3 Steps for Starting a Business in California

Jul 1, 2020 | Starting A Business

Starting a business can be a very exciting time! After you’ve chosen the name, business structure and gained the necessary funding, there are a few important steps you must take in order for your business to become a legal entity under California law.

1. FILING THE APPROPRIATE DOCUMENTS

Articles of Incorporation

The articles of incorporation/organization establish the existence of the business whether a corporation, LLC, etc. When filed, you are letting the State of California know you are in fact forming a business and the important details about the company.

Statement of Information

The Statement of Information (SOI) provides the state with information regarding the owners and officers of your company, important addresses and a description of the type of business you will be performing. The SOI must be filed within 90 days of the Articles of Incorporation/Organization in order to do business in the state of California.

Federal Employer Identification Number

An Employer Identification Number (EIN) is used to identify your business to the IRS for tax purposes. Your business will be issued a nine digit EIN that you must use to file your various business tax returns.

Licenses and Permits

Depending on what kind of business you start and the operations of your business, you may need to file for a certain type of business license or permit. There are many different types of licenses and permits, like alcohol license, zoning permits, and Seller’s permit, to name a few.

2. CREATING A BUSINESS PLAN

Many startups or newly formed businesses make the mistake of failing to properly set up a business plan for the company. It is highly recommended to sit down with your business partners to flesh out the important details of your business including the business purpose, your goals, a market analysis, financial projections, organization and management, etc.

One of the concrete ways of deciding on the organization and management of your business is by creating an LLC Operating Agreement or Corporate Bylaws.

LLC Operating Agreement

An Operating Agreement is a legally binding business document that fully lays out the operations, rules, percentages of ownership, roles, and many other important planning regulations for the business.

Although this document is not filed with the State of California, any LLC is required to have an operating agreement in order to prevent any conflicting opinions or actions among your business partners.

Corporate Bylaws

Much like the LLC Operating Agreement, all corporations in California are required to have Corporate Bylaws. Although Bylaws are not filed with the State of California, they must contain the rules and responsibilities of the shareholders, directors, and board of directors of your corporation.

A very important tip to keep in mind is that the Bylaws cannot contain anything illegal or conflicting with the Articles of Incorporation.

3. PROTECTING YOUR BUSINESS

Business insurance is a vital step in protecting your business from any potential and unforeseen liability.

General liability is the recommended type of insurance for all business. Depending on the insurance carrier you choose, liability insurance policies can provide protections for property damages and liability claims that might be made against your business. Without business insurance, costs associated with liability may have to be paid out-of-pocket.

There are many insurance companies that provide business liability protections. We advise you to consult with one of our attorneys to determine the best carrier for your business.

If you are in need of assistance with planning and starting your business, please feel free to contact our offices at (858) 926-5797.

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