What Does It Take to Start a Business?

As a San Diego North County business attorney, I am frequently asked: “What does it take to start a business?” Generally, there are six steps to take into account when starting a business:1. DECIDE ON A LOCATION FOR YOUR BUSINESSWhen deciding on a location for your business, certain factors need to be taken into consideration such as liabilities, taxes, incorporation costs and fees; where you want to do business; foreign entity doing business; raising capital; and reporting requirements. The decision to incorporate the entity in another state should only be made after weighing the advantages against the disadvantages. These factors should be discussed with your business attorney before you decide on a location for your business.2. DETERMINE THE APPROPRIATE BUSINESS STRUCTUREThere are several business structures that are used in setting up a business. Here are some of the most common entities used, their requirements and liability issues:Sole Proprietorship is a business owned and operated by an individual. Sole proprietorships are the basic forms of business organizations, which require no formal type of government filings to form the business and are not required to follow any type of operating formalities. The benefit of a sole proprietorship is the taxability of business income and the deductibility of business losses on the business owner’s individual tax returns. The liability of a sole proprietorship is that the business owner is personally liable for all liabilities and obligations of the business, which liability extends, not only to liabilities in excess of the amounts invested in the business including any insurance coverage, but also to the business owner’s personal assets.General Partnership is an association of two or more persons to carry on a business. A general partnership is another type of business entity which is easy to form but requires a written partnership agreement to govern the operations of the partnership and the relationship among the partners. Compliance requirements for a partnership are minimal and require that a Statement of Information be filed with the State of incorporation and the partnership maintains records to provide to the partners. The liability of a general partnership is that a partner’s liability not only extends to that partner’s percentage interest in the business but also to the partner’s personal assets as well.Limited Partnership is a partnership formed by two or more persons that has one or more general partners and one or more limited partners as co-owners of a business. A written partnership agreement should be established between the business and its partners and a written partnership agreement should also be established between the partners themselves establishing the classes of general or limited partners. Compliance requirements for a limited partnership require more formal filings with the State, such as, filing a Certificate of Limited Partnership and obtaining an agent for service of process. The liability of a limited partnership is that the general partner is personally liable for the partnership’s debts, obligations and liabilities. However, the limited partnership allows limited partners to avoid subjecting their personal assets outside of their investment. A limited partner is granted limited liability as long as the partner does not participate in the control of the partnership business.Limited Liability Company is an entity having one or more members, organized under State statute. Limited liability companies have all the powers of natural people, which include the ability to transact business, sue or be sued, make contracts, own and transfer real estate, and issue stock subject to limitations. Compliance requirements for a limited liability company require more formality in formation and operation, such as, filing Articles with the State, filing a Statement of Information with the State, obtain an agent for service of process, and establish an operating agreement. The liability of a limited liability company is limited for all its members, managers and officers. As long as the State’s statutory requirements are followed, the members, managers and officers of the business are not personally held liable for any debt, liability or obligations of the business arising in contact, tort or otherwise solely by being a member, manager or officer of the business.Corporation (commonly known as a C or regular corporation), is by far is the most common and well known form of business entity. All corporations are governed by the State of incorporation and are treated as separate and distinct legal entities separate from its owners with all the rights to own property, make contracts and sue in its own name. Compliance requirements for a corporation require strict statutory compliance, such as, filing the Articles of Incorporation with the State, filing a Statement of Information with the State, obtaining an agent for service of process, establishing bylaws, issuance of stock, establishing a board of directors, appointment of officers, holding annual shareholder meetings, holding annual director meetings, and maintaining books and records of written minutes. The liability of a corporation is limited for all its shareholders and the shareholder’s personal liability is limited to the investment. As long as the State’s statutory requirements are followed, the shareholders, directors and officers of the business are not personally held liable for any debt, liability or obligations of the business arising in contact, tort or otherwise.Subchapter S Corporation (commonly known as an S corporation), is a corporation that has elected to be taxed under Subchapter S of the Internal Revenue Code and is treated as a partnership for most tax purposes. The income of the S corporation is passed through to its shareholders therefore avoiding double taxation. Other than the different tax treatment, the S corporation operates identically to that of a C or regular corporation. Compliance requirements for an S corporation are identical to that of a C or regular corporation, however, for a corporation to qualify as an S corporation certain requirements must be met. The liability of an S corporation is identical to that of a C or regular corporation.3. FILE YOUR TAX AND EMPLOYER IDENTIFICATION DOCUMENTS
Like any individual, an incorporated entity must have its own social security number. This number is called the Employer Identification Number (EIN). This number will allow the incorporated entity to act as a sole and separate entity and allow it to pay taxes and open bank accounts. This number may be obtained through your business attorney or going online to the IRS web site.4. OBTAIN THE NECESSARY PERMITS, LICENSES AND REGISTRATIONS
Some of these permits, licenses, and registrations may include:
Patent and trademark protectionSecurities and Exchange Commission (SEC) filingFile as a foreign entityCounty filingAnnual state or states filingSpecific licenses to conduct certain types of businesses5. CREATE A BUSINESS PLANIt has been said that the most important step in running a business is the creation of your business plan. A business plan is a detailed description of your business which allows you and others to evaluate your business. Business plans generally include the following:Overview of your businessDescription of your product or servicesSales plans and forecasts for your businessMarketing and advertising strategies for your businessFinancial informationWho is your competition?6. COMPLY WITH ANNUAL REPORTING REQUIREMENTSYour business will need to conduct annual reporting in the state of its incorporation and in any state in which the business has qualified to do business, as well as on the federal level, such as the IRS and/or the SEC.

3 Great Business Ideas With Low Investment Requirements

Do you have big dreams of starting a business but have little money to get it off the ground?Do you feel that lack of money is the reason you have not started your business yet?Well, believe it or not there are many businesses you can start that don’t require a lot of capital.Read further to discover three great business ideas with low investment requirements you can start right from your home.Start on a ShoestringWhat is great about these businesses is that you can start them on a shoe string budget. More and more people today are finding ways to start small businesses just like these with little or no money.What also makes these businesses great, especially for someone where this is their first business, is that you can start out doing them part-time. Then as the business grows, you can then decide to go all out and do it full-time.#1 Home Cleaning ServiceA home cleaning service is one of the easiest businesses to start. Why? Because you already possess the skills to start this type of business (you clean your home, don’t you?).A home cleaning service is great for someone who likes things neat and tidy, or someone who is known to be a clean freak at heart.There is also great demand for home cleaning businesses. In recent years, a rising divorce rate has produced an unprecedented number of working single parent homes, and roughly 15% of the American workforce holds two or more jobs.And today, as we are living busier lives with little time for even the basic things, like cleaning, it’s no wonder more people are hiring home cleaning services for help around the home.Not to mention cleaning house is one of the least desirable things people enjoy doing.Getting started is relative easy. Start up cost is minimal because the supplies you will need you can purchase at any hardware or retail store.Start Up Cost: less than $500What You Will Need: business license, cloths, cleaning products, vacuum, duster, broom, bucket and mop, ladder, transportation, phone#2 Personal OrganizerDo you like organization? Are you always helping others stay tidy? If you so, then being a personal organizer could be the perfect business for you?What is a personal organizer? According to the National Association of Personal Organizers:”Personal organizers help people to get rid of the chaos, clutter and confusion in their lives by tackling their bulging closets, overstuffed garages and ceiling high piles of papers.” Personal organizers bring organization and peace of mind to the lives of their clients.Just like a home cleaning service, a personal organizing business is in great demand because more people today are living busier and more hectic lives with little time to tackle the most basic essential needs.As people lives and living spaces become more cluttered, these homeowners and apartment dwellers seek out personal organizers to help them get uncluttered and organized.Not only is this one of those great business ideas with low investment requirements, but it is also a business you can do part-time.Then as your business grows, you can decide to go full-time. No specialized skills or knowledge is required, although having organizational and people skills are great traits to possess.Start Up Cost: less than $500What You Will Need: business license, computer, a printer, a fax machine#3 Auto DetailingIf you are passionate about cars, a fanatic about keeping your own car looking show room finish, or enjoy cleaning other people cars, then you should consider an auto detailing business.Auto detailing is a business that is all about servicing the client and servicing the car. It involves thorough cleaning, polishing and waxing of an automobile, both inside and out, to produce a show-quality level of detail.Auto detailing is a business suited for car enthusiasts, and someone who is hard-working, eager and dedicated.There are many areas within the auto detailing niche you can specialize. You can focus your business on individual clients and their cars, or you could specialize in preparing cars for cars shows.You can run your auto detailing business from a fixed location, or you could have a mobile operation where you go to the client and detail their car on the spot.Although you may have a special knack for cleaning and detailing cars, it is recommended you also invest in developing your skills and knowledge of the auto detailing business.Continuous education is essential in this business, and keeping your skills sharp is critical to delivering that show room finish that car owners will come to love and expect from you.New tools and techniques are always being introduced, and you want to stay abreast of them for yourself and your business.Start Up Cost: less than $1000What You Will Need: Cleaning chemicals (auto wax, window, exterior, interior, wheel, tire and carpet cleaners.)Cleaning tools (vacuum, buffer, towels, window squeegees, buckets, brushes, sponges and plenty of cotton cleaning towels.)Now It’s Your TurnWhat do you think? Is having a lack of capital been the reason you have yet to start your own business? Can you think of something you can do as a business that would not cost a lot to get started?Go ahead. Dream again. Take some time for yourself, go to a quiet place and think about the things you can do that would make a great business. Make a list. You never know. One of those ideas could turn out to be one of those great business ideas with low investment requirements, and just maybe the business you have always dreamed about.Here’s to your success!

Under Construction During the Storm – A Hurricane Guide for Businesses that are Under Construction

As a business owner, you’ve likely created a hurricane plan for your business and your family, but did you overlook your construction project? Don’t worry, you’re not alone. Most people don’t even think about preparing their construction site because it’s not written into their “construction timeline.” But when a hurricane threatens, general contractors usually get panicked phone calls asking about potential damage, delays and cost.You can save time and frustration by contacting your general contractor to discuss their plan before a hurricane strikes. You’ve invested a lot of resources into your construction project, so insist that your contractor safeguard it the same way that you safeguard your home. Here is a guide on what to expect from your general contractor’s hurricane preparation plan:1. Preparation Timing – A construction site has infinitely more hazards than a completed building, so it is reasonable to assume that the site won’t be properly secured in one day. Depending on the size of the project, your general contractor should start preparing your site three to five days in advance of the storm.2. Actual Building Preparation – Your general contractor should complete a structural analysis of your building to assess its weaknesses in the days prior to the storm. Is the roof up? Are any of the frames or trusses exposed? Are the exterior openings exposed? Any work that will help the structural integrity of the building should continue if it can be completed in time (this might include concrete or roofing). At the same time, any work that is highly vulnerable to damage (like landscaping or exterior painting), should be put on hold until after the storm.3. Exterior Site Preparation – Any lose material like 2×4’s, rebar, scaffolding, and roofing tile could become a dangerous projectile. Your general contractor should secure all of these items to protect your building and to protect surrounding businesses and homes. Larger jobsites might require an engineering consultation to properly secure materials. Additionally, your general contractor should verify any onsite construction trailers are securely tied down, dumpsters should be emptied or removed, portable toilettes should be removed and any deliveries of non-essential materials should be placed on hold.4. Construction Documents – The same way that you would want to protect insurance documents or a mortgage, your general contractor should be protecting the jobsite documentation in a waterproof container, or relocating it to the contractor’s main office.5. Builders Risk Insurance – This is a policy that the general contractor purchases on your behalf. It is your policy to protect your investment, so make sure that you read it thoroughly and understand it. Specifically, you should be aware the following:a. Last year, there were several disputes over who paid the insurance deductible for damage. Since then, some insurance companies have already written that clarification into the policy. If the insurance policy doesn’t mention it, your contract with the general contractor should stipulate whether you or the general contractor is responsible for the deductible.b. Several buildings that were damaged last year were under-insured, so make sure that your insurance covers the full value of the building.c. If your project will be completed during hurricane season, consider purchasing a policy that covers an extra month or two so that you are locked into a lower premium rate if your project is delayed. Most insurance companies will allow you to drop the policy if the project is completed early.d. Builders Risk Insurance does NOT cover flooding or mold. However, you can purchase separate policies.You’ve prepared for everything else when the storm strikes, don’t forget to plan for your construction project too.