Starting a Business in California

There are a lot of important choices to make and a variety of rules and procedures that need to be followed when you are starting a business in California. The amount and nature of the paperwork required will be determined by the type of business you intend to create. It is not possible to find all of the different filing requirements in one place, but the information below should help you get off to a good start with your new business.

One of the best ways to begin the process of starting a business in California is by creating a detailed business plan. This plan will be a document that details all of the different aspects of your business. There are many facets of your business to consider when developing a business plan including location, promotion, advertising, marketing and sales. To find a tutorial that will help you create your business plan, go to the U.S. Small Business Administration's website.

If you would like assistance with finding a location for your new business, you can contact the California Business Investment Services department in the Governor's Office of Economic Development. CalBIS offers their site selection services to site selection consultants, real-estate executives and businesses. Their services are tailored specifically to the type of business you intend to create.

You must also select a structure for your business. Below you will find a list of the different business entity types available in California, along with a brief description of their respective structures. Prior to making a final decision on the type of entity you will form, you should seek advice from private tax and legal advisors.

Sole Proprietorships

If your business will be owned and operated by the same individual, you will need to set up a sole proprietorship. The sole proprietor will be liable for the business's obligations and taxes. He or she will also receive all of the business's profits and will have total control over the business. In order to form a sole proprietorship under a name different from the owner’s name, you must file a Fictitious Business Name Statement with the county in which the business is located. You will not need to file any formation documents with California's Secretary of State, but there may be other required paperwork based on the type of business.

Corporations

In California, a corporation exists separately from its owners by law. Taxes will be imposed on the corporation itself and on the shareholders. However, the owners of the corporation will have very little personal liability. In this type of business structure, additional capital can be generated through the sale of stocks and bonds, and the corporation's longevity can continue even after the owners have died. There are a variety of options available, so you should seek legal counsel before forming this type of entity. In the state of California, you must file Articles of Incorporation with California's Secretary of State to form a corporation.

Limited Liability Companies

In California, a Limited Liability Company is taxed differently than a corporation, but it still offers liability protection to the owners. An LLC can be managed by one or more members or managers. To form a Limited Liability Company, you must file the appropriate documents with the California Secretary of State. Members must also endorse an operating agreement pertaining to the LLC's affairs and business conduct. However, this operating agreement will be kept at with the LLC's other records rather than filed with the Secretary of State. You must file an Articles of Organization form with the Secretary of State to create an LLC in the state of California.

General Partnerships

General Partnerships in California must include at least two people participating in a business for profit. All partners in a GP are personally liable both jointly and separately for the obligations and debts of the company unless agreed upon by the claimant or provided by law. The partners' profits will be taxed as personal income. A Statement of Partnership Authority must be filed with California's Secretary of State in order to register a General Partnership at the state level, but this is optional.

Limited Partnerships

A Limited Partnership in California may provide some partners with limited liability. At least one general partner must act as controlling partner, and there must be at least one limited partner that will have liability limited by the amount of control possessed by that limited partner. In a Limited Partnership, general partners have unlimited personal liability for the obligations and debts of the company. A Certificate of Limited Partnership needs to be filed with California's Secretary of State in order to form an LP.

Limited Liability Partnerships

Limited Liability Partnerships are partnerships that are involved in practicing land surveying, practicing engineering, practicing architecture, practicing law, or practicing public accountancy. LLPs may also provide facilities or services to another California LLP that practices law or public accountancy, or to a foreign LLP. Limited Liability Partnerships must keep a certain amount of insurance by law. An Application to Register a Limited Liability Partnership needs to be filed with California's Secretary of State in order to form an LLP in California.

In order to choose the best possible business structure for your new venture, you should take into consideration the purpose of your business, who will be in control, and how you would prefer to be taxed. Once you have chosen the type of company you would like to create, it is also helpful to seek legal counsel in order to ensure that you have completed all of the necessary paperwork and that your business meets all applicable regulations.

Allow us to help you attain success by starting your new business off on the right foot.
Call Lopato & Associates today to learn more about Starting Business California.