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Small Business Basics FAQ

Small Business Basics

This article highlights the basic steps involved in forming a company, with a particular focus on the various permits and licenses that may be needed.
The following information is intended to assist in spotting legal issues to small businesses in the State of California. There are many factors to be considered in determining which actions and decisions would be most appropriate to any specific situation. This blog post only discusses some of the more important factors. It is not intended to substitute for legal advice. You should decide which course of action is best after discussing it thoroughly with an attorney.

Basic Steps

Choose a Legal Form
There are several types of entity structures for businesses, and business owners should consider which best fits their particular operation before taking steps to form a legal entity. This article highlights the basic differences between the most common entity types, but is not a substitute for legal advice as to what might best suit your operation. For more information on that topic, please visit the Internal Revenue Service: https://www.irs.gov/businesses/small-businesses-self-employed/business-structures.
                     a. Sole Proprietorship
                    b. Limited Liability Company (LLC)
                    c. Partnership
                         i. General Partnership
                       ii. Limited Partnership
                  d. Corporation
                       i. “C” Corporation
                      ii. “S” Corporation


Choose a Legal Name
When you file your organizational documents with the Secretary of State, you will be registering your corporate, LLC or limited partnership name at the same time. Before your name can be registered, the Secretary of State MUST approve it. Another CA legal entity of the same legal structure cannot have the same name. Specific naming requirements apply to LLCs, LPs, and corporations. More information can be found at the California Secretary of State’s website: https://www.irs.gov/businesses/small-businesses-self-employed/business-structures.
a. Sole Proprietorships: Usually your birth name
b. Limited Liability Company (LLC): Name must include the words “Limited Liability Company” or the abbreviations “L.L.C.” or “LLC”
c. General Partnerships: No specific naming requirements
d. Limited Partnerships: Name must include the words “Limited Partnerships,” “LP” or “L.P.”
e. Corporations: name must include the words like: “Corporation,” “Company”, “Incorporated”, “Incorporation”, “Limited”, “Corp.”, “Co.”, “Inc.”, “LTD”, etc.


Prepare and File Organizational Documents
e. Sole Proprietorships:
i. There are no requirements to file organizational documents with the California Secretary of State
f. Limited Liability Company:
i. Organizers must file Articles of Organization with the California Secretary of State
ii. Members enter into an Operating Agreement or Limited Liability Company Agreement which governs the relationship between the members and the running of the business
g. General Partnerships:
i. Partners must file a Statement of Partnership Authority with the California Secretary of State
ii. Partners prepare a Partnership Agreement which summarizes the obligations of the partners and controls the operation of the business
1. In the absence of a partnership agreement, California’s version of the Revised Uniform Partnership Act (RUPA) establishes standard rights and responsibilities of each partner
h. Limited Partnerships: Partners must file a Certificate of Limited Partnership with the California Secretary of State
i. Partners prepare a Limited Partnership Agreement which summarizes the rights and obligations of the partners—must be signed by the partners
1. In the absence of a partnership agreement, California’s version of the Revised Uniform Partnership Act (RUPA) establishes standard rights and responsibilities of each partner
i. “C” and “S” Corporations:
i. Incorporators must file Articles of Incorporation with the California Secretary of State and obtain any necessary waivers or consents from applicable state agencies
ii. Incorporators create Bylaws which document the governance of the corporation and establish the role of the Board of Directors
iii. An initial organizational meeting should be held, where shareholders elect the Board of Directors


Obtain a FEIN
a. A Federal Employer Identification Number (FEIN) for an entity is like a social security number for an individual; it identifies your business and you will use it on most important business, tax and registration forms
b. FEINs are required for most businesses, even those that don’t have employees
c. To obtain, you can either:
iv. File a Form SS-4 (Application for Employer Identification Number) with the IRS via mail, fax or over the phone; or
v. Apply for and obtain a FEIN online: www.irs.gov 


Register Fictitious Business Name
a. Sole Proprietorships and General Partnerships:
vi. No requirements to register the name of the business if a sole proprietor or a general partner is using his/her birth name in the business name
vii. Otherwise, sole proprietor/general partner must file a Fictitious Business Name (FBN) statement with the County Recorder-Clerk’s office of the county in which the office of the business is located
b. LLCs/Limited Partnerships/Corporations:
viii. If operating under a name different from its official name (as stated in its formation documents), then business must file a FBN statement with the County Recorder-Clerk’s office of the county in which the office of the business is located


Obtain a Local Tax Registration Certificate
a. Commonly known as a “business license”
b. Most cities require all businesses to register with the city’s tax collector, regardless of business type, structure, or size


Obtain Seller’s Permits
a. If you will sell tangible goods to the public, you must obtain a seller’s permit from the California Board of Equalization (BOE)
i. Tangible goods are things you can touch, like food or furniture
b. Businesses that only provide services are exempt
c. The permit allows the business to collect taxes from customers to cover any sales tax that may be owed to the BOE
d. To obtain a seller’s permit, you can either:
i. Apply online at www.boe.ca.gov; or
ii. Apply in person at a BOE office


Obtain Other Permits
a. Depending on the nature of your business, you may need to obtain additional licenses or permits, including:
i. City zoning permits
ii. Agency permits, including from the health department, police department, fire department, and public works department
iii. State and federal licenses
b. CalGOLD’s interactive website at www.calgold.ca.gov allows you to enter your business type and location and returns a list of the licenses and permits you’ll need from the local to the federal level, along with contact information for applicable agencies


Additional Resources  
• State of California Business Portal: www.sos.ca.gov/business/
• Small Business Legal Guides: https://www.nolo.com/legal-encyclopedia/small-business 
• CalGOLD: www.calgold.ca.gov