Starting a general contractor business in California requires several coordinated steps: choosing an entity type, meeting state contractor licensing rules, securing permits and local approvals, and setting up tax and payroll obligations. This guide explains where to register a business, how California contractor licensing interacts with local building permits, what state and federal tax registrations you’ll likely need, and practical next steps for banking, hiring, and budgeting so you know what to do next.
Registration & Entity Setup
Decide which business structure fits your needs: sole proprietorship, partnership, LLC, or corporation. California LLCs and corporations have entity filings with the California Secretary of State. Formation and contractor licensing are separate processes; forming an entity does not authorize it to perform licensed construction work. The Secretary of State’s informational filing source is listed in References.
Apply for an Employer Identification Number (EIN) from the IRS when required, including for partnerships, corporations, and businesses with applicable employment-tax obligations. A bank may also request an EIN even when federal tax rules do not otherwise require one. Use the IRS instructions for Form SS-4 to determine the requirements for your business.
Plan for Contractors State License Board (CSLB) licensing before bidding or contracting. Under CSLB’s licensing guidance, a construction project generally requires a licensed contractor if it requires a building permit, uses additional workers, or totals $1,000 or more in labor and materials. The small-project exemption is narrow; a larger project cannot be split into smaller contracts to qualify. The license must cover the individual or business entity doing the contracting.
Match the license classification to your work. Review the B – General Building classification for building projects. It has specific rules for multi-trade projects, framing and carpentry, specialty work, and subcontracting; it is not unrestricted authority to perform every trade. General engineering and specialty work may require different classifications.
Designate a qualifying individual who meets CSLB’s experience requirements and completes required examinations unless a waiver applies. Complete the applicable application and issuance steps before treating the license as active. These include required bonding, workers’ compensation documentation, and other items identified by CSLB. Review the license issuance checklist, rather than assuming that passing an examination completes licensing.
Consider tax, liability, and filing consequences before finalizing your entity choice. An actively licensed LLC contractor also needs an additional employee/worker bond and liability insurance meeting CSLB’s LLC licensing requirements. Include these obligations when comparing business structures.
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Permits & Local Requirements
Start with the city or county building and planning departments for each project address. Confirm required permits, inspections, occupancy approvals, zoning requirements, and any applicable fire-department review. Local requirements, processing times, and fees vary. The California Building Standards Commission’s FAQs explain local enforcement and exceptions involving certain state-regulated buildings.
A CSLB license does not replace project permits or inspections. Identify who will obtain the permits and arrange inspections before work begins, and confirm the requirements with the responsible jurisdiction. CSLB’s licensed-contractor guidance provides related consumer and project-planning information.
For home improvement work covered by Business and Professions Code section 7159, an aggregate contract price exceeding $500 triggers written-contract requirements, including required contract terms and notices. This is separate from the contractor-license threshold. Use compliant written contracts and written change orders, and review the applicable cancellation notices and payment provisions before accepting a residential improvement job.
Taxes & Ongoing Compliance
Federal tax obligations depend on how the business is taxed and whether it has employees. Self-employed owners should review the IRS Self-employed Individuals Tax Center for income tax, self-employment tax, and estimated payments. Employers also need to address applicable withholding and employment taxes.
Determine the California returns, taxes, and payments that apply to your entity and activities; do not assume every new business needs the same separate Franchise Tax Board registration. Filing and payment obligations differ for sole proprietors, partnerships, LLCs, and corporations. Use the FTB business filing and payment guidance for your tax classification and tax year, including any applicable annual tax, franchise tax, or LLC fee.
Review the CDTFA Tax Guide for Construction Contractors to determine whether you need a seller’s permit or another account. Sales and use tax treatment depends on the contract and the items supplied and installed. Materials, fixtures, and machinery or equipment can receive different treatment; do not assume all construction purchases or charges follow the same rule.
Maintain a compliance calendar for applicable Secretary of State filings, tax returns and payments, and CSLB renewals. Keep required bonds and insurance current, and verify continued eligibility before relying on a workers’ compensation exemption. The Secretary of State filing source, FTB due-date guidance, and CSLB issuance and bond requirements are listed in References.
Business Banking & Funding
Ask your chosen bank for its business-account checklist. Common documents include formation records where applicable, ownership information, business licenses, and an EIN or an accepted taxpayer identifier; a sole proprietor may be able to use an SSN. Requirements vary by institution and business structure. SBA’s business banking guidance is listed in References.
Compare commercial financing with SBA loan programs, including 7(a), 504, and microloans. Eligibility, permitted uses, underwriting, and approval depend on the program and lender. Prepare the financial records and business documents the lender requests rather than assuming that forming a company qualifies it for financing.
As of September 13, 2026, U.S.-created companies are exempt from FinCEN beneficial ownership information (BOI) reporting. FinCEN announced its final rule on August 11, 2026, and it became effective on August 14, 2026. Certain entities formed under foreign-country law and registered to do business in the United States remain subject to reporting unless exempt. Review FinCEN’s current BOI guidance if that description applies to your business.
BOI reporting is separate from a bank’s Customer Identification Program (CIP) and Customer Due Diligence (CDD). A domestic company’s BOI exemption does not prevent a bank from requesting identity or beneficial-owner information under applicable banking rules. Provide the documents the bank requests for account opening and ongoing reviews; see FinCEN’s CDD FAQs and the FDIC banking-compliance reference below.
Hiring & Labor Market
For a contracting business with employees, EDD requires employer registration within 15 days after paying more than $100 in wages in a calendar quarter. Set up the applicable payroll account, withholding, payments, and returns using EDD’s employer-registration guidance. Separately, report new hires within 20 days of their first day of work, including covered rehires.
California employers with one or more employees must provide workers’ compensation coverage through insurance or approved self-insurance, as explained by the Department of Industrial Relations. A CSLB no-employee exemption is not an alternative to covering employees.
Under CSLB’s requirements reviewed for September 2026, a contractor without employees may file an exemption only if eligible. C-8, C-20, C-22, C-39, and C-61/D-49 license holders cannot use that exemption, and neither can a license qualified by a Responsible Managing Employee. Check CSLB’s coverage and exemption requirements for every classification held before applying or renewing.
Complete and retain Form I-9 for each new employee hired to work in the United States, following USCIS instructions. Follow applicable federal wage-and-hour rules and California requirements for wages, overtime, breaks, and workplace postings. The DIR Small Business Portal provides state employer resources.
Construction employers must also address applicable Cal/OSHA requirements. Establish and maintain an injury and illness prevention program, train workers on relevant hazards, provide required protective equipment, and follow applicable incident-reporting rules. Use Cal/OSHA’s employer-responsibility guidance to plan safety procedures before crews begin work.
Cost of Doing Business
Build your licensing budget from the applicable CSLB application, issuance, and renewal fees; required bond premiums; and insurance quotes. Workers’ compensation costs may apply because of employees or license classifications. An active LLC license also carries the additional employee/worker bond and liability-insurance requirements described above. The CSLB issuance checklist identifies the relevant licensing categories; use current agency fee information for your application type.
Distinguish a bond’s required face amount from the premium a surety charges. Obtain quotes for the contractor bond and any required qualifying-individual or LLC bond. Review CSLB’s bond requirements, including authorized alternatives to a surety bond, before deciding how to satisfy the requirement.
Request current permit, inspection, and plan-review fee schedules from the responsible local agency for each job. Budget separately for applicable payroll taxes, state entity taxes and fees, and tax on construction purchases. Use EDD, FTB, and CDTFA guidance and project-specific quotes rather than a single statewide startup-cost total.
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References
- California Secretary of State — bizfile and business entity filings
- CSLB — Apply for a Sole Owner License
- CSLB — Licensing thresholds, qualifying individuals, and experience requirements
- CSLB — B General Building Contractor classification
- CSLB — Original license application and examination-waiver guidance
- CSLB — License issuance, workers’ compensation, and exemption requirements
- CSLB — LLC contractor licensing, additional bond, and liability insurance
- IRS — Instructions for Form SS-4
- California Building Standards Commission — Frequently Asked Questions
- California Legislature — Business and Professions Code section 7159
- CSLB — Hire a Licensed Contractor
- IRS — Self-employed Individuals Tax Center
- CDTFA — Tax Guide for Construction Contractors: Industry Topics
- Franchise Tax Board — Business filing and payment due dates
- FinCEN — Beneficial Ownership Information Reporting
- FinCEN — BOI final-rule announcement, August 11, 2026
- FinCEN — Customer Due Diligence Rule FAQs
- SBA — 7(a), 504, and microloan programs
- SBA — Business structures and business bank-account preparation
- FDIC — Bank Secrecy Act and Anti-Money Laundering resources
- EDD — Employer Payroll Taxes
- EDD — Employer-registration threshold and deadline
- EDD — Reporting new employees and independent contractors
- DIR — Employer workers’ compensation responsibilities
- USCIS — Form I-9 instructions
- U.S. Department of Labor — Wages
- DIR — Small Business Portal
- Cal/OSHA — Employer Responsibilities
- CSLB — Bond Requirements
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