The license is the part everyone focuses on. The thirty days after it arrives decide whether year one is profitable or a mess you clean up at tax time.
1. Pick the entity and stop mixing money
Sole proprietor, LLC, or S corporation all have real trade-offs around liability, self-employment tax, and payroll obligations. Whatever you choose, the non-negotiable is a separate business bank account from day one. Commingled accounts cost more to untangle later than any entity election saves.
2. Get the EIN and register with the state
EIN from the IRS, free and immediate. Then California registrations: Secretary of State for an LLC or corporation, EDD for payroll if you will have employees, and CDTFA for a seller's permit if you sell tangible goods.
3. Carry workers compensation
As of January 1, 2026, California requires all licensed contractors to carry workers compensation coverage regardless of classification, including those with no employees. This replaced the exemption many sole owners relied on. Verify your status with CSLB rather than assuming you are exempt.
4. Put your license number where it belongs
Your CSLB number has to appear on contracts, bids, proposals, business cards, vehicles, and advertising. This is a routine citation and an easy one to avoid.
5. Know the home improvement contract rules
If you do residential work, the contract requirements are specific and enforced: a written contract before work starts, a right to cancel notice, and a down payment capped at the lesser of $1,000 or ten percent of the contract price. Progress payments cannot run ahead of the work performed.
6. Set up the books before the first invoice
QuickBooks configured for construction, with COGS broken out by category and jobs tracked from the first transaction. Retroactive job costing is expensive and inaccurate. Six months of unstructured transactions is a cleanup project.
7. Decide how you will track time
Labor is your largest cost and the hardest to reconstruct. Pick a method in week one and enforce it, because a system nobody uses is worse than a paper timesheet everybody fills out.
8. Plan for taxes quarterly, not annually
Estimated payments are due four times a year. Set aside a percentage of every deposit into a separate account from the beginning. Contractors who skip this discover the shortfall in April, when the money has already been spent on materials.
9. Build the paper trail for subs
Collect a W-9 and a certificate of insurance before a subcontractor starts, not at year end when you need to issue 1099s. Verify their license is active and their workers compensation is real. An uninsured sub's injury can become your claim.
10. Understand what happens if you go after public work
Public works changes your obligations substantially: DIR registration, prevailing wage rates, weekly certified payroll, apprenticeship requirements. Do not bid your first public job and figure out the payroll afterward. Set it up before the award.
None of this is complicated in isolation. It is only expensive when it gets handled in year two instead of month one.