Starting a Business

10 STEPS TO STARTING A BUSINESS

INTRODUCTION

An Overview of the Four Stages

This month's posting is the first of a multi-part series discussing the complicated process of starting and legally operating a business - breaking this process down into the following 10 basic steps:

1.                   Business Formation

2.                   Fictitious Name Statement

3.                   Business Permits and Licenses

4.                   Employer Identification Numbers

5.                   Employment Eligibility Verification (Form I-9)

6.                   New Hire Reporting Program

7.                   Withholding Requirements

8.                   Insurance Requirements

9.                   Workplace Poster Requirements

10.               Pay Taxes

These 10 steps have been organized chronologically, and should basically be accomplished in four general stages: Setting Up Shop; Getting Licensed; Hiring Employees; and Paying Taxes.  Rather than diving right into the 10 steps, this first article is meant to lay the foundation for the individual steps by describing the needs of every business within these four stages.  Subsequent postings will then discuss each of the 10 steps in more detail.

STAGE ONE - SETTING UP SHOP (Steps 1-2)

Establishing the Legal Structure of Your Business Entity

The first step to opening any successful business is simply setting up and naming the business entity itself.  This first stage requires two basic steps:

• Business Formation - forming your business entity (e.g. corporation, LLC, LP, etc.) and registering it with the California Secretary of State.
• Fictitious Business Name - naming your business and filing your Fictitious Name Statement with the County Recorder Clerk's Office.

After properly forming and naming your business, your business should now be established as a distinct legal entity. But that is only the beginning...

STAGE TWO - GETTING LICENSED (Step 3)

Obtaining Business Licenses & Permits

While you now have a legally formed business entity through which you can run your business, that alone doesn't mean your business is fully authorized to engage in the type of activities you wish to perform.  After forming your business, you must then obtain a variety of licenses and permits, depending on the type of business you intend to run (e.g. restaurant, bar, retail sales, etc.).

For example, if you are thinking of opening a restaurant in Los Angeles County, you may need to obtain any/all of the following licenses and permits:

• Alcoholic Beverage License ("Liquor License")
• Sales & Use Permit ("Seller's Permit)
• Public Health Operating License ("Food Service Establishment Permit)
• Building and Construction Permit
• Burglar Alarm Permit
• Business License (Business Tax Certificate)
• Conditional Use Permit (required for sales of alcohol)
• Industrial Wastewater Discharge Permit
• Land Use Permit
• Zoning Approval

Since the licenses and permits required for any business will vary depending on the type of business you are operating, it is impossible to provide an exhaustive list of every license or permit you must obtain.  However, since operating a business without all the necessary licenses and permits can subject you to fines and other nasty consequences, anyone operating a business should make it a priority to be fully licensed before commencing operations, or as soon thereafter as possible, to avoid any unexpected penalties.  And since not all licenses and permits can be obtained simply by filling out an application (such as liquor licenses or conditional use permits), it's probably a good idea to employ a lawyer to assist you in getting your business fully licensed. 

Stay tuned for a more thorough discussion of how to obtain all licenses and permits required for your specific business in subsequent postings.

STAGE THREE - HIRING EMPLOYEES (Steps 4-9)

Complying with Employer Requirements

The most complicated, convoluted and burdensome aspect of setting up a business In California is the need to comply with a litany of Federal and State requirements relating to employees.  The moment a business hires even one employee, it is subjected to an overwhelming barrage of government regulations and requirements.  Therefore, it is imperative that any business wishing to hire employees put systems in place to ensure compliance with these laws.  Accordingly, most of the steps required to properly set up and operate a business in California are related to these requirements for hiring employees.  This stage includes the following six steps:

• Employment Identification Numbers - obtain employment identification numbers, at both the Federal and State level.
• Employment Eligibility Verification - verify employment eligibility of all employees using I-9 Form.
• New Hire Reporting Program - comply with the New Hire Reporting Program in reporting all newly hired and re-hired employees to the California New Employee Registry.
• Withholding Requirements - set up systems to comply with Federal and State withholding requirements regarding withholdings from employees' wages.
• Insurance Requirements - obtain all required types of insurance for employees.
• Workplace Poster Requirements - obtain and display all required workplace posters.

Stay tuned for a more thorough discussion of these six steps in subsequent postings.

STAGE 4 - PAYING TAXES (Step 10)

Filing and Paying Your Business Taxes

Now that you've formed your business entity, acquired all necessary licenses and permits, hired employees and complied with all employer requirements, you can begin legally running your business.  But don't forget, there is one very important final step to properly operating your business: paying taxes.  Employers are taxed at both the Federal and State level, and the taxes paid vary depending on a myriad of factors - such as the form of business, the number of employees, etc.  Accordingly, because of the complexities involved in filing and reporting taxes, it is highly recommended you consult with a CPA, tax lawyer, or other experienced tax professional, to ensure that you're properly calculating and paying your taxes (and also to ensure you are not overpaying). 

Stay tuned for a more thorough discussion of how to pay your business taxes in subsequent postings.

SUMMARY

As can be seen, the process of starting and successfully [and legally] running a business in California can be extremely complicated and time-consuming.  Those wishing to start their own business should contact us, as we offer package deals for assisting you with all 10 steps of setting up and operating your business - so you can avoid the headache of navigating these burdensome legal and regulatory obstacles, and just focus on running and growing your business. Something you do best.