by LawInc Staff
February 9, 2017
Starting a business in California is very popular these days. California is the number one state for venture capital, accounting for over fifty percent of all U.S. invested business venture capital last year. This corresponds to quadruple the national average.
California has also announced hundreds millions of tax credits to those starting or seeking to grow a business in California. This makes California one of the most desired states to start a small or large business.
Here are 7 important steps to follow when starting a business in California:
1. Draft a Business Plan
Starting a business can be overwhelming. It’s very easy to become disorganized and lose vision of your goals. Prior to starting your business, take some time to map out what your goals are and the exact steps that must be taken to achieve those goals.
Timing is also critical to business success so also establish when those specific steps should be taken.
Too often, entrepreneurs dive in head first without thinking about the consequences of their actions. While the concept of starting a business may be exciting, bringing it to life can be laborious and exhausting.
By mapping out the future of the business, via a business plan, you can help account and plan for unexpected issues ahead of time.
For more information about creating a business plan before starting a business in California, visit the U.S. Small Business Administration (SBA) website.
2. Consult With a California Business Attorney
Consulting with a California attorney is extremely important when starting a business in California. With so many legal repercussions associated with a new business, it’s essential that you consider all legal obstacles from day one. So many businesses fail due to unexpected lawsuits.
A lawsuit can be crippling to your business and working with an attorney from the get-go will help minimize the impact of unexpected legal issues.
3. Form a Corporation or LLC
Perhaps the most imperative task when starting a business in California is forming a corporation or Limited Liability Company (LLC).
Corporations and LLCs help protect business owner from liability and also provide tax savings. Be sure to form a corporation or LLC, the right way.
Accordingly, an attorney should be involved with the process to ensure the corporation is able to withstand any lawsuits that may arise in the future. An improperly formed corporation or LLC can be invalidated if not properly formed and maintained.
Also be sure that you are complying with all securities laws associated with creating a corporation or LLC.
Specifically, make sure to file the proper securities exemption notices with the California Department of Business Oversight. Failing to comply with securities laws requirements can result in criminal penalties.
4. Register a Business Trademark
Trademark registration is imperative when starting a business in California since you want to ensure that you are able to protect your business name throughout the future. By registering a trademark with the United States Patent and Trademark Office (USPTO), you will be able to prevent others from using a confusingly similar business name. It can even help protect your website URL. While you’re at it, consider also trademarking your business logo, to inhibit copycats.
5. Comply With License, Permit and Legal Requirements
After forming a corporation or LLC with the state, you must ensure you are complying with all local requirements. Examples include obtaining a local business license and obtaining any necessary permits. Failing to obtain proper permits and licenses can lead to penalties.
Be sure to obtain a Seller’s Permit from the California Board of Equalization (BOE) if you will be selling tangible personal property.
For assistance with determining what licenses and permits might apply to your particular California business, visit the CalGold website.
Also be sure your California business is complying with the American with Disabilities Act (ADA). It’s extremely important that your business is ADA compliant. Failure to comply with the ADA can result in significant expenses associated with defending and settling ADA lawsuits. According to the California Commission on Disability Access (CCDA), the most frequent ADA claims against California businesses involve parking, route and entry accessibility, access within public facility and bathrooms.
6. Register For, Pay and File Business Taxes
So many business owners completely fail to realize the importance of taxes when starting a business in California. The California Franchise Tax Board is extremely vigilant about going after businesses who fail to file and pay their taxes.
Moreover, businesses that fail to pay taxes can have their California corporations or LLCs suspended which results in the business entity being completely disregarded for legal purposes. Some business owners who fail to pay taxes can even have their bank accounts levied. Paying taxes in California is absolutely critical.
Beyond avoiding the trouble associated with failing to properly file and pay taxes, California business owners should also consider what steps should be taken to maximize tax savings. By planning ahead, with a qualified accountant, you can avoid tax pitfalls and also help save money on taxes. For more information about tax savings, visit the California Tax Service Center Tax Credits and Deductions page.
If you will be hiring employees, be sure to visit this California page about paydays, pay periods, and the final wages. Also be sure to register with the California Employment and Development Division (EDD). The EDD handles California’s payroll taxes and registration is typically required after paying over $100 in wages in a calendar quarter.
7. Properly Hire and Pay Employees
There are many tax, compliance and liability issues associated with hiring employees so it’s imperative that you ensure you are complying with all employee related laws when starting a California business.
From a legal perspective, it’s very important to have employees sign an employment agreement and an employee handbook, which is regularly updated to account for any changes in the law.
Be sure your hiring and firing practices comply with California and federal anti-discrimination laws. Also make sure employee wages, work hours and working conditions comply with state and federal laws. For California employee information, visit the California Tax Service Center page on hiring workers. For federal information about hiring employees, visit the California Department of Industrial Relations Labor Commissioner’s Office page.
Almost all employers are required to obtain employee Workers’ Compensation insurance for employees. Workers’ Compensation laws create employer liability for any work related accidents, whether or not the employer was negligent.
Penalties apply to California employers who fail to comply. Coverage can be obtained from the State of California or from California licensed private insurance carriers. There is also an option to become a self insured employer. For more information, visit the California Department of Industrial Relations Division of Workers’ Compensation page.
Workplace postings, regarding employee rights, should also be posted at a California business location.
For information about protecting employees from job safety and health hazards, visit the California Department of Industrial Relations Cal/OSHA page.
As you can tell, starting a business in California can be a major undertaking. It’s important to carefully plan everything and consult with legal and tax professionals during the process.
This is only a brief summary of the issues to consider when starting a business in California. Laws and regulations are always changing so be sure to speak with a California business attorney before getting the process started.