Luke Martin, MBA, JD
Staff Attorney
The Therapist
March/April 2020

If you look up what is playing at the movies today there is bound to be some sort of superhero movie from Marvel playing. While this seems like a common occurrence, Marvel’s first movie, Iron Man, took flight in 2008. This movie established some of our beloved superhero friends, their arch-nemesis, the existence of superpowers, and built a platform for others to be incorporated. From this transformative single movie, the addition of Hulk, Thor, Spiderman, Black Widow and Captain America have seamlessly swooped into the world Iron Man created. The Marvel Cinematic Universe would never have made it as big as it is today without Iron Man laying the foundation for its success.

When beginning any endeavor it is easy to be short-sighted and only see what is right in front of you. It takes vision to be able to see what is needed down the road. Most individuals starting a therapy business know that they need a license to practice, need an appropriate business structure, an office, marketing materials, etc., but oftentimes getting a business license is a key plot point that is forgotten. Ignoring such a necessary element can cause problems for the main protagonist in Act 2 of their business story.

What is a Business License?
A business license is a requirement for most businesses to operate in the state of California. Depending upon the city and/or county that your business is physically located in a business license may be required to lawfully operate a practice there. Unfortunately, since this is regulated per city and/or county there is not a uniform consensus as to the requirements. To make things a bit stickier, the city of San Diego, as well as other areas, actually utilize different terminology to explain this license. For example, the city of San Diego does not issue a business license, but instead issues a “Business Tax Certificate” to proprietors.¹

By definition, a business license is a permit given by a governmental body to engage in a given activity.² The best way to approach a business license is as a contract between you and the city and/or county your practice is located in that: 1) permits you to operate your businesses lawfully in that specific location, 2) initiates tax responsibilities including filing and paying taxes, and 3) serves as notice to those around you of your business venture. It may seem at first that a business license is a web of mystery like the Black Widow, but after understanding the city and/or county’s motivation it may become clearer why it exists.

Why Do I Need A Business License?
There are a variety of rationales as to why the license exists, but the altruistic rationale is that the city “wants to regulate business activity that may have an impact on the health, welfare or safety of the public.”³ Do you really want a loud auto-repair shop next to a middle school? Do you really want your nextdoor neighbor to be a Taco Shop? In places like Wakanda, where space is limited it is important for government entities to regulate the type of businesses that operate in specific locations to avoid hazards. However, not all cities or counties subscribe to the notion that a business license is required. So it is important for you to review your businesses’ specific location to verify if one is needed.

How Do I Know If I Need One?
With even the terminology in flux, it may feel like you need to be a mutant with special mind-reading powers to know if your city and/or country requires you to obtain a business license or not. Recognizing the complexity of complying with all permit requirements, the State of California has created a website CalGold.CA.gov that provides specific permit requirements. For information regarding applicable rules, regulations, and permits for your business please visit the State of California Business Portal CalGold.⁴

Please note that when utilizing the website at this time there is not a separate “business type” for mental health or psychotherapy. Instructions are provided on the website to aid the business owner in correctly identifying their business. The default setting that should be selected in this scenario as instructed is “General Business Information.” Individuals can also contact their respective city and/or county for rules and regulations governing their business license practices.

If your business has multiple locations, you may be required to obtain a business license in each city or county where your business operates. For example, if you have an office located in San Diego and Santa Monica, you will need a business tax certificate from the City of San Diego and a business license from the City of Santa Monica. If your business operates in multiple locations in the same city you may be required to obtain a business license or business tax certificate for each branch or satellite.⁵ Check with your city/county where your offices are located to see if you need multiple business licenses for all of your different office locations. You may be able to find the majority of this information our yourself via an internet search.

Where Do I Get A Business License?
In order to obtain a business license, you must procure an application from the appropriate government entity and provide the required information. Generally, there are two ways of obtaining an application. One way is by visiting your local government entity in person to obtain a paper application and the other is by downloading the application on their website.

Depending upon the jurisdiction that you are located, once the application is complete, you can either upload the document to the appropriate website, print, and mail or handdeliver to the issuing office. Most large cities allow you to apply completely online, which has eliminated the need for you to put in Hulk-like strength to obtain the license.

What Information is Generally Needed to Obtain a Business License?
Since there is no uniformity between the cities or counties, each location has different specific requirements in order to obtain a business license. However, most government sites require very similar information. You won’t need Tony Stark level intellect to fill out the application as most proprietors can expect to be asked for the following information:

• Business Name
• Business Address
• Mailing Address (if different from the main address)
• Phone Number
• Type of Business (LLC, Corporation,Partnership, or Sole Proprietor)
• Federal Tax ID Number (Employer Identification Number or EIN) obtained from the IRS (If you are a sole proprietor, this may be your social security number if you did not obtain an EIN)
• Each individual owner’s name, address and phone number
• Driver’s license number
• Type of Business to be conducted
• Number of Employees
• Expected Annual Sales

In addition to this information, you must also relinquish payment for this license and continue to pay on an annual basis. In most cities, the fee is fixed, but for others, it depends on your income, sales revenue, or gross receipts. The fee varies by location, but you can expect to pay somewhere between $35 and $100 annually. In the city of San Diego, the fee is set at only $38.00 and renews annually.⁶ However, in the city of Los Angeles, the fee for the first year of a new business activity is actually deferred to the second year when you are then required to pay both Year 1 and Year 2 simulatenously upon renewal.⁷

The majority of cities allow you to pay by credit card, but in remote or small offices writing a check may be a requirement. Upon approving the application and fee, the government entity will usually mail a copy of the license or certificate to you within a few weeks.

Where Is the Business License Displayed?
Although all cities and counties vary as to the name, requirements, fees, and even information obtained almost all the government offices uniformly agree as to the location the business license must go. Any person or entity engaged in business at a fixed place of business shall keep the license or certificate posted in a conspicuous place upon the premises where such business is conducted. Any person engaged in business in the city or county, but not operating from a fixed place of business, shall keep the license or certificate issued to him or her in their possession at all times while engaging in such business.

Are There Penalties for Not Getting A Business License? Failure to comply with the licensing and permit requirements may feel as if Thanos has invaded your business. Depending upon your jurisdiction, the penalties vary. Most locations view the failure to obtain a business license as a misdemeanor, which will result in fines and can also lead to the potential temporary closure of the business. In rare jurisdictions, such as the City of Santa Monica, the failure to have a proper business license is considered a misdemeanor that can result in up to 6 months in jail.⁸ The likelihood of enforcement of jail is extremely low, but by statute, it is a possibility in extreme situations.

Do I Need a Business License for a Home Office/Remote?
Again, each area of California is different, but in the City of San Diego, home occupations are defined as “a business conducted by a resident on the premises of their home such as a home office, a service provider, or the selling of goods…”⁹ This means that those that are wanting to follow the letter of the law like Captain America would be required to obtain a business license for any of their home-based business activities or self-employed activities.¹⁰ Businesses are not often inspected by the city or county they are located in for proper licensing unless reported for non-compliance, however, members have reported in the past they have been randomly audited. The success of any business is dependent upon having an established business plan that maps out Act 1, 2 and 3. Having the forethought to apply for a business license early on in Act 1 will allow you as the main protagonist or superhero of your business to grow your business rather than dealing with ancillary antagonists.

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Luke Martin, MBA, JD, is a staff attorney at CAMFT. Luke is available to answer member calls regarding legal, ethical, and licensure issues.

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Endnotes 

¹ https://www.sandiego.gov/treasurer/taxesfees/btax/btaxhow
² John Rapp & Son v. Kiel, 159 Cal. 702, 115 Pac. 651 (1911)
³ https://ttc.lacounty.gov/business-license-general-information/
⁴ http://www.calgold.ca.gov/
⁵ San Diego Municipal Code section 31.0130
⁶ https://www.sandiego.gov/treasurer/taxesfees/btax/btaxhow
⁷ https://finance.lacity.org/how-register-btrc
⁸ https://finance.smgov.net/doing-business/business-license/frequently-asked-questions and Santa Monica Municipal Code 1.08.010
⁹ https://www.sandiego.gov/sites/default/files/dsdib540.pdf
¹⁰ https://www.sandiego.gov/sites/default/files/10_key_steps_-april_2019.pdf

This article is not intended to serve as legal advice and is offered for educational purposes only. The information provided should not be used as a substitute for independent legal advice and it is not intended to address every situation that could potentially arise. Please be aware that laws, regulations and technical standards change over time. As a result, it is important to verify and update any reference or information that is provided in this article.