it's important to check this out first, before signing any lease or rental agreement.
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3
Get a city business license from the city planner or business license division of the city. All cities are different. They are usually located in or around the city hall. Some will require that you estimate your annual gross sales in advance and then charge a license fee based on this estimate. The city license fee will then be adjusted each year based on the actual gross sales.
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4
Obtain a resale permit from the state by contacting the State Board of Equalization at 800-400-7115 or online at www.boe.ca.gov. The state will ask you for your estimated gross sales per month and then decide whether you will report your sales tax monthly or quarterly.
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Set-up an accounting or bookkeeping system for the business. This is important because you'll have to report sales for sales tax purposes as well as for state and federal income taxes. If you're audited, a state or federal official will look at the accounting system in place and use that to examine the file as necessary. There are several bookkeeping systems available online including an excel spreadsheet, or you can contact a bookkeeper or CPA who can assist you.
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Tips & Warnings
It is best to answer all license and permit questions in advance, before you commit to a resale location. Record keeping is also important from the start since it is hard to reconstruct sales and a profit and loss statement after the fact.
In resale, you are responsible for paying the sales tax collected either monthly or quarterly. Be sure to set aside the collected tax so that you can make the payments when required.
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