Key Takeaways

  • Choose a business structure that limits liability, such as an LLC or corporation.
  • Register your business name and obtain a DBA (if needed).
  • Acquire required licenses, permits, and zoning clearance based on your location and consulting type.
  • Consider professional licensing if your consulting work falls under regulated professions.
  • Prepare clear contracts, privacy policies, and insurance coverage to protect your business.
  • Register for taxes, including sales tax (if applicable), and understand self-employment obligations.
  • Create a business plan, set your pricing, and identify your niche.
  • Utilize tools like CalGOLD and resources from the Secretary of State to meet local and state regulations.
  • You can find an experienced business attorney through UpCounsel to guide your setup process.

Starting a consulting business in California can be a lucrative and rewarding career option, as long as you are passionate about the subject on which you will offer consulting services.

How to Start a Consulting Business in California

Consultants offer advice to people on how to handle certain tasks and situations, as well as provide resources to their clients. According to data from the United States Census Bureau, California had a population of nearly 37 million people as of 2009. With this many residents, it's easy to see why consultants are interested in doing business in California. Professionals can find many potential clients and set up successful consulting businesses across many different industries and specialties.

The first step in setting up a consulting business is deciding on the type of consulting services you will offer. You should have a passion for and knowledge about the industry in order to have success in your new role. As you prepare to start your consulting business, it's important to take steps to become an expert in your field. Review the latest trends and information in the industry. Attend seminars, review industry-specific magazines, and read books to learn as much as you can to provide the best advice and services to your clients.

Define Your Niche and Services

Before launching, define your area of expertise and the specific problems you solve. Consulting spans various industries such as marketing, finance, IT, HR, sustainability, and legal compliance. Having a clearly defined niche will help you:

  • Attract your ideal clients
  • Set pricing based on your expertise
  • Build a strong personal brand
  • Tailor your services to meet market demand

Identify whether your consulting will be productized (fixed services) or customized (tailored solutions), and whether you'll work remotely, on-site, or a hybrid.

How to Start a Business in California

After you have become an industry expert, you can start the formal process of starting a business. You will need to make sure to select the right type of business.

The easiest way to form a business is as a sole proprietorship. It doesn't exist as a separate legal entity, and you don't have to file any paperwork with the state. However, this business entity type also doesn't offer any protection from personal liability. As a result, you would be held personally responsible for any business debts or legal troubles. If two or more individuals are forming a business, this can be formed as a partnership.

A limited liability company (LLC) is one of the most highly recommended business formations, especially for those who are not citizens of the United States. An LLC is also one of the most common business structures for smaller companies because it offers flexibility, along with personal liability protection. A C corporation exists as its own legal entity, separate from its owners, shareholders, and managers. A corporation can legally pay taxes, incur debt, and enter into contracts separately from the owners of the business

Register Your Business Name

If you plan to operate your consulting business under a name other than your legal name, you must file a Fictitious Business Name (FBN), also known as a Doing Business As (DBA). In California:

  • File the FBN with the county clerk’s office where your principal place of business is located.
  • Publish a notice of the FBN in a local newspaper once a week for four consecutive weeks (as required in many counties).
  • Renew the registration every five years or if there are changes.

This helps protect your brand identity and keeps your business compliant.

Obtaining an EIN

The next step in starting a California-based business is obtaining an employer identification number (EIN). Also known as a tax identification number, the company's EIN serves as its key identifier and is assigned by the IRS. The number is similar in its functions to a social security number for a human being.

You will need an EIN for a number of reasons:

  • Applying for licenses and permits.
  • Opening a business bank account.
  • Complying with IRS regulations.
  • Paying taxes.
  • Reporting business profits and losses.

Licenses and Permits

Next, you will need to apply for any necessary business permits and licenses as required in the area of California in which you will be providing your consulting services. You must obtain these permits and licenses prior to taking on a single client. Just about every type of business operating in the state is required to have some type of permit or license to operate. You could need:

  • A zoning permit.
  • A business license.
  • A seller's permit.

Review the list of required permits and licenses on the SBA website's page titled “Business Licenses & Permits.” When you review the information on this page, you will need to provide two key pieces of information:

  • Business type.
  • County or city in which your business will operate.

After you input the information about your business, you will be redirected to a page with a list of business licenses, permits, and other requirements that are required in your city or county and your industry.

Most businesses need a tax certificate, which can be obtained from the Office of Business Licensing. The owner of a consulting business may also need to hold a professional license. In certain professions, you must be licensed to provide advice. Examples include health care, legal services, and architecture.

Marketing and Building Your Brand

Marketing is essential to grow your client base. Start by:

  • Creating a professional website with service offerings and contact info
  • Listing your business on platforms like Google Business Profile and LinkedIn
  • Attending networking events or joining local business groups
  • Publishing thought leadership content such as blogs, white papers, or webinars

Position yourself as a subject matter expert and build a reputation over time.

Contracts and Business Policies

Create clear service contracts and internal policies before working with clients. Key documents include:

  • Consulting agreement – outlines services, scope, payment terms, confidentiality, and dispute resolution.
  • Non-disclosure agreement (NDA) – protects sensitive client information.
  • Privacy policy – if collecting data from users or clients online.
  • Independent contractor agreement – if hiring subcontractors.

These documents not only help avoid legal issues but also build trust and professionalism with clients.

Business Insurance and Risk Management

Even small or solo consultants should consider business insurance to mitigate legal and financial risks. Common types of insurance for consultants include:

  • General liability insurance – covers bodily injury or property damage claims.
  • Professional liability insurance (Errors & Omissions) – protects against claims of negligence or professional mistakes.
  • Business property insurance – protects equipment, whether at home or on-site.
  • Cyber liability insurance – essential for consultants handling sensitive data.

Consult with a licensed insurance agent to determine the right mix for your needs.

Professional Licensing and Industry-Specific Requirements

Certain consulting services may fall under professional or occupational licensing. If your consulting involves regulated advice—such as in law, accounting, engineering, architecture, real estate, or health care—you may need:

  • A California state license or certification
  • Registration with a professional board (e.g., State Bar of California, Board of Accountancy)

Visit the California Department of Consumer Affairs or CalGOLD to determine licensing requirements based on your industry.

Zoning and Home-Based Business Considerations

If you plan to operate from home, check local zoning regulations. Some residential areas restrict or prohibit certain types of business activity, especially those that increase traffic or require signage.

You may need to:

  • Obtain a home occupation permit
  • Comply with local noise, signage, and visitor regulations
  • Secure a zoning clearance certificate

Always consult your local planning or zoning department before setting up a home office.

Tax Obligations for Consultants

As a California consultant, your tax responsibilities may include:

  • Self-employment tax: Includes Social Security and Medicare contributions if you're a sole proprietor or single-member LLC.
  • California income tax: Based on your net business income.
  • Sales and use tax: If you sell physical goods or taxable services.
  • Annual franchise tax: If operating as an LLC or corporation in California.

You can register for state taxes through the California Department of Tax and Fee Administration (CDTFA) and manage federal tax requirements through the IRS.

Frequently Asked Questions

  1. Do I need a license to start a consulting business in California?
    It depends on your consulting focus. While general consulting may not require a license, regulated professions like law, finance, or health do.
  2. Can I run a consulting business from home in California?
    Yes, but you may need a home occupation permit and must comply with local zoning laws.
  3. Is an LLC the best structure for a consulting business?
    LLCs are popular due to liability protection and flexibility. However, the best structure depends on your goals and tax situation.
  4. How much does it cost to start a consulting business in California?
    Costs vary but typically include business registration ($70–$100+), licensing fees, insurance, and marketing expenses.
  5. What taxes will I owe as a consultant in California?
    You may owe self-employment tax, California state income tax, and sales tax (if applicable), plus an annual LLC franchise tax if incorporated.

If you need help starting a consulting business in California, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.