By Attorney Tom Flores
Special to THELAW.TV
Starting a business can be a very rewarding, but tricky experience. This article provides basic tips on getting started.
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1. Know the local zoning of the area you want to start your business.
Certain types of business are not allowed in certain parts of town. While it's possible to secure an exception to city zoning rules, the city council are mindful of the community. This means that it's unlikely the city counsel will allow a paper mill to open in the middle of a neighborhood. Some businesses like food and beverage service, nursing homes, and certain types of manufacturing may require an appointment with a county inspector before opening.
2. Know the applicable local ordinances.
Different counties regulate businesses differently and all businesses must follow local city, county, and state ordinances. For example, Santa Clara County, California has special regulations on fortune tellers, requiring a special license and posting a $10,000 bond. And the City of San Jose prohibits casinos from letting people spend more than twenty hours a day on the premises. Since business regulations can be location specific, it is best to seek the advice of a local attorney for advice on local business matters.
3. Know the Federal laws that apply to your business.
While your state and local laws govern your business, there are certain types of businesses that must also follow federal law. Federal laws are applied the same way across all 50 states and enforcement is done by federal law enforcement agencies, like the Drug Enforcement Agency. Types of businesses subject to federal law include: alcohol, pharmacological goods, firearms, defense goods, exporting, and transportation.
4. Identify all intellectual property issues.
Starting a business without properly registering your creative, original works with the Library of Congress can expose your business to significant losses. If your business involves creating music, artwork, literature, film, or software, speak with a copyright attorney to successfully protect and license your work. If your business involves creating a new invention, process, or method of making something, you should speak with a patent attorney to protect your work and make sure that you aren't infringing on existing patents.
5. Pick the right ownership structure.
Choosing between a sole proprietorship, partnership, corporation, or a limited liability structure is a very important decision. Each structure involves different formation rules and tax breaks. Before choosing your ownership structure, all key players to the business must come to the same understanding to avoid civil and criminal penalties in the future.
6. Pick the right name for your company.
If you have a unique name for your business, product, or service, it's beneficial to enlist a local trademark attorney to conduct a search to see if the trademark is already registered and if not, to help you register it with the U.S. Patent and Trademark Office. Registering your trademark protects your business' reputation and develops brand recognition.
7. Know what insurance to get.
The law may require your business to carry a certain level of insurance or to post a bond. Obtaining insurance protects businesses against natural disasters, slips and falls, vandalism, or fires, as well as your personal assets. An insurance broker can explain which policies are required.
8. Start accounting the right way right away.
Keeping accurate books is one of the most important things to do. Banks may ask to see your accounting before approving a loan and investors will want to see them before providing funds. Poor accounting can lead to higher interest rates and sometimes IRS involvement, resulting in criminal charges. Record all transactions with bookkeeping software or hire an accountant.
9. Have a business plan with an exit strategy.
If things don't go your way, or if you end up selling the business, have a plan on wrapping up the business affairs, servicing existing clients, and paying creditors.
The author, Tom Flores, is an attorney in San Jose, California. Mr. Flores focuses his practices on software licensing and technology-related litigation.