Taking the Right Legal Steps to Launch a Business in California
The start of any new economic venture is an exciting time. However, it’s important to remember to take all necessary legal steps for proper business formation. It’s a smart idea to consult a business law attorney who can help you select the type of organization best suited to your needs and objectives.
Choosing a business structure is one of the first decisions you’ll need to make. Your choice of entity will have tax implications as well as impacting your management and operational model. California recognizes the following legal structures for a business:
- Sole proprietorship — One individual owns and operates the business and is responsible for all taxes and liabilities.
- Corporation — This entity exists independently of its owners and protects them from personal liability. A corporation pays taxes at the entity level.
- General partnership — Two or more partners own the business, with some or all managing the operations, and all are liable jointly. The partners’ individual profits are taxed as personal income.
- Limited partnership — At least one person is a general partner who is fully liable. Other partners’ liability is limited to the extent of their shares.
- Limited liability company — An LLC offers protection similar to a corporation but is not a taxable entity. Typically, members pay taxes on their individual returns based on the allocation of profits.
- Limited liability partnership — This is similar to an LLC. However, in California, only attorneys, architects, and accountants may form an LLP.
Most of these business structures are required to file organizational documents with the California Secretary of State’s office. An experienced business law attorney can prepare and file those documents on your behalf.
The next step in starting your own business is to file all necessary tax-related and operational documents. You will need to apply to the federal government for an employer ID number (EIN), which becomes your ID number for taxes and other purposes. There may be other filings depending on your business structure and type of industry. For example, if you have an LLC, you must file a Statement of Information within the first 90 days of registering the business and again every two years thereafter.
Next, if you plan to have employees, you must adhere to federal and state employment laws, such as those that mandate minimum wage and overtime pay and prohibit discriminatory hiring. Your attorney can assist you with employment agreements, wage and hour issues and other matters pertaining to the law of the workplace.
At Schlecht, Shevlin & Shoenberger in Palm Springs, California, we are pleased to provide the Coachella Valley community with business and employment law services. You can schedule a consultation by calling 760-320-7161 or contacting us online.
