FAQ for Small to Midsized Businesses and Startups

Starting a business is a stressful, risky, and, above all, a rewarding endeavor. One of the most problematic issues that entrepreneurs face in the early days of their business or startup is whether they are doing everything right and abiding by both state and federal law. Making a mistake early on can cause problems for a company for years to come.

Here are the answers to some of the most frequently asked questions that we get about mid-sized businesses and startups in California.

What Licenses and Permits Will I Need for My Business?

The licenses and permits that you will need to run your business depend on what your business will do. For example, the licenses and permits that you will need to run a bar will be far different than they will be if you are running a brokerage firm.

The best way to know exactly which ones you will need to run and manage your business legally is to talk to a California business attorney. However, you can get a good sense of the licenses and permits that you will need by finding businesses that are similar to yours and seeing what they have. Bear in mind that certain licenses and permits are required by all of the different levels of government – federal, state, county, and city – and that you will need to satisfy them all to stay compliant.

What is the Best Legal Structure or Corporate Form for My Business?

There is no “one size fits all” corporate form, or a single legal structure that is always the best for a particular business. Instead, there is a wide variety of corporate forms, and each one has its own set of unique strengths and weaknesses.

Generally, if your business venture is going to be one that carries a significant amount of risk, or that will have a lot of income or expenses, then you will want to choose a corporate form that provides a lot of legal protection and shields you from being personally liable for the obligations of your business. In these cases, you might want to consider incorporating or at the very least forming a Limited Liability Company (LLC). On the other hand, if your venture is small and relatively safe, then you might not need a corporate form at all.

What are the Pros and Cons of Incorporating My Business?

When you choose to form a corporation for your business, you are adopting the legal structure that provides the most legal protection for the owners of your company. There are significant benefits to this: If your company gets sued, ends up incurring financial obligations that it cannot meet, or goes bankrupt, then the company’s obligations do not become personal obligations. As long as the proper formalities are kept, the corporate form insulates you from having to pay those obligations out of your own pocket.

However, these benefits may come with other drawbacks. Corporations may be taxed differently than other corporate forms and have stricter requirements, like board meetings and bookkeeping obligations.

What is the Easiest Way to Form My Business?

If you do not think that your business will incur any risk or other obligations that you will not be able to cover out of your own pocket, if you are running the business on your own, and if you just want to get started, then the easiest way to structure your business may be as a sole proprietorship.

Sole proprietorships offer no significant legal protections to the owners of the business, but also have very few requirements. It is the only business model that does not even require you to get an Employer Identification Number (EIN). In fact, forming a sole proprietorship is so easy that many people who run their own business have done it without knowing it.

What Records Should I Keep?

The records that you should keep and the records that you are required to keep may be different.

When you run your own business, especially in the early years, you should keep records of everything because they help you identify areas of loss and gain. The records that you are required to keep depend on the corporate form that you have chosen for your business. Forms that offer more legal protections, like corporations or LLCs, require more record keeping than those that offer fewer protections, like partnerships or sole proprietorships.

How Can I Register a Name for My Business?

If you are creating a business and want the name of the business to be something different than your name, you will have to register the name of your business with the appropriate authorities.

If you are running a sole proprietorship or a partnership, you can generally register your business’ name with the county in which your business will operate by obtaining the correct application and filling it out. On the other hand, if you are running your business in a different legal structure, you will have to register your business’ name with the California Secretary of State by filling and returning a business name registration application.

How Do I File a Doing Business As Form?

“Doing Business As,” or DBA, allows a business to operate under a name that is different from its owners.

In California, filing for a DBA is the same as registering a name for your business, outlined above.

I Have Other Questions. How Can I Get More Personalized Help?

Every business venture is different, spanning the spectrum from selling handmade jewelry out of your garage to running a multi-million dollar venture capital firm. Each one has different risks that need to be accounted for and protected against, and every owner who runs a business has their own level of risk aversion.

The best way to get the personalized help that you need for your business is to contact a business lawyer like Mohsen Parsa. Call his Los Angeles or Irvine office or contact him online to set up a consultation and get the answers you need to the pressing questions you have.