Legal Considerations When Launching Your San Diego Startup

So, you are finally ready to launch your new San Diego startup business. Congratulations! Starting your own business is exciting and nerve-racking at the same time. Here are a few of the most important legal considerations for any business when they are first starting out:

Forming a Corporate Entity is Essential

Many people make the mistake of thinking that they can run their business without forming a corporate entity of some sort- which you can but this may not always be in your best interest. Many also think that they can save money by not incorporating. Forming a corporate entity allows you to protect your personal and family assets from business-related liabilities. The initial cost is minimal, and because of the shield provided by the corporate structure, the initial cost is actually is a cost-savings long-term. When you are starting up your business, you must have long-term time horizons. There are several types of corporate entities from which to choose including standard corporations — the most common choice — limited liability companies, California professional corporations, and others. Your trusted San Diego corporate attorney can help set up the right entity for your needs and can keep it in good standing as your business grows and succeeds.

Getting Your Tax ID Numbers and Permits

Once you have your corporate entity up and running, your new company needs its own tax identification numbers. The most common ID number obtained is a federal employer tax number which is obtained from the IRS. In general, this is the number you need to open a financial account and/or if your new business is seeking financing or credit. Think of the tax ID number as a sort-of “social security number for your business.” The tax ID number uniquely identifies your business for various taxing and governmental agencies. There are also separate ID numbers needed from the State of California if you are a seller of goods — needed for collecting and remitting sales taxes — and/or if you have or plan to hire employees — needed for employee-related withholding taxes and compliance with California labor laws. Finally, if applicable, you will need to obtain your permits and operating licenses where required by the County or City where you live. Some types of businesses are highly regulated like establishments that serve alcohol. With something like a nightclub, the process of obtaining permits will be lengthy. Other types of businesses are less regulated, and you may or may not need a permit or business license from your local governmental authorities.

Protecting Your IP

Every business has intellectual property (“IP”) even if you do not have traditional IP like patents. This is true because IP includes trade secrets and trademarks (even if they are not registered). Trade secrets are any information that has commercial value from being kept secret. Here, a common example is customer lists, customer preferences, vendor lists/sources, and the like. However, to obtain legal protection for your trade secrets, certain steps are needed to keep the information secret. You will need some company policies and some confidentiality agreements for employees and others with whom you share the information. Protecting your IP is important because, sometimes, IP can be the difference between success and failure.

Having a Founders/Owners Agreement (aka a Buy-Sell Agreement)

If you are launching your San Diego startup with friends and colleagues, it is very important to have an owners or founders agreement drafted and signed, also called a Buy-Sell Agreement. This does not have to be too complicated, but you want everyone to “be on the same page” with respect to how the business is run, how profits are shared, how much money can be taken from the business each year, what happens if a business partner wants out or can no longer contribute to the business, how disputes and disagreements are to be resolved, and similar issues. Having a written agreement helps avoid disputes and can help avoid costly litigation down the road.

Contact San Diego Corporate Law Today

For more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard can be reached at (858) 483-9200 or via email. Mr. Leonard has been named a “Rising Star” for four years running by SuperLawyers.com. Mr. Leonard provides a full panoply of legal services for businesses and proudly serves the San Diego business community. Like us on Facebook.

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