Starting a small business can be a very exciting prospect for most people, but the idea of beginning a small business is also going to involve some very important legal hurdles. It is important for all small business owners to be sure they are complying with relevant laws because failure to do so can lead to potentially costly litigation that can be far more damaging than one slow day of sales.
Small businesses in California should be sure they are working with a small business lawyer who can help guide them on the proper steps necessary to getting started. There are many things that small businesses are going to need to be concerned with.
Picking a Business Structure
A small business first needs to establish what kind of business entity it wants to operate as. It is possible to be either a sole proprietorship, general partnership (GP), limited partnership (LP), limited liability partnership (LLP), limited liability company (LLC), C corporation (C corp), S corp, B corp, close corporation, or nonprofit corporation.
Health insurance providers are required to offer identical plans to small businesses with any number of employees, meaning that just because a small business only has a couple employees does not mean it will get a worse plan. A small business can select any plan an insurance company offers, but health insurance is generally quite expensive.
California state law mandates that the rate a small business pays for health insurance will stay the same for an entire 12-month period, although adding or removing employees from a plan can change the amount paid. Insurance companies cannot raise rates after a couple months for no reason.
The National Federation of Independent Business (NFIB) states that the monthly Small Business Economic Trends survey shows that unreasonable government regulations rank as a top problem. NFIB says the most burdensome regulations often include beneficial ownership, Waters of the United States (WOTUS) rules, Scope 3 regulations from the Securities and Exchange Commission (SEC), and data privacy.
State and Federal Taxes on Business Income
Business structure can have a major impact on tax considerations. Whereas C corporations will pay taxes based on income using graduated rates, sole proprietorships, S Corporations, partnerships, and LLCs will add personal income of shareholders be taxed on personal returns.
According to the Oregon Department of Consumer and Business Services (DCBS), California has the third-highest workers’ compensation premium index rate in the country at 2.26 or or 178 percent of the median, behind only New Jersey and Hawaii. Unfortunately, many small businesses spend lots of money paying workers’ compensation premiums only to see little of that money back in the hands of their workers, so there are often many frustrations with the state system.
While lenders offering business loans in California must be transparent in dealing with loan applicants, the regulations stipulating which types of businesses may be considered small businesses are incredibly complex. Because lenders must ensure businesses they lend can pay loans back, a small business will need to provide various kinds of paperwork that proves the business will be a safe investment.
Speak with an Experienced Mountain View Small Business Attorney
Are you about to start a small business or do you need help operating one you already began? Do not wait to get in touch with Kalia Law P.C.
Our firm understands the needs of small businesses and can help you make sure that you are doing everything you are required to do. You can call (650) 701-7617 or contact us online to set up an initial appointment.