Starting a Business in California

If you decide to start a business in California, you need to be aware that many legal issues are surrounding that particular activity, such as choosing the right business structure, selecting the appropriate name for the company and/or the product, and deciding on how to fund your business. Besides, you also need to have in mind what potential liabilities you face with your proposed business, and also what licenses and permits you will need for your company.

The essential thing in your business is finding an experienced transactional attorney who can guide you make success in today’s economy. Today, deals cannot be verified with promise or handshake. This site will help you find necessary information which can help you start and also protect your business.

Business Entity

Once you have taken necessary steps to start your business, you should find a way to make your business legal. Primarily, you need to decide which legal structure fits for your business. There are four main types: sole proprietorship, partnership, corporation and limited liability company. Ask yourself which one provides for you.

A sole proprietorship can be a good option if you have no assets, your business is not likely to be a source of liability, and you don’t expect earning more than $50,000 a year. However, if you have assets to protect, or believe your business can generate at least $50,000 in income, then choosing either a corporation or a limited liability company is a good option for you. The best you can do is to discuss your decision with the local attorney who can save you a lot of time and money in the future.

Sole Proprietor

If you are not suitable to form a corporation, or a limited liability company, because of reasons as mentioned above, you can remain a sole proprietor.

To do so you need to get:

  • a taxpayer identification number or EIN
  • a unique, fictitious business name
  • a local city license for business
  • a seller’s permit in case you will be selling taxable goods
  • other city or state permits which may be required for a particular business

Partners

However, if you have plans to go into business with someone, you should get a commitment. It is an agreement that determines your relationship, expectations, and financial responsibility. In case you want to form a corporation, make sure that you have a shareholder buy-sell agreement. If you choose to create a limited liability company, make sure the Operating Agreement includes buy-sell provisions as well.

If your plans include operating as a general partnership, be certain that the new co-owners can contribute to your products and/or services as opposed to money. If so, you should consider starting a single owner business with contractual agreements with individuals who can grant products and/or services. In this case, you are able to find the replacement, if the party fails to perform their obligations. So, if you decide to operate as a partnership, find a way to execute a written partnership agreement which includes provisions explaining under which circumstances partners can leave the business.

Starting a business on your own is always the best decision. However, if co-ownership is important, be sure to have a properly written partnership agreement.

It should include:

  • the request for forming a corporation or limited liability company if a particular goal is achieved
  • buy-sell provisions that allow for the buyout of any co-owner at a set price if the co-owner fails to
  • perform his job in cases of death, disability, bankruptcy, or divorce involvement in case they are co-owners with their spouses

Name of Company

After you deal with the legal structure of your future business, you need to come up with the name under which the business will operate. The name should not be too general; it should describe your products or/and services in short and it should be easy to remember. The best way is to wind three to five possible options, and then you need to check if names are available. If you find the one that is available, you should enlist the name as DBA with the county.

Business Plan

Once you are done with legal structure and company name, you should prepare a business plan. It will be your guide and help you understand the company’s vision, its market, and target customers, but also strengths and weaknesses, potential competitors, as well as risks and required budget. Further, your business plan can serve as the primary document to present the company to potential investors.

Finances

The most common mistake in new businesses is starting and operating with insufficient capital. It is crucial that business is appropriately funded to make a success. Funds can come from different sources, such as family loans, bank loans, the stock sale as well as from other sources.

Location

You also need to have in mind where will your business be located. You should know that there are costs for a city business license, as well as for city taxes for your intended location. On the other hand, you can find better taxes in neighboring cities. Consider if you need a commercial office or industrial space, or you can run your business from your home. You can also rent the space, but be sure that properly located and according to the services your business will offer. Besides, you need to negotiate beneficial commercial lease terms, which are entirely different from residential lease terms. Note that every commercial lease needs to be reviewed by an attorney before it is signed.

Customers, Service Providers, and Employees

If you want to be successful, prepare the grounds for potential clients. Make customer contracts, order terms, warranties, shipping costs, refund policy and other agreements and contracts.

Get the necessary items such as phones, computers, electrical and cleaning services which are all going to help you provide proper service.

Find the employees who have certain qualifications, determine your employment policies, discuss their benefits, responsibilities, and consequences. It is advised that all hired individuals get employee handbook prepared by an attorney.