So you have an idea for a business, you have the motivation, resources and capabilities to succeed. Now what? Though it is obviously important to have a solid vision of what you want your business to achieve, there are several steps that should be taken to ensure your business is protected at the outset, so you can maximize your chances of success. With that in mind, the following is a startup business checklist of several basic steps and “to-do’s” for getting a business started.
1) Choose and Protect Your Business Name
Choosing a business name can be a fun and creative process. But before you start to register your name, you should perform a clearance search to identify any other businesses that are using that name, or one that is confusingly similar. There are several different agencies to register a business name with (discussed further below), so it is important to search each one, identify a name that appears to be available in each, and then proceed to register the name with those agencies.
a) Secretary of State: The Secretary of State lists all businesses that have been incorporated and registered with the state. Click here for the California Secretary of State.
b) Recorder’s Office: The County Recorder’s Office lists fictitious business names that are being used by individuals and businesses in the county. A fictitious business name (aka DBA’s) is not an incorporated entity, and therefore would not show up in the Secretary of State directory. Click here for the San Diego County Recorder’s Office.
c) USPTO: The United States Patent and Trademark Office provides a searchable database of all registered trademarks. Click here for the USPTO.
d) Domain Name: You should also ensure that you are able to obtain the domain name for your business. You can perform a search on any domain name registrar, the most popular of which are Google and GoDaddy. Click here for GoDaddy
e) Online Search: Once you have selected a name that appears available with each of the foregoing agencies, you should do an online search with your favorite search engine. This can help identify other parties using your proposed name, but have not otherwise registered that name.
2) Choose Your Business Entity
There are numerous types of business entities, each of which has specific characteristics, and may be appropriate depending on the specific goals of the business owner. A sole proprietorship is a person is merely conducting business as himself or herself. A partnership is two or more people working together in a common business venture. Each of these are non-incorporated entities, and are not required to be registered with the state. The most common types of incorporated entities are limited liability companies, and corporations. Corporations have several sub-types, including S-Corp’s, Close Corps and Professional Corps.
There are numerous pros and cons to each entity type, which alone would require several articles. If you have any questions about the different types of business entities, you should consult with a local business incorporation lawyer that can help you determine which would be the most appropriate for you.
3) Register Your Business with the Secretary of State
If you are going to incorporate your business as a limited liability company or corporation, you will need to register the company with the Secretary of State by filing the applicable Articles of Organization / Incorporation. It typically takes approximately 2 weeks for the Secretary of State to review your application. Once the business is approved and registered, it will be an independent legal entity, existing separate and apart from its owners, and can begin conducting business.
4) File a Fictitious Business Name Statement
If you are operating as an individual or business, and wish to also do business under another name, you should file a Fictitious Business Name Statement with the County Recorder’s Office. Once the application is approved, you must then have that stamped application published with a newspaper or publication in the county in which your FBN was filed.
5) Employer Identification Number
An employer identification number (EIN) is the equivalent of a social security number for a business. It is issued by the IRS and is used for tax purposes. If you are a sole proprietorship, you may wish to obtain an EIN to have a tax ID that is separate from your own social security number. Incorporated entities must also have their own EINs, which will allow them to open a bank account and file taxes.
6) Business License and Permits
Most cities and counties require all businesses operating within their borders to at least have a basic business permit or license. In San Diego, all businesses are required to apply for a Business Tax Certificate, which is basically their version of a business permit. You will likely need a business permit for each county that you are conducting business in (ie. you have an office, employees, regular clients, or regularly visit for meetings). You should conduct an online search for the business permit requirements for each county that you anticipate doing business in.
Aside from the basic business permits, many other business types require additional or specialized licenses. Retail or e-commerce businesses will need to obtain a Seller’s Permit, food-related businesses will need an extensive amount of permits with both the city, and Department of Health. You should also consider seeking the assistance of a startup business attorney for more information on the specific licenses and permits that you business may require.
7) General Liability Insurance
Depending on the requirements of your profession, or the potential liability you may be exposed to, it is generally advisable to obtain an insurance policy for your business. Professional insurance is required for certain types of business such as doctors, lawyers, etc. For most other standard types of businesses, general liability insurance can help protect you and your business from various types of liability and financial loss, such as trip-and-fall accidents at the office, damages or theft of office supplies or equipment, and various other types of circumstances that may give rise to civil claims. You can simply perform an online search for insurance companies, and contact them to get a quote for business insurance.
8) Bank Account
For all incorporated entities, such as limited liability companies, and corporations, it is necessary to open a bank account under the name of the actual entity. A crucial component to retaining the liability protection from an incorporated entity, is making sure the business assets are kept completely separate from your personal assets. The business’s bank account should be used to transact all finances for the business, including income, expenses, payment of salaries, etc. With a business account, you will typically also receive a business debit or credit card, which you should use only for business expenses. Contact your local bank for details on setting up a business account.
9) Intellectual Property Protection
The world of intellectual property is very broad and varied. In simplified terms, a business may, whether purposely or inadvertently, own intellectual property rights in a variety of materials. In order to protect that intellectual property to the extent possible, it is important to identify any potential intellectual property that the business may own, that is may wish to own or pursue, and take the proper steps to register the IP.
Copyrights generally apply to creative works such as writings, photos, videos, website or app code, etc. Trademarks generally apply to business names or logos that are actually used to sell goods or services. Patents generally apply to inventions or processes that are new, non-obvious and somehow functional. Trade secrets generally apply to confidential information that gives a business a competitive edge, such as processes, recipes, chemical compounds, etc. Different types of IP can be registered or protected in different ways. You should consult with an intellectual property attorney to help identify and protect any IP that your business may own.
10) Business Address and Phone Number
Because home and virtual offices are becoming more and more common, the line between home and work can become blurred. Even if you have a productive and successful home-based business, it is generally a good idea to have an established address and phone number that are dedicated solely for the business. This can help create a professional separation between your home and business. Listing a business address is necessary when incorporating a business, and is generally helpful to provide a place for mail to be sent, to meet with clients, have an independent office if desired, and a place for employees to work. Many companies like Regus offer a variety of custom and virtual office options. If you research the companies in your area, you can find a location and lease package that works for you and your business.
A dedicated business phone number can also help separate personal calls from work calls. Some companies such as Google Phone provide phone numbers that are free, and have a variety of features for voicemail and call forwarding.
11) Employment & Independent Contractor Agreements
Regardless of the type of business you own, it is very likely that you will have the need for some type of written contractual agreement. Employees will require employment agreements, hiring developers or contractors will require independent contractor agreements, providing services to clients will require a services agreement, commercial lease spaces will require lease agreements, etc. A very common cause of litigation is that the parties to an agreement never took the time to write down the terms, and end up having different understandings of who was supposed to do what, or paid how much. Whatever type of transaction is at hand, a written agreement will help ensure that all of the rights and obligations of the parties are clear, unambiguous and easy to enforce.
12) Taxes
With a new source of income from your business, it is important that you properly document your income and expenses, file all of the necessary forms with the IRS, and complete your business’s annual tax returns. There are many additional considerations and implications you should be aware of regarding your business and its income. To ensure you fully comply with all state and Federal laws, you should consult with a tax advisor, CPA or tax attorney.
13) Go Go Go!
Though there are many different steps to take to protect your business, the most important step of all is actually running the business and getting your products or services to your customers. There are no simple instructions on how to build or run a successful business, but as long as you take the proper steps at the outset, seek assistance where needed, and work hard to achieve your vision, you should have all the resources you need to make your business successful. A successful business doesn’t have to be built alone. If you have any questions about protecting your business, a small business law firm can help you determine what options are best for your business, and formulate a game plan to help you move forward.