How to Start a Property Management Company in California: The Broker License Rule for Collecting Rent

The short answer: if your company will collect rent, place tenants, or manage rentals for other people, you need a California real estate broker license. A city business license, a general contractor license, or a salesperson license by itself does not let you run a property management business. This rule shapes every other decision in the startup process, so read this section before you pick an entity name, sign an office lease, or take on your first owner.

This guide covers the licensing path, the entity filings, the fees, and the mistakes new operators make most often, in the order you will encounter them. It is informational content, not legal or tax advice. Talk with a qualified California attorney and a certified public accountant (CPA) before you make structural or tax decisions.

The Rule: Collecting Rent for Someone Else Requires a Broker License

Business and Professions Code (BPC) 10131(b) applies to a person who, for compensation or in expectation of compensation, does any of the following for real property owned by another person: leases or rents or offers to lease or rent it, places it for rent, solicits listings of places for rent, solicits prospective tenants, negotiates leases, or collects rents. If your company does any of that work for an owner, the law treats it as acting as a real estate broker, and you need a broker license from the Department of Real Estate (DRE).

Three points follow directly from that rule:

• A city business license is not enough. A city business tax or registration certificate lets you operate locally. It does not authorize brokerage activity.
• A general contractor license does not cover property management. Contractor licensing governs construction work. It does not authorize leasing, rent collection, or tenant placement.
• A salesperson license does not let you run the company. A salesperson works under a licensed broker. To own and operate a firm that manages rentals for others, you need the broker license, and the firm operates under a broker of record.

Who Is Exempt, and Who Probably Is Not

BPC 10131.01 exempts certain people from the 10131(b) rule:

• the manager of a hotel, motel, or auto or trailer park;
• the resident manager of an apartment building, complex, or court; and
• that manager's employees.

A limited exemption also covers certain employees of a property management firm retained to manage a residential apartment building, if they work under the supervision of the firm's broker of record. The conditions are specific. Read the statute itself and check with DRE before you rely on this exemption for any staff member.

An owner who manages their own property is generally not acting for another person under this rule. A firm that manages properties for investors is in a different position. Confirm your specific facts with DRE before you assume an exemption applies.

Materials and Costs You Will Need Before You Start

Gather these items before you begin. Confirm current amounts on the agency pages before you pay.

Item	Cost	Paid to
Salesperson exam	$100	DRE
Salesperson license	$350	DRE
Broker exam	$150	DRE
Broker license	$450	DRE
Fingerprint processing (Live Scan)	$49	Live Scan provider
Salesperson renewal	$350	DRE
Broker renewal	$450	DRE
Late renewal within two years, salesperson	$525	DRE
Late renewal within two years, broker	$675	DRE
LLC Articles of Organization (Form LLC-1)	$70	California Secretary of State
Stock corporation articles	$100	California Secretary of State
LLC name reservation	$10, lasts 60 days	California Secretary of State
LLC Statement of Information (Form LLC-12)	$20, every two years	California Secretary of State
Corporation Statement of Information (Form SI-550)	$25, every year	California Secretary of State
LLC minimum annual franchise tax (organized or registered 2024 through 2026)	$800	Franchise Tax Board
Fictitious business name statement	Statutory $10 plus $2 per additional name or owner, county fees may be higher, newspaper publication separate	County clerk-recorder

You will also need a California registered agent, a California office address, a business bank account, and transcripts for your broker coursework. Budget for the time as well as the fees. The experience and coursework requirements are the longest part of this process.

Step-by-Step: From Salesperson to Operating Broker

Step 1: Confirm that your activity requires the broker license

List every service you plan to offer. If any of them involve collecting rent, placing tenants, soliciting prospective tenants, or negotiating leases for an owner, plan for the broker path. Then check whether any BPC 10131.01 exemption applies to your staff or your own holdings. Get that answer in writing from your attorney or from DRE before you hire.

Step 2: Obtain a salesperson license

The salesperson license is the first stage. Pass the salesperson exam ($100), pay the license fee ($350), and complete fingerprint processing through Live Scan ($49, paid to the Live Scan provider). Use the DRE website at https://www.dre.ca.gov for current application steps.

Step 3: Meet the broker experience requirement

To apply for a broker license, you must have held a salesperson license for at least two years within the five years before you apply, and you must have been actively engaged as a salesperson during that time. If you do not meet that test, you may file a petition showing equivalent general real estate experience. Under BPC 10150.6, a four-year degree with a real estate major or minor may be treated as the equivalent of two years of experience. Plan your timeline around this requirement, because it usually sets the pace for the whole process.

Step 4: Complete the eight required college-level courses

Broker applicants complete eight three-unit college-level courses. Five are required: real estate practice, legal aspects of real estate, real estate appraisal, real estate financing, and real estate economics or accounting. The other three come from a list that includes property management, real estate office administration, and business law. Choose the property management course among your electives, because it matches the work you will be doing. Real estate practice must include implicit bias and fair housing components, along with a role-play exercise, under BPC 10153.2.

Step 5: Pass the broker exam and pay the broker license fee

Once your experience and coursework are in place, pass the broker exam ($150) and pay the broker license fee ($450). Keep copies of every application, transcript, and receipt. You will need them for renewals and for any DRE review.

Step 6: Form the entity with the Secretary of State

Most operators choose between a limited liability company (LLC) and a corporation. Both are filed with the California Secretary of State through bizfile Online at https://bizfileonline.sos.ca.gov/.

• LLC: File the Articles of Organization (Form LLC-1) for $70. The name must include 'limited liability company,' 'L.L.C.,' or 'LLC,' and it may not contain 'bank,' 'trust,' 'trustee,' 'incorporated,' 'inc.,' 'corporation,' or 'corp.' You can reserve a name for $10 for 60 days. California does not allow a domestic series LLC, and an LLC cannot render a licensed professional service, in which case professional corporations are used instead.
• Corporation: File Articles of Incorporation for $100. A corporation that wants a DRE corporate license needs an officer who is a licensed broker. When that officer is currently licensed, the DRE corporation license fee is $450. For other cases, check with DRE.

Both entity types must maintain an agent for service of process who resides in California or is a corporation holding a Corporations Code 1505 certificate. An LLC must also keep an office in California. That office does not need to be a place of business activity, but it must exist.

Step 7: Set up the operating structure as broker of record

The company needs a broker of record, a written management agreement with each owner, and a process for handling tenant rents and security deposits. Put every owner relationship in writing before you accept rent or deposits. Trust account handling, record keeping, and any reports DRE requires are rules you must confirm directly with DRE before you open accounts or start collecting funds. This is the area where a mistake is most expensive, so do not rely on general advice to fill the gap.

Step 8: Register for the taxes and employer accounts that apply

You do not need a general state business license. California has none. Register for each obligation that fits your operations:

• Franchise tax: An LLC organized or registered in 2024 through 2026 owes the $800 minimum annual franchise tax from its first year. An LLC whose first taxable year begins in 2027, 2028, or 2029 pays $400 in year one under RTC 17941(g)(2), so confirm the first-year amount with the Franchise Tax Board at https://www.ftb.ca.gov. A newly incorporated corporation or qualified S corporation owes no $800 in its first taxable year.
• Sales tax: Register with the California Department of Tax and Fee Administration (CDTFA) only if your business sells taxable goods. The seller's permit is free. Statewide sales tax is 7.25% plus district taxes, with city rates running 7.25% to 11.75%.
• Employees: If you hire staff, register with the Employment Development Department (EDD). State minimum wage is $16.90 in 2026 and $17.40 starting January 1, 2027. Verify the 2027 figure before you build your payroll budget.

Step 9: Check the local layer

Most California cities charge a local business tax or require a registration certificate. Of the 483 cities, 445 report revenue from one. There is no common formula, so the answer depends on the city where your office sits. Counties license only regulated activities. Some cities also require rental registration or regulate rent under local rent control rules. Check with the city before you sign your office lease, because the local requirements can change your startup budget and your compliance calendar.

Step 10: Calendar your recurring filings

Set reminders for the filings that keep the company in good standing: the Statement of Information (due within 90 days of filing the articles, then every two years for an LLC or every year for a corporation), your DRE renewal, and the fictitious business name renewal. A missed Statement of Information carries a $250 penalty. A fictitious business name expires after five years.

Fictitious Business Names: Filing a DBA

If your company will operate under a name other than its legal entity name, file a Fictitious Business Name Statement with the county clerk-recorder in the county of your principal place of business. File within 40 days of starting to do business. Publish the statement in a newspaper once a week for four weeks. The statutory fee is $10 plus $2 per additional name or owner, but counties charge more, and the publication fee is separate. Renew before the five-year expiration. Review the state guidance at https://www.sos.ca.gov/business-programs/business-entities/fictitious-business-names.

Common Mistakes to Avoid

• Collecting rent before you hold a broker license. Under BPC 10131(b), collecting rent for an owner is brokerage activity. Starting the business early does not change that.
• Treating a city business license as your authority. A local registration lets you operate locally. It does not replace the broker license.
• Using a general contractor license to cover management. The contractor license covers construction work. If your company does repairs, the contractor license threshold is $1,000, so confirm your obligations with the Contractors State License Board before you take on that work.
• Hiring leasing staff without checking the exemptions. Only the specific roles in BPC 10131.01 are exempt, and the residential apartment exemption depends on supervision by the broker of record.
• Operating on a salesperson license. A salesperson works under a broker. Running the firm requires the broker license.
• Assuming an owner's exemption covers a management firm. An owner managing their own property is in a different position from a company managing property for others.
• Guessing at trust account rules. Confirm trust fund handling, record keeping, and reporting requirements with DRE before you accept any tenant money.
• Naming the company with a restricted word. A name containing 'trust' or 'bank' will be rejected for an LLC. Check the name availability before you print business cards.
• Forming an LLC to render a licensed professional service. An LLC cannot render a licensed professional service. Ask your attorney whether professional corporations apply to your services.
• Forgetting the recurring filings. A missed Statement of Information carries a $250 penalty, and a late DRE renewal costs more than an on-time one.

Expected Results

Following this path is likely to leave you with a legally structured company, a broker license, and a clear set of recurring obligations. Companies that work through each step in order often find that the experience and coursework requirements, not the filing fees, set the timeline. The results you see will depend on your experience, your local city requirements, and how carefully you confirm the points flagged for DRE review. Treat this outline as a starting checklist, not a guarantee of any outcome.

Do You Need a Real Estate License to Manage Property in California?

Yes, if your company will collect rent, place tenants, solicit prospective tenants, negotiate leases, or do any of those tasks for an owner in exchange for compensation. The broker license is required under BPC 10131(b). The exemptions in BPC 10131.01 cover certain hotel, motel, park, and apartment managers and their staff, along with a limited residential apartment exemption tied to the broker of record. An owner managing their own property may fall outside the rule, but confirm the facts with DRE before you rely on it.

Next Steps

Start with the eligibility question: which services will you perform for owners? Then map your path to the broker license, choose your entity, and confirm the local and trust account requirements before you accept your first management agreement. Use the California Secretary of State at https://www.sos.ca.gov/business-programs for entity filings, and the DRE at https://www.dre.ca.gov for licensing questions.

Disclaimer: This article is informational content, not legal or tax advice. Licensing, entity, and tax rules change, and your situation may differ from the examples here. Consult a qualified California attorney and a CPA before you form the company, and confirm all fees, deadlines, and trust account requirements with the relevant agency.