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This is the first two parts of a legal guide. It’s called “Get Your Legal Together – A Guide for Entrepreneurs and Creatives” by Grant Atkinson, Founder/Managing Attorney at Framework Law Group PC.

LEGAL BASICS FOR EVERY VENTURE

GOVERNMENT FILINGS

Every business in Los Angeles needs to follow a few basic steps to operate legally. Below are some of the commonest steps you should consider:

Local Business License Most cities require you to register a business license and they may tax your business once you reach certain income levels (i.e. $100k year). You can generally register online on your own. For example, if you operate in the city of Los Angeles, you can register here: http://finance.lacity.org/

Seller’s Permit If you sell goods, you may need a seller’s permit from the state of California. If you don’t sell goods (i.e. you just provide services), you may be able to skip this step. You can read more about the requirements and registration here: https://www.boe.ca.gov/sutax/faqseller.htm

Fictitious Business Name If you are doing business using a name that is different than your name as an individual or different than the name of your LLC or Corporation (if you have one), then you may need to register a fictitious business name with the county. This is also sometimes referred to as getting a “DBA” because you are “Doing Business As” a name different than your legal name. You can register your DBA with Los Angeles County here: https://www.lavote.net/home/county-clerk/ fictitious-business-names/general-info

Other Licenses, Permits, & Regulations Depending on the nature of your business, there may be other licenses, permits, or regulations you need to comply with. California provides a helpful search directory here: http://www.calgold.ca.gov/

Finances & Insurance

Contact a Certified Public Accountant (CPA) You will want to structure your finances to be taxed in the best way possible for your business, and you will need to pay all applicable taxes. Contact a CPA for professional guidance.

Open a Business Bank Account To assist with your accounting and to maintain your limited liability status (if you have a registered LLC or corporation), you should open a business bank account that you use for all your business transactions. Consult with your CPA about how best to manage your finances.

Contact an Insurance Broker To help limit your out-of-pocket liability for issues that may arise with your business, it may be smart to get appropriate insurance coverage. Contact an experienced insurance broker for advice about how best to insure your business.

This is just a summary of the law and should NOT be relied upon as legal advice. Every business has its own unique needs which may not be listed here.

BUSINESS FORMATION

Registering your business as an LLC or Corporation comes with some significant benefits, including:

• Limited Liability — Avoid personal liability for debts or lawsuits incurred by your company. This benefit is very important as it reduces your personal risk exposure while running your business.

• Tax Benefits — Enjoy better taxation options. Check with your CPA about the best taxation options for your business.

• Equity / Stock — Use the stock or equity in your company to leverage employees, business partners, and investors.

Common Entity Types

Consult with your attorney and CPA to determine the best entity for your business. Some common entity types include:

Limited Liability Company (LLC) – A popular choice for many businesses as it offers the most flexibility and least amount of formalities. LLCs can have unlimited owners and different classes of ownership, so it can be suitable for simple or complex business structures. Owners can choose how they want the LLC to be taxed (i.e. as a sole proprietor, partnership, or S-Corp). LLCs also have the least amount of formalities required to upkeep and maintain the business. However, depending on your goals, an S-Corp or C-Corp may be a better option in some instances.

Corporation (S-Corp) — Generally good for small companies with just a few owners that do not need a complex business structure. They have “pass-through” taxation, meaning there isn’t a Federal tax on the company’s profits. Business owners only get taxed once when they pay themselves from the company. S-Corps only have one class of stock, so they are not ideal for complex business structures. CPAs sometimes recommend businesses be formed as an S-Corp instead of an LLC for tax purposes.

Corporation (C-Corp) — Generally good for companies seeking venture capital or looking to go public. Can have unlimited shareholders and different classes of stock (i.e. common stock and preferred stock). C-Corps are subject to double-taxation, meaning the company gets taxed on profits and the owners also get taxed when they get paid. Venture capital investors often prefer investing in a C-Corp over an LLC.

Sole Proprietor — This when you do business as an individual without forming a separate legal entity. You will not enjoy the benefits listed above. This is not a not a separate legal entity. There is no limited liability protection. If anything goes wrong, your personal assets are at risk. May be ok for low income, low risk, ventures if you are willing to tolerate the risk involved. Can get insurance to limit risk exposure. Still need necessary licenses and permits.

GOVERNMENT FEES & TAXES

• Government fees associated with business formation range from about $90 – $125 to file all your paperwork. Professional legal fees to assist with filing may vary. • There is an annual franchise tax in California of $800. This amount is owed annually regardless your revenue. This is due 3 1/2 months after you form your business and annually thereafter.

This is just a summary of the law and should NOT be relied upon as legal advice. Every business has its own unique needs which may not be listed here.