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February 25, 2024
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Starting a Small Business in LA? Know these key legal considerations

Starting a small business in LA is not a quick or easy project. Launching a successful business in LA is a significant feat that requires time, effort, elbow grease and some good luck. However, for some, simply getting a small business off the ground is a meaningful accomplishment in and of itself. Most entrepreneurs insist the legal challenges posed by launching a Los Angeles business are especially intimidating. Let’s take a look at the top legal considerations to have at the forefront of your mind when starting a small business in LA.

1. Mind the Name

It pays to sweat the small stuff, especially in the context of naming a new business. Choosing a is important yet even the most marketable name won’t be legal if it is already in use by another company in the United States. It is up to you to determine if the name you covet for your new business in LA has already been claimed. If the name is already in use by another business, move on to the next candidate at the top of your list.

Continue to verify the availability (or lack thereof) with the appropriate state agency and conduct a name search until you find one that is not in use. Reserve the name in question with the Secretary of State’s Office and it will be protected for your use for a period of four months. It is during this period of time that you must complete all required paperwork ranging from partnership agreements to articles of organization, articles of incorporation, etc.

Business owners must also perform a web-based search for trademarks through the United States Patent and Trademark Office (USPTO) to determine if the name is available. Keep in mind, even if you establish ownership and legal control over the name of your business, that control ends at the country’s borders. When in doubt, reach out to an experienced business law attorney in Los Angeles for guidance.

2. Consider the Structure of the Business

The legal structure of the business has ramifications in terms of the law, taxes and more. Consider establishing the business as a limited liability company or LLC for short. Services are available to help you with the process in California of forming an LLC.

There are several other business structures available in addition to LLCs. Examples of alternative business structures include S-corporations, limited partnerships, corporations, partnerships and sole-proprietorships. However, LLCs are typically favored by small business owners as they separate the company’s assets from those of the business owner, meaning the business owner’s personal assets will not be legally liable for seizure in the aftermath of a lost lawsuit related to the business or the business going bankrupt.

Aside from providing legal protections, LLCs are also favored as they offer added flexibility in the context of taxation. Your LLC in LA will be automatically taxed as a partnership or sole proprietorship, depending on the member count. The LLC’s owners can opt for taxation as a C-corp or S-corp if the desire is to avoid being taxed as a partnership or sole proprietorship. Opt for corporate taxation and you, the owner of the LLC, will be financially compensated for your contributions as an employee of the company. This arrangement sets the stage for you to take advantage of the company’s benefit programs and save a considerable amount of money on taxes.

Alternatively, S- corp businesses are pass-through entities in the context of taxation, meaning the company doesn’t pay a corporate tax yet each owner of the business pays his or her personal income tax. C-corp businesses pay corporate taxes. The owners of C-corp businesses pay taxes on received distributions.

Another advantage of LLCs is they do not require yearly shareholder meetings. Nor is there a requirement for a board of directors or governance from the administrative rules that often hamper corporations. LLCs have that much more freedom to organize and operate as desired.

3. Pay Attention to Zoning

Entrepreneurs sometimes understandably overlook zoning. After all, it is not as though there is a sign on each available property that indicates if it is commercial or residential zoning. Invest the small amount of time necessary to check the zoning of the location you have in mind for your business before taking additional steps in regard to buying or leasing the site. Do not assume an area is zoned for commercial entities simply because a business is in the area. The business in question might have obtained an exemption for operating at that specific location. Alternatively, zoning laws might have changed in recent years.

4. Satisfy all Licensing, Permits and Other Requirements

The business structure and type of business you start determines the types of licenses and permits necessary. A business license along with tax registration will be necessary at the bare minimum. Los Angeles has its own specific licensing requirements based on business type. If you plan on starting a business in LA, be sure to obtain and register the Business Tax Registration Certificate. The Certificate must be provided to the City of Los Angeles’s Office of Finance. You can learn more about requirements for operating a business in the city of Los Angeles by visiting the LA County government website.

5. Trademark the Name and Logo

Once you have decided on a name and logo and ensured no other businesses are already using them or have reserved them for use, take the legal step necessary to protect them. Trademark the name and logo of your business and others will not be able to register their business with the same name or use your logo without your permission.

6. Sweat the Small Stuff of Contracts and Policies

The contracts, policies and other legal documents that are written after forming your small business in LA will ultimately serve as its foundation in the context of the law and finance. If these contractual agreements and policies are not carefully written, they will present others with an opportunity to pursue financial damages that have the potential to bankrupt your business.

When in doubt, have a business law attorney review the small print of a contract or company policy you are considering. Above all, do not sign your name on a contract or other legal document that you have not read or understand.

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