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Entity Formation - Starting a Small Business in California Checklist

Posted by Paul D. Woodard | Apr 14, 2017 | 0 Comments

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The initial decision to start your own company can be the most difficult step to take in creating a small business. Even if you are familiar with the industry, practices, and market, the process of getting your business going can be daunting. Going through a simple checklist can help you decide what steps you need to take to start a small business in California. After that, the next step may be talking with your experienced San Diego business attorneys to help get your new company off the ground.

1. Create a Business Plan

Creating a business plan may be the most important initial aspect of starting your new company by providing an essential roadmap for business success. Your business plan should outline the future plans for your small business, including company description, market analysis, and financial projections. An established business plan may also be necessary when seeking to finance your business or getting a small business loan. Loan financiers are especially hesitant to loan money to new businesses that have no historical track record. Having a comprehensive business plan may help alleviate some of the loan financiers' concerns.

2. Financing Your Business

Starting a new business is not free. In most cases, you will need financial resources to start up a new company, including paying regulatory fees, rent, employee salaries, and paying for initial raw materials or inventory. The most common way to finance your business is through a bank loan. If you are turned down by the bank, you may be able to finance your company through other methods, including crowdfunding (i.e. Kickstarter), seeking money from friends and family, or using a credit card. There are serious risks associated with various types of financing options, so make sure you understand what is at stake.

3. Find the Right Location

The commercial real estate market is difficult in San Diego, and finding the right location can take time. However, even if your business does not require a physical storefront, you still need a place to work. Like the humble beginning of many tech companies and startups, starting in a home office or your garage is an option for many initial operations and may provide significant income tax benefits. Just ask Apple, Microsoft, HP, Google, or Harley Davidson, all of which were all started in a garage.

4. Register for Federal, State, and Local Taxes

You will not be able to operate for long without making sure you are registered with federal, state, and local tax authorities to make sure the government gets their fair share. You do not want Uncle Sam knocking at your door looking for his share. Similarly, you may need specific permits and business licenses depending on your business type. With many various rules and regulations, California can make it difficult and expensive to operate in the state. Consulting with your local business attorneys can help you avoid regulatory problems and financial penalties.

5. Choosing the Right Legal Entity

Choosing the right legal entity for your company is one of the most important long-term decisions for your company. Options include an LLC, S Corp, Partnership, Sole Proprietorship, or operating as an independent contractor. As a company, your legal entity will affect your liability and tax structure. Choosing the wrong entity can be an expensive mistake and could cost you more than your company. There are benefits and drawbacks to each option, so make sure you understand the differences between these types of legal entities.

6. Consult with Experienced Local Business Attorneys

If you have any questions about starting a new business in California, Butterfield Schechter LLP is here to help. We will make sure you are prepared for success in your future business venture, help you determine entity formation, and stay in compliance with upcoming regulations. Contact our office today with any questions you have on how we can help you and your business succeed.

About the Author

Paul D. Woodard

Paul Woodard practices in the areas of Employee Benefits, Employee Stock Ownership Plans, Pension and Profit Sharing Plans, ERISA, ERISA Litigation, Business Law, Qualified Domestic Relations Orders (QDROs), and Estate Planning.

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