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Starting a Home-Based Business in California

There are few things more exciting than venturing out on your own and starting a new home business, and at the end of the year, people tend to start thinking about their futures even more than usual. You may already have your idea in production already, or perhaps you’re just at the brainstorming phase for your new enterprise.

No matter where you are in the business planning phase, however, it’s critical that you consider the legal needs for your new business as early as possible. When starting a home business in California, you’ll need to be prepared to protect yourself from any legal challenges down the road. As San Diego business attorneys skilled in both transactional work and corporate litigation, we can give you the legal counsel you need to build a successful and thriving home business from the ground up.

Here are a few things you should keep in mind as you get started:

  • Double check that your business name is actually available. You can do this by first checking with the California Secretary of State’s Office, and then by performing a national trademark search with a verified company. You’ll need to make sure that your business name is not already taken in order to prevent a trademark lawsuit later, or risk changing your name after you’ve started doing business.
  • Decide on a business structure. Home businesses are fairly small, so it’s unlikely that you’ll be filing to form a full corporation anytime soon. However, you’ll still need to determine the basic structure of your business. Will you be the sole proprietor? Or are you looking to form a partnership and share joint liability for the business? Depending on which structure you chose, you will need to file different forms with the Secretary of State’s office.
  • Get all necessary permits, licenses, and regulatory inspections squared away. Looking to sell homemade baked goods? You’ll need to get a different permit depending on whether you’ll sell them directly to consumers, or indirectly through stores and restaurants. There are also new regulations on what kinds of food you can make and sell from your home, based on the recently passed food cottage industry laws in California. Virtually every industry has regulatory considerations like these, so regardless of what you’re looking to sell, it’s important to do your homework here.
  • File the right tax and employer documentation to appropriate agencies. There are dozens of state agencies that administer business taxes, and you’ll also need to work with the Internal Revenue Service (IRS) on the federal level. To even begin doing business, you need to get a unique tax ID from the IRS, known as an EIN. Although sole proprietors can use their Social Security number, an EIN is far more professional, and a better bet in the long run.
  • Decide whether you will use a registered agent. Most states require you to use a registered agent when you are a small business owner. This is a third party that can act as “backup” for your business, and ensure that tax forms, lawsuit notices, and any other correspondence from the Secretary of State will reach your business. It can also help you secure a legal business address for online profiles, as you may not want your home address to be easily visible on Google – or the public record.
  • Think through any plans to hire employees. Once you become an employer, you have certain responsibilities to your employees that you will be legally accountable to uphold. If you’re thinking of hiring a few employees right off the bat, it may be valuable to brush up on California employee laws to ensure you’re meeting federal and state guidelines.

At Purdy & Bailey, LLP, we have more than 50 years of collective experience helping new business owners operate in San Diego and surrounding areas. We can advise you on key matters in transactional work, and help you resolve disputes or lawsuits later down the line. Contact us at (858) 360-7080 today for a free consultation!

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