Have a great business idea in California that you need to put into action? Over the last few decades, startups have taken over, and some of the best are not limited to tech startups. They are in every industry, from health to consumer and retail, e-commerce, artificial intelligence, financial tech (e.g., Stripe), supply chain (e.g., Instacart) and more. Getting started with your startup business, however, is the hard part. There are laws and regulations that must be followed. Getting it right can mean either a solid foundation from which your business will grow or a rocky foundation from which your business may fail.
At Law Office of Aletha J. Smith, PC, we want your startup to grow. Our startup attorney based in San Bernardino County will help you get established with the best business structure for your idea while also meeting all your legal obligations to help you avoid future fines or potential lawsuits. Contact us at (909) 222-6680 to schedule a Business Formation Consultation today.
Startups and the Importance of Business Structure
One of the first, and most important, decisions when setting up your startup is which business structure to use.
The main business structures to choose from are:
- Sole proprietorship. The most straightforward and affordable business structure to set up, a sole proprietorship is a single-owner business. It may suit solopreneurs and consultants conducting low-risk business activities.
- Partnership. A partnership is owned by two or more partners whose personal liability depends on the type of partnership set up (general, limited, or limited liability (LLP)). LLPs are often useful for professions such as lawyers, financial advisors, and accountants.
- Limited liability company (LLC). An LLC combines the features of a sole proprietorship or partnership and corporation. The structure suits a range of medium to high-risk small businesses that are seeking a simpler alternative to incorporation.
- Corporation. A corporation has a separate legal identity from its owners, limiting their personal liability. However, corporations are expensive and complex to set up and run. Incorporation may be attractive to startups requiring large amounts of venture capital or maximum liability protection.
The structure of your startup has long-term legal, financial, and tax consequences so it's important to choose wisely.
Startup Legal Services in California
When setting up your startup, you should engage a lawyer to advise and assist you on a range of matters.
Choosing a Business Structure
A business lawyer can explain the business structures available, the pros and cons of each, and which may be the best choice for your startup. They can also advise you of any city, county, state, and federal regulatory requirements, such as licenses, permits, and professional registration.
Drafting Initial Documents
There's a lot of paperwork involved when starting a new business. An attorney can draft all the necessary initial documents, including:
- Partnership agreements
- Operating agreements
- Articles of incorporation
- Investment agreements
- Employment contracts
- Service contracts
- Website terms and conditions
- Privacy policies
- SaaS agreements
- Venture financing documents
In addition to preparing contracts for you, a lawyer can review and advise you on any business contracts prepared by third parties, like clients, suppliers, or landlords (e.g., commercial leases).
Protecting Your Intellectual Property
A lawyer can assist you with patent, trademark, and patent applications to protect your business's intellectual property.
Providing Ad Hoc Advice
There is a range of other legal issues that can arise in the course of setting up and running a startup business. These include tax, capital raising, and employment issues, like determining employee stock options and termination.
Identifying Any Legal Risks
Once a business lawyer has an overview of your business and what it does, they can identify and explain any legal risks or potential issues that may arise. They can advise you on how to avoid them and best protect your business.
Making Sure You Comply with Regulatory Laws
The government regulates the activities of businesses, including startups. Five main areas of law can be significant and could impact your startup in California. These five core areas include:
- Advertising restrictions (to protect consumers)
- Employment and labor laws (to protect employees, provide safe working conditions, etc.)
- Environment regulations (to protect the environment)
- Data security and privacy protection (to protect sensitive data and other information collected from employees, customers, clients, business transactions, etc.)
- Safety and health (to protect employees from unsafe and hazardous work conditions, etc.)
These five areas are regulated by the federal government, state governments, and local governments. The layering of laws and regulations can make compliance more difficult, but a well-versed business attorney knows the laws and regulations and will ensure compliance.
Five Factors to Consider before Starting a Business in California
Starting a business can be risky if adequate planning and due diligence are not undertaken. There are many issues to think about before setting up your business, and here are just a few of those things.
1. Nature of your business
Clearly outlining the nature of your business helps guide many of the choices you make when starting a business, such as choosing a business structure. This includes identifying the product you are selling or the service you're providing, your target audience, and where the business will be based.
One of the best ways to think through these issues is in a detailed business plan.
2. Business structure
The best structure for your business depends on a variety of factors, including the number of owners involved and how the business will be funded. Its structure will determine the business' tax obligations and the personal liability of its owners, so it is crucial to take time to consider the issue.
One of the biggest questions when starting a business is how it will be funded. Are you funding it personally from savings or via a business loan, are family members contributing, or will you seek external investment?
Will your business need to hire employees? If so, you need to factor salaries and any other compulsory employee contributions into your financial planning. You will also need to familiarize yourself with the relevant federal and state employment laws.
There are also various state and federal regulations on businesses (as already noted), depending on the business structure and its activities. It is important to understand all of these compliance requirements, such as registration requirements, financial reporting, and other record-keeping obligations.
A business lawyer can advise and guide you on many of these issues.
Contact a Business Startup Lawyer in San Bernardino, Riverside, Orange and Los Angeles County Today
At Law Office of Aletha J. Smith, PC, we want to help you start your business from its conception. Our experienced business startup lawyer in San Bernardino, Riverside, Orange and Los Angeles County will get your business up and running quickly. We will make sure your startup is structured properly for efficiency's sake and to minimize risk. We will make sure your business complies with all relevant laws and regulations. We will provide the legal services you need to succeed.
Contact us today by filling out our online form or calling us directly at (909) 222-6680 to schedule a Business Formation Consultation. We look forward to creating a productive business relationship.