You’ll need a business plan if you're planning to attract outside investors or get a small business loan from a financial institution to help finance your start-up. But even if you intend to fund your business yourself, a business plan can help you project your needs, estimate your startup costs, and provide a roadmap to tell you when you can expect to turn a profit.
At a minimum, your business plan should include:
For more details, check out our article on why you need a business plan.
If you haven’t detailed your start-up costs in your business plan (or you haven’t written a business plan) you’ll need to calculate your start-up costs and sales and revenue projections to determine whether you’ve got enough funding to get your online business off the ground.
Begin by making a list of all your expenses for the steps listed above plus any of the following that apply:
Divide your list into one-time costs (items like registration fees and website development costs) and ongoing costs (such as web hosting and payment processing services).
Compare your sales and revenue projections to your startup expenses to estimate when your business will become profitable, and how much cash you’ll need until it does.
If your available funding isn’t sufficient, consider using an outside source such as:
Make sure you clarify and document the terms and conditions of the funding. Modify your articles of organization or articles of incorporation to account for the arrangements you negotiate.
How you structure your business will depend on how much personal liability protection you need, what tax opportunities you're looking for, and what type of investor opportunities you want to create. The most commonly used business structures are:
If you're the only owner, a sole proprietorship is the simplest way to go but this won’t provide you with personal liability protection from your business’s debts and obligations. A general partnership acts in the same way as a sole proprietorship, just with multiple owners.
If you want personal protection from your business's debts and liabilities, you'll need to create an LLC, corporation, or other business entity with limited liability protection. But keep in mind that LLCs and corporations have more requirements and are usually more costly to run.
For more information on small business entity choices, see our article on business ownership structures.
Unless your business is a sole proprietorship or a general partnership, you’ll have to select a legal business name in order to register your business in the state or states where you operate. (In general, sole proprietorships and general partnerships legally operate under the names of their owners with no action required.)
Regardless of whether registration is required, it's a good idea to designate a unique name for your business. You can protect your rights to exclusively use your business name by registering your business name as a trademark. In addition, states often require sole proprietors and general partnerships to register their business name as a DBA (short for "doing business as"). Typically, you can protect your legal business name or DBA as a trademark.
The best advice for choosing a business name is to keep it short and simple and make sure it describes your business or product. For example, if you're selling shoes, steer clear of a name like “Walking on Clouds,” no matter how comfortable your shoes are. People searching online for your product will use the product name as a keyword in their search so be sure to include it in your business name. Companies like Nike and Red Bull can afford to spend millions of dollars branding their companies; you can let your name do the advertising work for you.
As an online business, you usually have two business names to manage: your legal business name and your domain name.
Typically, any business structure—other than sole proprietorships and general partnerships—will require you to register with the state. You'll usually file a formation document (for example, articles of organization or articles of incorporation) with your state to create your business. Your state's secretary of state office or corporations division is usually responsible for these filings.
To learn more, see our sections on forming an LLC and forming a corporation.
As an online business, your website is your store and, like a brick-and-mortar shop, it needs a name so customers can find it. The name you give your website is known as a domain name. Ideally, your business name and domain name will be the same. You can register your name through a domain registrar such as GoDaddy as long as the name isn’t already taken. If the name you want to use is held by someone else, consider adding the state or city where you're located or adding your name to the business name to make it unique.
Domain names end with an extension such as “.com,” ".net," or “.biz.” Nonprofits or schools often en in “.org." For an online business, it’s generally best to stick with “.com” because it is the most familiar.
You can apply for an employer identification number (EIN)—also called a "federal tax identification number"—for your business through the IRS website. While sole proprietors and single-member LLCs aren't required to have an EIN (as long as they don’t have employees), it’s usually a good idea for all businesses to get one. Many banks require an EIN to open a business bank account and having an EIN helps you avoid using your Social Security number.
For more, read how to get an EIN.
States, counties, and cities all have their own permit and license requirements for different types of businesses. You'll need to check with the appropriate agencies for your business location to see what's required. Typically, your location and business activities will determine which licenses you need.
Seller's permit (also called a "sales tax license"): Most states require businesses that sell taxable goods or services to have a seller’s permit, which enables the government to keep track of taxes the business collects. You’ll find details on the types of businesses required to collect sales tax on the website of your state’s taxation department or division.
Resale license: If you're going to be purchasing products that you intend to resell, you’ll also need a resale license or certificate. These licenses exempt you from paying taxes on products you purchase for resale.
Federal licenses: The federal government also requires permits and licenses for certain activities and sales it regulates, like alcoholic beverages and aviation. Contact the governing federal agency for more information on these licenses and permits.
For a full breakdown, read our article on the legal requirements for starting a small business.
If you have a product, logo, artistic work, or other intellectual property that you want to protect, you might want to apply for a trademark, patent, or copyright. Having these protections in place gives you legal recourse should you need it. You can apply for a trademark or patent through the U.S. Patent and Trademark Office or a copyright license through the U.S. Copyright Office.
These offices have databases of applications and registrations filed through their office. You can search through these databases to make sure your logo, authored work, invention, or other intellectual property isn’t already owned by someone else.
If you infringe on an existing copyright or trademark, you could owe money damages. So it’s a good idea to conduct a search before you start selling online. A thorough search will help you avoid potential legal pitfalls like selling t-shirts or other items with trademarked or copyrighted logos or pictures without permission from the owner of the trademark or copyright.
If you're selling goods or services online, you’re going to need a platform that allows users to interact with you—by viewing, choosing and purchasing products. At a minimum, you’ll need a way to process payments, collect sales tax, track your inventory, and ship your goods.
Developing your own website: Choosing to develop your own website allows you to have total control over your business. But development and maintenance costs are high and you'll likely have to hire a number of experts to set up and maintain all the required functions.
Using third-party platforms or marketplaces: E-commerce websites like Amazon and eBay allow you to sell your wares on their site for a fee. These types of hosts do much of the marketing work for you so you won’t need a domain name, a website, or a marketing budget. They’ll also handle payment processing, sales tax collection, and sometimes, other details. But you’ll be limited in your ability to brand your company.
Utilizing SaaS website solutions: SaaS, or software-as-a-service hosts, allow you to conduct business over your own, separate website while they work behind the scenes to provide services like 24/7 customer support, payment processing, tax collection, and inventory management. These providers (Shopify and BigCommerce are examples) are typically subscription-based, and they offer different pricing packages geared to the size and scope of a business.
The platform you choose will depend on your business and budget. In deciding what's best for you, be sure to compare each platform's:
You should also check what platforms your competitors use to make sure the platform you choose fits with the needs of your industry. Your website design will be key to your success.
Online businesses are responsible for following laws, regulations, and practice standards specific to operating on the internet.
Payment Card Industry (PCI) compliance is mandated by the credit card industry. Online businesses aren't only responsible for providing secure payment options, they must also protect the customer data collected and stored. The PCI Standards Council sets the guidelines and rules your online business must follow to ensure compliance.
If you use a third party to sell your products, these protections are likely built into their platform. If you set up your own website, you'll need to build PCI compliance into your system. You’ll also need encryption tools such as an SSL certificate that verifies that your online interactions are private.
If your online company is an e-commerce business, you’ll need inventory to sell. Start-ups often use their home garage or spare room to store inventory. If your homeowner association rules or rental lease doesn’t allow you to conduct business from your home, you’ll have to rent warehouse space and hire workers to fulfill and ship orders.
If you don’t use a third-party host or SaaS platform, you’ll need to decide:
You’ll also need a system to track your inventory so you know when it’s time to restock or reorder.
Though not required by law, you’ll probably want to purchase one or more insurance policies to protect your business and personal assets. (If you take out a business loan, you might find that the lender requires certain coverages.) Some of the types of insurance policies you might consider include:
Businesses that have employees will probably need workers’ compensation insurance.
(You can learn more by reading about what types of insurance your small business needs.)
As you can tell from the steps outlined above, starting an online business is involved but attainable. You can launch your online business on your own and many do so every day. Still, many new business owners find it useful to seek out legal help at some point in the start-up process.
For example, if you're unsure whether you need to register your business for sales tax in a state, it can be a good idea to reach out to a local business or tax attorney. Or, if your business needs to apply for multiple licenses and permits, consulting with a lawyer with experience in your industry can be a great way to reduce your liability moving forward. You can work with a lawyer from beginning to end or hire an attorney for one particularly complicated task.
]]>All delivery services transport goods and packages in pretty much the same ways, but they differ in the size of the investment and the kind of work you’ll need to do to get your company off the ground.
The three basic types of delivery services are:
Starting a local delivery service is like starting a business from scratch, with all the risks associated with a new business. You’ll have to find and build a customer base, develop a competitive fee structure, and build a reputation.
When you buy a bread route or corporate delivery service, much of that work is done for you. You get an existing business with an established customer base, and the corporate brand becomes your brand.
Some bread routes allow you to set your own fees, but others, along with corporate courier and delivery services, provide you with a fee schedule that’s already been tested and proven in the market. You won’t have to research market rates, and you can avoid typical mistakes like overpricing your services, which can make you less competitive.
Corporate and franchise delivery services often include the equipment you’ll need in the franchise or route price. (The more equipment and services provided, the higher the franchise or route fee, and many require an investment of $100,000 or more.) You might also be required to purchase uniforms, truck decals, hand-held computers, scanners, and software.
By comparison, if you already have a vehicle, the startup cost for a local delivery service is typically less than $5,000. The equipment you’ll need includes:
You’ll also need to obtain insurance policies that cover your vehicle as well as loss, theft, or damage to the merchandise you deliver. Depending on the goods you deliver, you might need a commercial driver’s license and other permits.
If you’re buying a bread, FedEx, or Amazon delivery route, the delivery area, customers, and products you transport are predetermined. But if you're starting an independent delivery service from scratch, it'll be up to you to decide what your business looks like. You'll need to establish the size and boundaries of the delivery area you service, the types of businesses you work with, and the types of products or packages you deliver.
Choose a delivery area that contains busy commercial districts and many businesses that might need your services. Visit the business owners to learn about other delivery services that already operate in the area and the services and prices they offer. Doing some market research upfront will help you determine what you’ll need to offer to compete.
The larger the delivery area you service, the more opportunities you’ll have to sell your services and earn more income. But unless you use an electric or hybrid vehicle, servicing a larger area will also likely mean higher fuel and vehicle maintenance costs that can chip away at your profits.
You might also need additional equipment for certain types of customers, like hanging racks for delivering dry cleaning.
The research you do to determine your delivery area will also help you choose the types of products you deliver. Consider whether it makes sense to specialize in one area. For example, you could market yourself as a:
If there are a lot of restaurants in your area, then sticking to delivering from restaurants and coffee shops might make the most sense. If you're using a small van or don’t want to hire employees, you might want to steer clear of furniture and appliance stores. If your vehicle is a passenger car, consider limiting your business to restaurant deliveries or transporting documents for accountants and lawyers.
You should also consider whether you want to market yourself as a same-day delivery service. With some products, like meals and groceries, people will expect this speed. But with other products, same-day delivery can give you an edge.
As mentioned earlier, if you’re starting a delivery service from scratch, you’ll need to find your own customers and market your service to them. Start by making a list of the potential customers in the area you're servicing.
Getting customers isn’t usually a one-and-done affair. You can kick things off by announcing the opening of your business and offering discounts to encourage first-time customers to try your service. After the initial contact, it’s important to follow up regularly so potential customers regard you as reliable and trustworthy.
You can use a variety of marketing strategies to get the word out about your service and start building your customer base.
Cold calling. A tried-and-true, albeit time-consuming, sales method, cold calling can be done in person or by phone. You’ll need business cards or flyers to leave with potential customers you visit, and an email or physical address to send a follow-up flyer after a call.
Mailers. Mail flyers, postcards, or brochures to potential customers and post them on local bulletin boards in grocery stores, community centers, and the like. You might have to follow up with in-person meetings with business owners. Any time you make a delivery on behalf of a business, you're representing that company, and the business owners will want the added assurance of knowing you are reliable.
Social media. Post announcements about your business on neighborhood social media apps and sites like Facebook. You can also use these sites to advertise to local businesses for a fee. (For more, see our article on social media marketing for businesses.)
Newspaper advertising. Local community newspapers usually feature classified advertising sections that allow you to promote your services.
The pricing structure you set for a local delivery service will depend on your business expenses and the prices charged by competitors.
Delivery services typically charge according to the distance traveled, an hourly rate, or a combination of the two. For example, you might charge a flat $25 fee for deliveries within a certain radius and apply additional charges or an hourly rate if the delivery is outside the area, above a certain weight, or a rush job. Consider adding a fuel surcharge for longer distances and travel times.
Consider the competition. Another thing to consider is the competition in your chosen area of operation. For example, if you make restaurant deliveries, find out what other services like DoorDash charge and consider offering a lower price. Knowing what those services charge will help you set a competitive pricing structure.
Charging a markup. Bread route delivery companies typically purchase products from the manufacturer at wholesale prices and sell them at a markup to the retailers on their route. The amount of markup added depends on what the market will bear. Other bread route contracts work on a commission basis.
Negotiating your cut of set fees. When you operate a FedEx or Amazon delivery service, those companies typically set the fees, and you’ll have to negotiate the payment you receive when you set your contract.
It’s common practice for the owner of a local delivery service to also serve as the delivery driver. A service that consists of a single delivery vehicle won’t need additional workers unless the job calls for hauling especially large or heavy merchandise.
But if you purchase multiple routes or your local business grows to the point that additional vehicles are needed, it’s likely that you’ll have to hire additional drivers to handle the workload.
Your accounting system can be as simple as a handwritten ledger or a spreadsheet on your computer. Your system should track:
Alternatively, you can use accounting software such as QuickBooks or hire a bookkeeper.
At a minimum, you’ll need a navigation app like Google Maps to find the locations of your delivery stops. But you’ll have to manually organize your deliveries to optimize your time and fuel use.
Once your business grows—and you’re making more than ten stops a day—consider using a fee-based route planner. These applications figure out the fastest way to organize your deliveries and avoid traffic congestion. They provide navigation, GPS tracking, and other features.
Just as you would with any business startup, you’ll need to follow your state’s requirements for setting up your delivery service. Each state has its own requirements for setting up your business. Information and requirements are usually available on your state's secretary of state website.
In general, you’ll have to take the following steps to set up your business. (For more guidance, read our article on how to start your own business.)
The most commonly used business entity types are:
An LLC or corporation provides the greatest protection from personal liability if your business goes bankrupt, is sued, or incurs other debts or obligations. You pay taxes on only the income that your business distributes to you (such as wages), and your business pays taxes on its profits. If you choose these business entity types, you’ll have to register your business with the state.
The owners of sole proprietorships and general partnerships are personally responsible for the business’s debts and for paying taxes on the business’s income. However, they’re not required to take the added step of registering their business.
Most business owners can choose the type of business structure most beneficial for their needs. But some corporations might require their delivery services to operate as corporations.
If your company is structured as an LLC or corporation, you’ll have to choose a name for your business when you register it. The name you choose must be unique to your company. Many states have additional naming requirements and restrictions, such as requiring LLCs to include the ‘LLC’ abbreviation in the company name.
For sole proprietorships and partnerships, the owners' names automatically become the company's legal name. If you want to operate a sole proprietorship or partnership under a different name from your own, you'll probably have to register a DBA (an abbreviation for "doing business as"). Your state might refer to a DBA as a "trade name," "fictitious business name," or "assumed name." You'll usually have to file your DBA with your state or county.
An EIN is like a social security number for a business. An EIN is a nine-digit number issued by the IRS for federal tax purposes. An EIN isn't required for all business entity types. But you’ll typically need an EIN for any business entity to:
You can apply for an EIN on the IRS website.
Sole proprietors and general partnerships aren’t required to use a business bank account—they can use their personal bank accounts for their business. But having a business bank account can simplify recordkeeping, and you’ll need one to apply for a loan regardless of your business entity type.
Starting a delivery service can get complicated and it pays to do your research. At one point or another, you might have legal questions specific to your business and situation. Alternatively, talking to a lawyer can provide you with reassurance that you're covering all of your legal bases.
If possible, try to find a business lawyer who's worked with other delivery businesses. They might have experience or expertise that can benefit you and streamline your startup process. You can work with an attorney from beginning to end or hire an attorney for one particularly complicated task.
]]>An employer identification number (EIN) is a nine-digit number used by the IRS to identify a business and track the wages paid to employees and business owners. A responsible party, such as an owner or general manager, applies for an EIN on behalf of the business, using their own name as well as the business name.
You’ll use an EIN, also called a "federal tax identification number" (FTIN), when you file taxes and prepare other official reports that might be required for your business.
A business needs an EIN when it:
Certain types of business entities—such as corporations and partnerships—need to have an EIN regardless of whether they meet any of the criteria listed above. For a complete list of the types of business entities and conditions that require an EIN, read our article on when to apply for an EIN.
Even when the IRS rules don't require a business to have an EIN, you might need or want one in one or both of these situations: A bank might require one before it'll let you open a business account. And, using an EIN in your business dealings instead of your personal Social Security number (SSN) will help to reduce the chance of identity theft.
Getting an EIN is free, and you need no special knowledge to apply. The IRS allows you to apply online, by U.S. mail, or by fax. (International applicants can apply for an EIN by phone.)
Applying online is the fastest method, and you can usually get your EIN immediately upon applying. Some third parties will apply for an EIN on your behalf, and charge you for the service. To avoid paying a fee, apply directly with the IRS.
Visit the IRS website to apply and submit an application online. You’ll receive a confirmation letter and your EIN immediately upon submitting your application.
To submit your application by mail or fax, you’ll first need to obtain a copy of Form SS-4 on the IRS website. Fax your completed form to (855) 641-6935 or mail it to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
If you apply for your EIN by fax and provide a fax number on your application, you'll receive your EIN in about four days. If you mail your application, you’ll typically receive your EIN in about four weeks.
You’ll need to provide the following information when you apply for an EIN:
If you’ve previously had an EIN, you’ll also need to provide it. You can also designate someone else (like a lawyer or accountant) to receive the confirmation letter and EIN from the IRS.
If you can’t locate the letter you received from the IRS confirming your application and providing your EIN, you can try the following steps to find your number:
Look up a previous tax return. If you’ve had your EIN during a prior tax year, you can find it on your tax return.
Contact your bank or local licensing agency. If you used your EIN to open a bank account or apply for a business license, you can ask the bank or agency that issued the license to look up your EIN. Your EIN might be located in your bank records.
Contact the IRS. Call the Business & Specialty Tax Line at the IRS at 800-829-4933. The IRS will give you the number over the phone, as long as you're the person authorized to receive it on behalf of your business and you're able to answer the questions they ask to verify your identity.
You'll likely use the same EIN throughout the existence of your company. However, if the business changes so substantially it essentially becomes a new business, the IRS will require you to apply for a new EIN.
Circumstances when your business doesn't need a new EIN. Changing the name, location, or tax status of your business usually doesn’t require you to get a new EIN. Changing your tax status includes electing S Corporation status, and applying for 501(c)(3) tax-exempt status.
Changes in business structure and ownership require a new EIN. For example, if you applied for an EIN as a sole proprietor and later took on partners and changed your business entity to a partnership, you’ll have to get a new EIN.
Filing for bankruptcy sometimes requires a new EIN. If a business goes into bankruptcy, it'll need a new EIN if the business is a sole proprietorship, but not if the business is a corporation or a partnership.
When corporations need a new EIN. The rules for corporations are more complex. If a corporation becomes a subsidiary of another company, it needs a new EIN. However, it doesn't need a new EIN if it becomes a division of another corporation or following a corporate merger. You should talk to a business lawyer for more help with better understanding the differences between the corporate changes and when to apply for an EIN.
You can find a complete description of the events that trigger the need for a new EIN on the IRS's Do you need a new EIN? webpage.
The application is the same whether you're applying for the first time or you need a new EIN.
Most people can apply for an EIN on their own. The process is free, accessible, and fairly simple. However, you might have questions or prefer a legal representative to get an EIN for your business on your behalf. If you need legal assistance, consult with a local business attorney.
]]>While you could operate your day care business as a sole proprietorship or partnership, you should consider using a legal form that protects you from personal liability, such as a limited liability company or corporation.
A child care center or facility might not be the most dangerous business, but you'll be taking care of the most precious thing in the lives of your clients: their children. You'll be responsible for the health and safety of those children, many of whom could be toddlers, for hours every day. There's always a possibility that a child could be injured while on the premises of your child care business—in which case you would want the business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
In California, the Department of Social Services (CDSS) oversees and licenses child care businesses through its Child Care Licensing Program. You need a license if you'll be caring for children from more than one family that's not related to you. Operating without the required license can result in significant penalties.
The Child Care Licensing Program licenses two types of child care facilities:
Typically, CCCs are located in an independent facility while FCCHs are operated out of a person's home. The distinction between the two types of licenses is important: The license and renewal fees are higher, and the regulations are more extensive, for CCCs.
When applying for a child care license, you must show that you've checked all the boxes to qualify for the license. Because a CCC involves hiring staff, you'll need to make sure your staff has met the education and training requirements before they can begin work. If you plan to run an FCCH, you, as the licensee, will need to meet the required qualifications as well.
To receive a license, An FCCH licensee must:
CCC staff have stricter education and training requirements.
Before you apply for either type of child care license, you'll need to attend an orientation. You can register for an online orientation with the CDSS. If you want to apply for an FCCH license, you can attend an in-person orientation. Your local CDSS Regional Office should have a schedule of upcoming orientations that you can register for. You can also attend a live virtual orientation for an FCCH license. You must pay a non-refundable fee for the orientation.
After you complete the orientation, you'll need to complete the license application. The application asks for a variety of information, including:
The forms required for each license vary. The CCC application is much more extensive and requires 15 separate forms in addition to supporting documents.
See the CDSS's FCCH application instructions for guidance on how to apply for an FCCH license, including an application checklist. Review the CCC application booklet for information about the forms and supportive documents that are required for the CCC application.
You also will have to pay a license application fee. This fee will depend on your license type and the number of children you'll be caring for. You must also pay a renewal fee each year. The fees change every year. You can find the current fee schedule on the licensing fees section of the CDSS website.
Apart from state licensing, you should keep in mind that there might be local zoning laws that would prohibit running a child care business in a particular location.
Commercial space. Most commercial locations will be appropriately zoned for your business plans, thought it's best to do your due diligence and check how the area is zoned. You should also make sure that your commercial lease allows for your kind of business. You should also pick a location that's suitable for a day care center. For example, you might not want to choose a spot right next to a smoke shop.
Home-based business. You'll likely run into more obstacles if you choose to run your day care out of your home. If you live in a clearly residential—as opposed to commercial—area, business activities might be restricted. Apart from zoning ordinances, you'll need to look at your deed, HOA rules, or lease to make sure these documents don't prohibit business activities. (See our article on licenses and permits for home-based businesses for more guidance.)
Even if running a CCC or FCCH is permissible under the local zoning ordinance, you might be required to obtain a compliance certificate from the local zoning authority. In short, your best bet is to investigate zoning regulations before you open for business.
The government is very concerned about the health and safety of infants and small children, and California’s child care regulations are extensive.
With some variation depending on whether you're operating out of your home or an independent child care center, key areas of state regulation include:
As the last item on the list indicates, the state has the authority to inspect your operation. These inspections can be unannounced and can include interviews of children and staff. They can also include inspecting any part of the CCC, or those parts of a home in which child care services are provided. Similarly, you should expect that a fire marshal or other fire prevention official will inspect the space to ensure there are adequate routes of escape in case of fire.
Before obtaining their license, FCCH applicants must have their homes inspected by the DSS. The inspection will determine whether:
You can find copies of the laws and regulations that apply to child care facilities on the CDSS website. These laws include Title 22 regulations that directly apply to FCCHs and CCCs. You can also find California's Health and Safety Code as well as the Evaluator Manual. The Evaluator Manual is a great resource that demonstrates how the CDSS carries out its rules and policies.
If you run your daycare business out of your home, you might be able to deduct expenses for the business. To qualify, you must:
The two main expenses you can deduct from your taxes are the space in your home that you use to provide the child care services and the meals you provide to the kids.
Business use of your home. The IRS allows you to deduct a particular amount from your business expenses based on how you use your home for your child care business. There are two methods to figure out how much to deduct. Most people use the standard, simplified deduction ($5 for every square feet of your home you use). But you can also use the more complicated method that involves accounting for the percentage of square feet you use for your business versus the total square feet of your home and whether your use of the space is exclusive.
Meals. You can also deduct the costs you pay for the meals you provide the kids under your care. You can deduct the actual costs or use the standard meal and snack rates provided by the IRS.
Details about how to figure the deduction can be found in IRS Publication 587 on the IRS website.
There are particular risks associated with operating a child care center, primarily those related to the health and safety of infants and small children. These child-related risks are on top of more generic business risks such as fire, theft, or other sources of property damage or personal injury.
Try to work with an insurance agent who has previous experience writing policies for child care providers. Consider coverage for sexual abuse or molestation, for corporal punishment, and for employees who are child care providers. In general, make sure you have an excellent general liability policy.
For more information, see our article on what types of insurance your small business needs.
Most daycare centers have employees and, in many cases, there can be relatively frequent turnover. You should review basic employment law issues such as illegal discrimination, workers' compensation, and how to handle the hiring process. Concerning hiring in particular, learn how to:
Keep in mind that some employment laws are specifically relevant to daycare workers, such as state training requirements and rules relating to criminal records. California requires the licensee of a home-based child care operation, and at least one on-duty staff member at a child care center, to be trained in pediatric CPR, first aid, and other health-related areas.
A good resource for general employment issues is The Employer’s Legal Handbook, by Aaron Hotfelder (Nolo). Also, many key employment laws are administered through the U.S. Department of Labor and California's Labor and Workforce Development Agency, and you can find information and resources on their websites.
Starting a business is a mighty, but manageable, task. Along the way, you're bound to have questions. You can find much of the information you need on the CDSS website (as referenced throughout this article). You can also contact your county office for your questions.
If you need help with your commercial lease (for a CCC) or the license application process or you have questions about business structure, employment issues, insurance, or health and safety laws, consider speaking with a California business attorney. They can help you throughout the process from start to finish or answer questions as needed.
To learn about other California business opportunities, see our section on starting a business in California.
]]>Few owners have the luxury of going into a new business startup knowing exactly how much money they’ll need. The cost of starting a business depends on the type and size of the business, the industry, the location, the competition, and many other factors.
How much money you need also depends on how long it will take your business to break even and turn a profit. For some businesses, it could be three months. Others can take a year or longer.
A better question is, “What expenses will I have in the first six to 18 months of operating my business?” The next question you should ask is, “Do I have enough cash to pay those expenses until my business generates enough revenue to pay them?”
Having a business plan can help you focus on the types of expenses you must cover to start your company. If you don’t have a business plan, you can still project your expenses on a monthly and quarterly basis to determine how much money you’ll need to pay your bills.
Include both one-time expenses, like furniture, and ongoing expenses, like rent. Some expenses, like inventory, are variable—they’ll change as your business grows—so it’s important to revise your projections as your business rolls out.
Once you’ve identified the items you must include in your expenses, you’ll have to estimate how much each will cost. Estimating costs takes a lot of research and a little bit of guesswork. The more realistic your estimates, the less likely you’ll be to run out of cash (the primary reason most small businesses fail). Consult trade associations and other available research to estimate your costs, and make sure you comparison shop to get the best prices for your budgeted items.
The list below includes expense items common to many businesses. Include all the expenses that apply to your business, and remember to include any other expenses that are unique to your business. Some of these expenses are one-time, initial costs; others are recurring.
Business entity formation costs. If yours will be a one-person, owner-run business, it will be a “sole proprietorship,” and you won’t have to file any paperwork with state agencies. But if you’ll have multiple owners, you’ll need to decide whether to be a partnership, limited liability company (LLC), or corporation. The last two business entities must complete paperwork with their state formation agency, and pay for the privilege. (Single owners can also choose to operate as an LLC or a corporation, particularly when they wish to limit their personal liability for their business's debts.) You can read more about business entities in Nolo’s article, “Business Ownership Structures.”
Inventory. If you are manufacturing or retailing goods, you’ll have to start out with an inventory of products or raw materials.
Consider how many varieties of items you plan to sell, projected sales revenues, how quickly products will turn over (how many times you expect to replenish your stock over a specific period of time), how much storage space you have, and average supplier shipping times. As your business rolls out, make sure you conduct regular inventory checks and revise your projections when needed.
Rent. If you are manufacturing or retailing goods, or providing services in a brick-and-mortar location, you’ll need a physical location and will have to factor in your monthly rental costs. Remember to include your initial security deposit and other expenses, like insurance and common area maintenance, that might be required.
If you are starting a home-based business, you might think that your rent is free, but you should factor in the portion of your home’s rent or mortgage costs so that you are accurately reflecting the cost of the goods you sell or make.
Utilities. Electricity, gas, water, and trash disposal will be different for a restaurant than an insurance business, and these costs will also differ depending on the size of your facility and your hours of operation. If you’re renting in a multi-tenant property, these costs will likely be spread among all tenants, and you’ll pay a specified portion.
Technology. Include phones, printers, and fax machines, as well as computers.
Furnishings, fixtures, and equipment. Add office furniture, lighting, built-ins such as counter space, and shelving for warehouses when applicable.
License and permit fees. Include any licenses and permits you’ll need to obtain at the outset, such as a seller’s permit, as well as fees to register your business and domain name.
Accounting and legal fees. Budget for accounting software and professional accounting assistance as well as legal assistance, if needed, to set up your business.
Website design and platform development. Consider whether you can use an off-the-shelf website, such as those supplied by ecommerce platforms. If your business requires a customized design and platform, you’ll need to engage a web page designer.
Off-the-shelf website offerings often also give you an option for website hosting services. If you are developing a customized website from scratch, you’ll also need to account for hosting services and maintenance costs.
If you will be accepting electronic or credit card payments, remember to include processing fees.
Packaging and shipping costs. These costs represent a significant portion of expenses for ecommerce retailers and other types of businesses, such as wholesalers.
Salaries and wages. If you’re starting out with employees, you’ll have to account for salaries and wages. Remember to also include payroll taxes, unemployment insurance premiums, and any benefits you will offer.
Advertising and marketing. Consider expenses like the cost to design a logo, announce your business opening, and business cards. If you have a brick-and-mortar location you’ll need signage, and if you plan to sell at trade shows, include the cost of exhibiting as well as travel expenses. Keep in mind that marketing costs tend to get lower as sales increase.
Insurance. The type or types of insurance you need will depend on your business. Owners with brick-and-mortar locations carry general liability insurance to protect against damage the business might cause to others like customers (if you rent, your lease will undoubtedly require it; if you own the space, your lender might require it too). If you have valuable business equipment, you’ll want property insurance to protect your business or real estate from damages due to events like fire and theft. A commercial auto policy will protect vehicles your business uses in the event of traffic accidents and from losses due to theft or fire. If you have employees, you are required to carry workers compensation insurance.
Don’t make the mistake of thinking that your homeowner’s or personal auto policy will cover your business property or insure your business vehicles. You’ll need a separate commercial policy for these protections.
Business supplies. Include a budget for pens, writing pads, mailing stamps, and so on.
Once you’ve identified the expense items that pertain to your business, you’ll need to assign a dollar amount to those items.
Take into account seasonal variations and items that are tax deductible (although you’ll still need enough to cover the full cost until you file your taxes at year-end). Keep in mind that the cost of variable items like inventory or employee wages can change as your business grows.
While you want to come up with a realistic projection of expenses, it’s a good idea to heed the old expression, “Everything costs twice as much and takes twice as long as you think it will.”
You might not need to fully double your estimated expenses, but at a minimum, you should add a cushion to account for unanticipated expenses and costs that you might underestimate.
It’s also a good idea to allow extra time for your business revenues to cover your expenses, so that you don’t run out of cash and have to scramble for additional financing. For example, if you expect your business to be profitable after six months, use a timeframe of nine or ten months to allow for the unexpected.
As we’ve shown, there’s no easy answer for determining the cost to start a small business, but you can find research on the average cost to start a small business by industry. Here are some examples:
Add up your expenses by month and subtract the total from the cash you have available. If the result is a deficit, you’ll need to identify outside funding sources.
Some options include:
Loans and investments from outsiders typically include fees and interest. Venture capital investors will require you to be a corporation, which many small businesses will find burdensome (most are sole proprietorships or LLCs). Make sure you include those expenses in your startup budget.
]]>Depending on the business you're launching, you might have to register your business and apply for licenses and permits. These registrations, licenses, and permits often come with fees. You might also need to buy insurance to protect both your personal and business assets and to comply with the terms of your business loan or commercial lease.
No matter the type of business, you’ll need a computer, an internet connection, and a website to compete in today’s marketplace. Even if you already have these tools, you’ll need to factor some costs into your budget to maintain them for your business.
You’ll also need a plan to support yourself (it can take six months to two years before your business generates enough money to pay your salary), and a way to attract customers (even the best idea can fall flat if customers don’t know it exists). Many social media marketing options are free, but you’ll pay in time spent learning these tactics through trial and error if you’re not experienced.
You might also need an extra cushion in case something goes wrong and you find you must tweak or change your plans.
That said, it takes less money to start some businesses than others, and you might be able to finance some businesses using other people’s money. What’s important is to understand at the outset just how much money it will take to get your business started, and to prepare accordingly.
You’ll spend far less money to start up a service business that relies nearly entirely on your skills, expertise, and time than one that involves making or selling a product. After all, if you are opening a restaurant or launching a clothing line, you can’t very well lease space, buy inventory, and keep the lights on for free.
Some of the businesses you can start on the cheap include:
You’ll need to bring at least some expertise to start any of the businesses listed above, although the amount varies.
For example, having your own pets is probably enough experience to get started as a dog walker or pet sitter, but it’s probably unwise to start a resume writing service if the only resume you’ve ever written is your own.
Potential customers will expect you to have credentials for some businesses, like tutoring (a college degree with a major in the subject matter you are tutoring), resume writing (experience as an HR professional or recruiter), nannying (a degree in child development), or business consulting (a track record running a business).
You can turn a hobby like cooking into a business, such as a catering service, but you’ll probably need to first offer your services free of charge to friends and family so that you can show some work experience to gain the confidence of clients.
Photographers and videographers with no work experience and even those who have worked professionally will need to create a portfolio or reel of their work, to demonstrate their skills to potential customers.
The businesses listed above require very little in the way of equipment, assuming you already own basic tools like a computer, a cell phone, and a vehicle to get to job sites. The more equipment your business idea requires, the greater the complexities involved in starting your business, and the more difficulty you’ll have bootstrapping your startup unless you have a tidy nest egg of savings (more on starting and financing these types of businesses below.)
Starting an e-commerce business isn’t as inexpensive as starting the businesses listed above, but you can cheaply bootstrap some types of e-commerce businesses by using a drop shipping service.
A drop shipper is a manufacturer or distributor that sells goods to e-commerce retailers and also agrees to ship the merchandise directly to the retailer’s customer.
The drop shipper charges you for orders only when they’re shipped to your customer, so you don’t have to invest in inventory, though you’ll still need a computer, a Wi-Fi connection, and a platform such as Shopify to create and run your website.
Some companies that supply products like t-shirts and baseball caps will also embellish them with logos, sayings, or artwork and drop ship the finished items to your customers. (Make sure you use only your own original or properly licensed logos, sayings, or artwork, lest you could end up with an expensive lawsuit for trademark infringement.)
It’s important to remember, however, that drop shippers price the items you buy from them based on volume. When you buy an item in a small quantity like one or two units, you’ll pay a lot more per unit than if you purchase 100 units of the very same item. When you’re starting out and you have few customers, you’ll have to plan your costs carefully so that your retail prices are competitive.
It takes a lot more money to start a business that requires you to rent a facility and buy expensive equipment, than one you can operate from home with nothing but your talent and experience.
Suppose you want to turn your passion for baking into a bakery? Maybe you’ve got a family recipe for tomato sauce you want to bottle and sell, or you’re a cycling enthusiast who wants to own and operate your own bicycle sales and repair shop.
If your business idea is going to take thousands, if not tens of thousands of dollars, it’s also going to require you to conduct market research, perhaps set up an appropriate business structure, and develop a comprehensive, written business plan.
The more money you must invest to start your business, the more important it is to vet your business idea, write a business plan, choose a business structure that protects your personal assets and allows for arms’ length investors (if you will look for these), and follow many other formalities for setting up your business.
At a minimum, you’ll have to follow these seven steps to get started.
A number of organizations offer training, networking, mentoring, and other types of assistance for entrepreneurs starting out. Some are free but in other cases, you must join and pay a membership fee to take advantage of the programs.
These organizations have local chapters around the country, and in some cases, around the world:
The U.S. Chamber of Commerce, through its local chapters, provides technical assistance and resources to help with business plans, getting required certifications, and managing a business.
SCORE, which is affiliated with the U.S. Small Business Administration, provides volunteer business mentors and online training programs.
Entrepreneurs’ Organization connects entrepreneurs with each other and with thought leaders through events, networking opportunities, and mentorship programs.
LinkedIn is an online platform for business professionals that offers networking groups on a variety of topics, including marketing, finance, business startups, and industries such as retail, banking, and entertainment.
Network After Work is a professional community that offers events and training courses along with networking opportunities.
Keep in mind that you will need to cover more than the cost of opening a business. In most cases, you’ll need to have funding in place to run your business for six months to a year or more, or until it generates enough revenue to cover your expenses.
If you’re unable to bootstrap your business for that length of time, you’ll need to seek outside funding.
Small business loans are available from the U.S. Small Business Administration (SBA) as well as banks and private lenders like American Express and Lending Tree.
The maximum amount you can borrow on these types of loans is typically $50,000. You’ll usually be required to meet certain criteria, and you might have to put up collateral such as your personal car or home to qualify.
Economic development agencies that operate in many cities often offer microloans for smaller amounts (typically $5,000 or $10,000). Microloans are usually made for a short term of two or three years.
Unlike a loan, you don’t have to repay a grant, but grants are much more difficult to obtain. You’ll have to meet a longer list of criteria than banks require, and many grants are offered only to certain types of business owners, such as women, veterans, and minorities.
The SBA maintains a database of organizations and agencies that offer grants to businesses. The federal government, through many different agencies, also provides grants. You can access the database of federal grants at grants.gov.
Crowdfunding websites like Kickstarter give you access to thousands of potential investors who are each willing to invest small amounts of money in new business ideas, usually in exchange for something like an equity interest in the company or first crack at a new, innovative product.
You’ll have to describe your idea, set a fundraising goal and time period, offer a reward to investors, and pay the website a fee (a percentage of the amount of money you raise).
]]>The fitness industry has become increasingly segmented. Many gyms now offer a single activity, such as:
Most would-be gym owners will naturally gravitate to the types of activities they themselves engage in and enjoy. It’s important to balance your personal preferences with the business elements that will make your gym successful.
Some of the elements to consider when deciding on the type of gym you want are:
The demographic market. Each type of gym tends to draw a particular type of customer. Although every consumer comes to the gym with assumptions about their abilities and the experience they expect to encounter, an understanding of the typical profile of your gym’s customer will help you to anticipate the types of amenities you’ll have to offer and how much you’ll be able to charge.
For example, you might learn that rock climbing enthusiasts are less picky when it comes to fancy amenities than other groups. Keep in mind, you’ll have an uphill battle for customers if your pricing isn’t in line with competitive gyms.
Competition in your local area. Most consumers won’t travel a long distance for a gym and, when deciding which gym to join, they’ll evaluate your offerings against others close-by. Your gym will come up short if it doesn’t offer a comparable—or better—experience.
The size of the investment. The largest expenses for gyms are rent and equipment. Determining the size of the facility and the amount of equipment you’ll need will help you decide whether the investment required is within your financial means or the debt you’re willing and able to assume.
Some niches, like yoga, require little or no equipment; while others, like cycling, require a substantial investment in equipment. A barre studio doesn’t need as much space as a circuit training facility, and so on.
You can start your gym from scratch, or buy an existing gym or a franchise. When you buy a franchise, you’ll usually get an established brand recognized by consumers, along with the ability to tap into proven operational and marketing systems. But the cost for buying a franchise is generally greater than the cost to start your own gym (more on costs below), and many franchise agreements require additional expenditures, including royalty fees, advertising, and training fees, whether or not you feel it necessary or are satisfied with the support and services provided.
Many gym owners create additional revenue streams by renting space in the gym to related service providers. Some of the services or amenities you might consider offering at your gym include:
The cost to open a gym varies from $200,000 for a small facility to $1 million or more for a large gym. The location, the equipment, staff size, and the amenities you offer, along with the size of the facility (the rent) all determine the cost to run the gym.
In general, the initial investment to acquire a franchise can range from $300,000 to $4 million or more.
When planning your budget, factor in both startup and ongoing costs, including:
You’ll have to purchase equipment like hand weights, elastic bands, kettle bells, and gym balls, but equipment like treadmills, “cage” systems with pulleys, and elliptical machines can be purchased or leased.
Leasing gym equipment. The cost to lease equipment ranges from $60 to $100 per month per item. As with any lease, the amount you’ll pay in financing depends on your credit history, borrowing history, and past business history. You can usually deduct the financing costs of leasing equipment from your taxes.
Purchasing gym equipment. The cost to buy equipment can range from $2,000 to $7,000 per item, depending on the equipment type and brand. For any equipment you own, you’ll be able to deduct from your taxes either the whole cost at once or the depreciated value over time.
If you lease your equipment, you won’t have to worry about maintenance and repair costs, and you can often get brand new equipment when your existing lease expires and you enter into a new one.
You’ll need to take many of the same steps to open a gym as you would for any other business. The nature of a gym business—your risk exposure—makes it very important to pay special attention to some aspects, like choosing your business structure and getting insurance.
In general, you’ll want to:
Let’s look at each of these steps more closely.
A business plan gives you a roadmap for opening and running your business. You’ll need a written business plan if you expect to get a loan to finance your business or seek investor funding.
Your business plan should include a description of your business; an analysis of the fitness industry, the local market, and the competition; and the way you plan to differentiate your gym.
The plan should detail your strategies for growth, your start-up and ongoing expenses, your marketing strategy, and your revenue and profit projections. The plan should also set a timeline for breaking even and turning a profit, so you can anticipate the financing you’ll need.
If you decide to operate on your own (and not buy a franchise), you’ll need to decide how to structure your business. Will it be as a sole proprietor, or a partnership (with other owners), or an LLC or corporation? To cut to the chase, there’s no debate about what you need: an LLC or a corporation.
Here’s the issue: As a gym owner, you run a greater risk that customers might be injured on your premises than you would if you owned, say, an art gallery. If you’re sued or have unpaid debts, litigants and vendors will be able to tap into the assets of your business for payment. But what about your personal assets—will your home, car, and personal bank account be at risk? Not usually, as long as you choose a business entity that protects your personal assets.
The two types of business structures that protect your personal assets are limited liability companies (LLCs) and corporations. As an LLC, you’ll have fewer rules to follow and more flexibility in choosing the way you pay taxes than you would with a corporate structure. Sophisticated outside investors, however, will require your business to be structured as a corporation.
It's important to be aware that neither an LLC nor a corporation will protect your business assets from being used to settle business lawsuits or pay business debts. Limited liability refers only to protecting personal assets like your home. And if you fail to follow the rules for running your LLC or corporation—if you intermingle your personal and business expenses—a court can decide that you aren’t entitled to the limited liability protections these business structures provide, and allow your personal assets to be available when jury verdicts and settlements result in your having to pay money to creditors. (For more on how you can lose limited liability protections, read our article about piercing the corporate veil.)
LLCs and corporations must register with the state where they operate. You can find information and an online application for registering your business on the website of your Secretary of State. If you register in one state but operate in another, you’ll probably need to file to qualify as a foreign business in the state where you’ll operate.
Business registration rules. Rules for registering a corporation are different from those for an LLC. For example, if you’re registering a corporation, your state might require you to list the type and number of authorized shares for your business. If you’re registering an LLC, your state might require you to list the LLC members’ names and addresses. For specific rules, check with your Secretary of State or agency that governs business registrations in your state.
Domain name availability. Before you settle on a business name, you should make sure that the same name is available as a domain name for your website. Using the same name for your location and your website will help you build awareness for your business and your brand. Domain names are sold by website builders and others.
A quick internet search will tell you whether the name is available, but that answer isn’t all that you can glean from a thorough search. Look for names that are not exact matches, but similar to yours. You don’t want to use a name that’s very similar to one already in use. Domain sellers will tell you only whether the exact name you chose is already in use.
Gyms typically use one of two pricing strategies, depending on the type of gym:
Some gyms offer both: access to the gym in general, plus the ability to sign-up for structured activities.
Gyms offering weight equipment along with exercise classes typically work on an annual membership fee. Gyms that offer specialized classes such as barre, boxing, and yoga typically charge per class, with discounted rates for those who buy a set number of classes at a time.
Both LLCs and corporations must separate the finances of the business from their owners, so it’s essential to open a bank account for your business and set up a business-only credit card. It can also be useful to establish a “net-30 account” (a line of credit with your vendors that allows you to pay invoices within 30 days without interest charges).
As a gym owner, you’ll need a general business license (usually from your local municipality), as well as specialized licenses, including:
Many states have dedicated departments or agencies that oversee business licensing. For details on how to get a business license in your state, check out our state guide to business license requirements.
Occupational certification. While most states don’t require you or your instructors or trainers to have a fitness certification, it’s customary for providers to be certified by a nationally recognized institute or academy in the type of exercise they provide.
CPR certification. Some states, however, do require gym owners, trainers, and instructors to have CPR certification including training on an automated external defibrillator (AED). Even when it isn’t required, you and your trainers and instructors should consider getting CPR certification, such as the one provided by the American Red Cross.
As noted, the risk of accidents and injuries is greater with a gym than with many other businesses. Most gym owners will find they need several kinds of policies, each covering specific risks and damages.
For example, if a client slips on a wet floor that you failed to cone-off, your general liability insurance will likely cover any medical expenses that result. But a general liability policy won’t protect you if that same client were to claim that the same injury resulted because an instructor didn’t provide proper instruction for performing an exercise. You’d need professional liability insurance to cover that type of circumstance.
Here are some of the insurance policies gym owners typically carry. Some can be bundled into a single business owner’s policy.
General liability insurance provides coverage for non-employees (that is, visitors and members) who suffer bodily injury or property damage on your premises due to negligence (such as the wet floor example above) or equipment malfunction. For example, general liability insurance would protect you if a customer is injured after falling off a bike that wasn’t properly bolted to the floor.
Professional liability insurance, also called errors and omissions insurance, protects you from losses that arise when the accident or injury occurs because a client wasn’t advised correctly or wasn’t advised at all on the way to safely perform an exercise.
Cyber insurance is often worthwhile coverage for gym owners when they store client credit card information on their computer system. For example, if your system is hacked and a customer’s personal data is stolen resulting in fraudulent activity on their credit card, cyber insurance will help cover the losses.
Business equipment insurance will cover items like gym equipment if it is lost or damaged for any reason.
Commercial property insurance covers damage to real property. If you own the property that houses your gym, you’ll need commercial property insurance. If you lease, make sure your landlord carries this policy.
Personal property insurance covers equiment that is lost or damaged due to accidents or thefts.
Workers’ compensation insurance covers your employees if they suffer injuries on the job. Most states require employers to carry workers’ compensation insurance (Texas is a notable exception).
Most gyms ask members to sign liability waivers, in which members agree that they will not hold you responsible if they are injured as a result of your negligence (waivers typically will not be effective if the injury results from your extreme carelessness or recklessness). In the poorly-secured bike example above, an enforceable waiver would protect you against a successful lawsuit or insurance claim.
While you should include a waiver in your sign-up documents, don’t assume that it will always protect you if a client is injured. As noted, you’re fair game for a lawsuit if your conduct was extreme. Judges construe waivers narrowly, and if, in a particular situation, your waiver is not upheld, you will need an insurance policy as a backstop.
Running a gym requires specialized recordkeeping to track membership data, payments, and scheduling.
Make sure that your software offers these capabilities and integrates with your accounting software.
Some states have laws aimed at deceptive and unfair practices used by health clubs. These laws might govern the terms of your membership contract, refunds and automatic membership renewals, initiation fee charges, advertising practices, and members’ rights to cancel their memberships.
Additionally, all states have consumer protection laws that might affect your gym policies and procedures. It’s a good idea to check with the office of the Attorney General in your state before setting your gym policies.
You’ll remember that we discussed fitness training and certification earlier. It’s equally important to stay in your lane when working with clients. Don’t stray from the credentials you have.
For example, a fitness trainer can discuss some aspects of healthy eating with their clients, but they can run afoul of the law if they call themselves nutritionists or dieticians, and they should never give nutrition advice for health conditions such as diabetes and heart disease.
Even a small gym will start running up expenses well before opening day, so it’s important to start marketing your gym before you open your doors.
For more information on how to form an LLC in any state, check out our article on how to start an LLC.
You must choose a name for your LLC that's unique. It can't be the same as, or too similar to, the name of a domestic or foreign LLC that's registered or reserved with the California Secretary of State (SOS) records. Your name also can't be misleading to the public. (Cal. Corp. Code § 17701.08 (2023).)
You can check to see whether your business name is available by searching the SOS's business name database. Before you register your business, you can reserve your business name for up to 60 days. You can reserve a business name online using bizfile Online or by mailing in a Name Reservation Request form to the SOS. As of 2023, the fee to reserve a name is $10.
Under California law, an LLC's name must contain either:
The words “limited” and “company” can be abbreviated to “ltd.” and “co.” In addition, the LLC's name can't contain the words “bank,” “trust,” “trustee,” “incorporated,” “inc.,” “corporation,” “corp.,” “insurer,” “insurance company,” or any words suggesting that it's in the insurance business. (Cal. Corp. Code § 17701.08 (2023).)
For more guidance on your LLC's name, check out the business entity names webpage of the SOS website and the SOS's business entity name publication.
Every California LLC must have an agent for service of process (usually called a "registered agent"). A registered agent is an individual or certified corporation that agrees to accept legal papers on the LLC's behalf if it is sued. An LLC can't serve as its own agent for service of process. The agent should agree to accept service of process on behalf of the LLC prior to designation. (Cal. Corp. Code § 17701.13 (2023).)
Individual agents must reside in California and their street address (not a P.O. box) must be listed in the LLC's articles of organization. The agent can be a member, manager, or officer of the LLC, but doesn't need to be affiliated with the LLC.
The SOS maintains a list of private service companies (commercial registered agents) that will act as agents for service of process for a fee.
A California LLC is created by filing articles of organization with the SOS. The articles must include:
(Cal. Corp. Code § 17702.01 (2023).)
You can file your articles online through bizfile Online. You can also hand deliver or mail in a completed Form LLC-1 to the SOS. As of 2023, the filing fee is $70.
LLCs can either be member-managed (managed by all the LLC's members) or manager-managed (managed by managers).
Most small multi-member LLCs choose to be managed directly by their members. But LLCs can appoint a manager or small group of managers to manage the LLC—somewhat like how a board of directors oversees a corporation. Managers vote on key issues such as taking out a loan, purchasing real estate, or changing strategic plans. In a manager-managed LLC, managers can be LLC members or nonmembers.
California doesn't require an LLC to have an operating agreement. While not required, it's highly recommended that you have one for your company.
An operating agreement is an internal document that establishes how your LLC will be run. It sets out the rights and responsibilities of the members and managers, including how you'll manage your LLC. This document can also help preserve your limited liability by showing that your LLC is truly a separate business entity from the owners. In the absence of an operating agreement, California's LLC laws will govern how your LLC operates.
If you've already formed an LLC, we offer an LLC operating agreement that you can create online.
Every California and non-California LLC registered in California must file a Statement of Information (Form LLC-12) with the SOS within 90 days after filing their articles of organization.
After the initial statement, a Statement of Information must be filed every two years (biennial). The filing period is the calendar month when the original articles of organization were filed and the prior five calendar months. For example, if you filed your articles in March, you must file your biennial reports every subsequent two years between October 1 and March 31.
You can file the statement online through bizfile Online or mail or hand deliver Form LLC-12 to the SOS. As of 2023, the filing fee is $20. (In-person submissions have an additional $15 handling fee.)
The statement of information must include:
(Cal. Corp. Code § 17702.09 (2023).)
All LLCs and foreign LLCs must pay California taxes to the California Franchise Tax Board (FTB) if they both:
(LLCs taxed as corporations must comply with California's corporate tax rules.)
If you formed your LLC in California in 2021, 2022, or 2023, you can enjoy a one-year exemption—available for the LLC's first taxable year—from California state's $800 minimum annual franchise tax. Starting in the second taxable year, all LLCs would be subject to the annual $800 annual minimum franchise tax until they formally dissolve. The purpose of the exemption is to temporarily ease the burden of forming a new business in California.
Annual minimum tax. All LLCs doing business in California must pay an annual minimum franchise tax of $800 (figure as of 2023). You submit the annual tax to the FTB using Form 3522 (LLC Tax Voucher).
Additional taxes. LLCs with net income over $250,000 must pay an additional fee based on their total annual income (2023).
Filing procedures. Most LLCs must file California Form 568 (LLC Return of Income) by the 15th day of the third month after the close of the LLC's taxable year (March 15th for most LLCs). There's an exception for certain single-member LLCs.
The LLC webpage on the FTB website has more information about LLC taxes in California, including links to the necessary forms and fee schedules.
You'll need to comply with any other tax and regulatory requirements that apply to your LLC. These might include the following:
EIN. If your LLC has more than one member, it must obtain a federal employer identification number (EIN), even if it has no employees. If you form a single-member LLC, you must obtain an EIN for your LLC only if either you elect to have your business taxed as a corporation instead of a sole proprietorship (disregarded entity) or your single-member LLC has employees. You can get an EIN by completing an online EIN application on the IRS website. There's no filing fee.
Business licenses. Depending on what type of business your LLC is engaged in and where it's located, you might need to obtain other local and state business licenses and permits. For more information, go to CalGold on the California Office of Business and Economic Development website.
Sales and employer taxes. In some cases—for example, if you'll be selling goods and collecting sales tax or if you have employees—you'll need to register with the appropriate California taxing authority. For instance, if you'll be collecting sales tax, you'll have to register with the California Department of Tax and Fee Administration. For employer taxes, register with the California Employment Development Department (EDD). For more information on state LLC tax registration, see our article LLC biennial report and tax filing requirements in California.
The SOS has a lot of information to help you form your business. Check out the SOS's starting a business webpage for details on how to create your LLC. You can also find helpful topics on the left side of the webpage, such as name reservations; forms, samples, and fees; filing tips; frequently asked questions; and resources.
You can also use our online LLC formation service to start your LLC. Just answer a few questions about the company you want to form and we'll do the paperwork for you.
If you'd like personalized legal help, talk to a California business attorney. They can help you choose a name, set up your LLC, draft your formation documents, and guide you through state laws, regulations, and requirements.
]]>Follow these eight steps to create your corporation in California.
Your corporation's name can't be the same as, or too similar to, an existing name on record with the California Secretary of State (SOS). Your name also can't be misleading to the public, such as implying a connection with a state or local government or using the word "bank" when your company isn't an authorized financial institution.
The corporation's name can—but doesn't need to—include the words (or an abbreviation of them):
(Cal. Corp. Code § 201 (2023).)
The SOS provides a business entity name regulations guide that provides an explanation of the various rules and laws related to naming your corporation.
You can do a free preliminary check on the availability of a proposed name through the SOS's business search database. Before registering your corporation, you can reserve a name for 60 days by filing a Name Reservation Request Form with the SOS. You can mail in the completed form or file the form online using bizfile Online.
Every California corporation must have an agent for service of process in the state. A registered agent is an individual or company that agrees to accept legal papers on the corporation's behalf if the corporation is sued. A corporation can't serve as its own agent for service of process. Your agent should agree to accept papers on behalf of your company and understand their name and address will be public information before they accept the designation.
Your corporation's registered agent can be:
The agent must have a physical street address in California, not a post office box. Small corporations typically name a director or officer to serve as the initial agent. A different agent can always be named later.
The SOS maintains a list of private service companies that can act as the agent for service of process; however, not all such companies are on the list.
Your corporation is legally created by filing Articles of Incorporation - General Stock (Form ARTS-GS) with the SOS. You must include the submission cover sheet when you file your articles. You can submit your articles by mail or online with bizfile Online. As of 2023, there's a $100 filing fee to submit your articles of incorporation.
Your articles must include:
(Cal. Corp. Code § 201 (2023).)
The articles on the SOS website include a broad purpose statement. If your corporation will issue different classes or series of shares, you should specify the designation of each series or class and list how many shares can be issued under each class or series. If a class or series has special rights, privileges, preferences, or restrictions, you should include this information as well.
Every corporation has a set of rules that it must follow that lays out how the corporation will operate. These rules are outlined in a corporation's bylaws. Bylaws are an internal corporate document and don't need to be filed with the state.
Your corporation isn't required to have bylaws but it's highly advantageous to have them. This document gives officers, directors, shareholders, and outside investors an agreed-upon roadmap for how your corporation will be run and how decisions will be made. Having bylaws also shows banks, creditors, the IRS, and others (like investors) that your corporation is legitimate. This document can also help demonstrate that your corporation is its own entity separate from its officers, directors, and shareholders—preventing others from piercing the corporate veil and holding individuals in the corporation liable for corporate debts.
Also, set up a corporate records book where you can keep all of your corporation's important papers, including minutes of director and shareholder meetings. You can use a three-ring binder or you can order a special corporate records kit through a corporate kit supplier. Keep it at your corporation's book principal office.
The incorporator (the person who signed the articles) must appoint the corporation's initial corporate directors. These directors will serve on the board until the first annual meeting of shareholders when the shareholders will elect new board members (or elect the current board members for a new term).
The incorporator should complete an “Incorporator’s Statement” showing the names and addresses of the initial directors. The incorporator must sign the statement and place a copy in the corporate records book. You don't need to file the statement with the state.
The first meeting of the corporation's board of directors should be held to:
Record all decisions made and actions taken by the directors in corporate minutes. If you want your corporation to be taxed as an S corporation, the directors should approve the election of S corporation status at the first meeting as well.
After all the initial matters have been decided at the first directors' meeting, you should issue stock to the shareholders in return for their capital contributions. Shareholders can contribute cash, property, services, or all three.
Although not legally required in most states, small corporations usually issue paper stock certificates. Log each shareholder's name and contact information in the corporation's stock transfer ledger. California corporations don't need to establish a par value for their stock—a set amount below which the stock can't be sold. The board sets the value and number of the initial shares.
Federal and state securities laws classify shares of corporate stock as a security. So, you'll need to keep in mind applicable securities laws as you issue stock for your corporation. However, federal law exempts "private offerings": a non-advertised sale to a limited number of people (generally 35 or fewer). Thus, if you’re issuing shares to 35 or fewer people, you don’t have to worry about federal securities laws.
California has its own version of this federal exemption. To claim a limited offering exemption under state law in California, you must file a Section 25102(f) Notice Filing - Limited Offering Exemption Notice (LOEN) with the California Department of Business Oversight. You should file the notice within 15 days after your corporation issues stock.
You can file the notice online. As of 2023, there's a filing fee of $25 to $300. For more information, see the securities FAQ page on the Department of Financial Protection and Innovation website.
Every California corporation and foreign corporation registered in California must file a Statement of Information (Form SI-55) with the SOS:
The form can be completed and filed online, or printed from your computer for mail or drop-off submission. As of 2023, the filing fee is $25. If your corporation has more than one director, you'll need to attach Form SI-550A as well.
All California corporations and foreign corporations doing business in California must pay California taxes to the California Franchise Tax Board (FTB).
Annual minimum tax: Every corporation that's registered or doing business in California must pay an $800 annual minimum franchise tax during the first quarter of each accounting period. The minimum tax applies to corporations regardless of whether they conducted business in California (unless the corporation's tax year was 15 days or less). For new corporations that qualify or incorporate with the SOS, the minimum tax doesn't apply. Instead, a new corporation's tax is measured based on its income for the first year and subject to estimate requirements. For all subsequent years, the minimum tax is $800.
Additional taxes: Corporations with income over certain levels must pay an additional fee based on their total annual income.
Filing procedures: Regular corporations must file a California Franchise or Income Tax Return (Form 100) by the 15th day of the fourth month after the close of their taxable year. Corporations that have elected to be taxed as S corporations file California S Corporation Franchise or Income Tax Return (Form 100S). For details and forms, see the FTB website.
EIN: Your corporation must obtain a federal employer identification number (EIN). You may obtain an EIN by completing an online application on the IRS website. There's no filing fee.
California Employment Development Department (EDD): A California corporation becomes subject to the state's payroll tax requirements if it pays more than $100 in wages in any calendar quarter. This rule applies even if a corporation operates without any employees except for the corporate president. The EDD issues employer account numbers (sometimes called "state employer identification numbers" or "SEINs") and administers California's payroll taxes, including Unemployment Insurance, Employment Training Tax, State Disability Insurance, and California Personal Income Tax withholding. For details, see the EDD website.
For more information, read our article about California state business income taxes.
Corporations, as opposed to other business structures, require a relatively significant amount of initial preparation. To form your corporation, you'll need to know how many shares your corporation will be allowed to issue. After incorporation, you should prepare various documents, such as bylaws, an incorporator's statement, meeting minutes, and a shareholders' agreement. You'll also need to consider securities laws when you do issue stock. During this process, you might find it helpful to talk to a business attorney. They can help you prepare these documents or advise you on the language you need to include to stay compliant.
You can also use our online California corporation service, which will form a corporation for you, providing you with everything you need, including a corporate name check, articles, bylaws, a corporate records book, an incorporator's statement, minutes of the first meeting of the board of directors, stock certificates, and a stock transfer ledger.
For further education, check out Incorporate Your Business: A Step-by-Step Guide to Forming a Corporation in Any State, by Anthony Mancuso (Nolo). This book provides you with many corporate forms and explains the benefits of incorporating your business.
]]>Step | Resources |
1. Determine if the type of business suits you. | Evaluating Your Business Idea |
2. Use a break-even analysis to determine if your idea can make money. | Will My Business Make Money? |
3. Write a business plan, including a profit/loss forecast and a cash flow analysis. | |
4. Find sources of start-up financing. | Business Financing, Loans & Capital |
5. Set up a basic marketing plan. | Building Your Business Image |
6. Identify the number of owners of your business. | Business Ownership Structures |
7. Decide how much protection from personal liability you'll need, which depends on your business's risks. | What are the risks of starting my own business? |
8. Decide how you'd like the business to be taxed. | How Sole Proprietors are Taxed How LLC Members are Taxed How Corporations are Taxed |
9. Consider whether your business would benefit from being able to sell stock. | Incorporate Your Business |
10. Research the various types of ownership structures. | Choosing the Best Ownership Structure for Your Business |
11. Get more in-depth information from a self-help resource before you settle on a structure. If you are unsure, talk to a lawyer. | Nolo Store Talk to a Lawyer |
12. Think of several business names that might suit your company and its products or services. | How to Name a Business |
13. If you will do business online, check if your proposed business names are available as domain names. | Choose and Register a Domain Name |
14. Check with your county clerk's office to see whether your proposed names are on the list of fictitious or assumed business names in your county. | Make Sure Your Proposed Business Name Is Available |
15. For corporations and LLCs: check the availability of your proposed names with the Secretary of State or other corporate filing office. | Register Your Business Name |
16. Do a federal or state trademark search of the proposed names still on your list. If a proposed name is being used as a trademark, eliminate it if your use of the name would confuse customers or if the name is already famous. | How to Do a Trademark Search |
17. Choose between the proposed names that are still on your list. | Choosing a Business Name FAQ |
18. Register your business name with your county clerk as a fictitious or assumed business name, if necessary. | Register Your Business Name How to Register a DBA |
19. Register your business name as a federal or state trademark if you'll do business regionally or nationally and will use your business name to identify a product or service. | File a Federal Trademark Application |
20. Register your business name as a domain name if you'll use the name as a Web address too. | Choose and Register a Business Name |
25. Identify the features and fixtures your business will need. | Your Business Space & Commercial Lease How to Start a Home Business |
26. Determine how much rent you can afford. | Tips for Assessing the Cost of the Commercial Rental. |
27. Decide what neighborhood would be best for your business and find out what the average rents are in those neighborhoods. | Determine the Space Your Business Needs. |
28. Make sure any space you're considering is or can be properly zoned for your business. (If working from home, make sure your business activities won't violate any zoning restrictions on home offices.) | Home Businesses and Zoning Laws |
29. Before signing a commercial lease, examine it carefully and negotiate the best deal. | Commercial Leases: Negotiate the Best Terms |
30. Obtain a federal employment identification number by filing IRS Form SS-4 (unless you are a sole proprietorship or single-member limited liability company without employees). | Licenses & Permits for Your Business |
31. Obtain a seller's permit from your state if you will sell retail goods. | How to Get a Seller's Permit |
32. Obtain state licenses, such as specialized vocation-related licenses or environmental permits, if necessary. | Small Business License Requirements: 50-State Guide |
33. Obtain a local tax registration certificate, a.k.a. business license. | 50-State Business Income Tax Requirements |
34. Obtain local permits, if required, such as a conditional use permit or zoning variance. | Local Start-Up Requirements for Small Businesses |
35. Determine what business property requires coverage. | What Type of Insurance Does Your Small Business Need? |
36. Contact an insurance agent or broker to answer questions and give you policy quotes. | |
37. Obtain liability insurance on vehicles used in your business, including personal cars of employees used for business. | |
38. Obtain liability insurance for your premises if customers or clients will be visiting. | General Liability Insurance for Small Businesses |
39. Obtain product liability insurance if you will manufacture hazardous products. | |
40. If you will be working from your home, make sure your homeowner's insurance covers damage to or theft of your business assets as well as liability for business-related injuries. | Homeowners' Insurance |
41. Consider health & disability insurance for yourself and your employees. | The Employer's Legal Handbook |
42. Decide whether to use the cash or accrual system of accounting. | Cash vs. Accrual Accounting |
43. Choose a fiscal year if your natural business cycle does not follow the calendar year (if your business qualifies). | Choosing a Fiscal Year |
44. Set up a recordkeeping system for all payments to and from your business. | Bookkeeping and Accounting Basics |
45. Consider hiring a bookkeeper or accountant to help you get set up. | Choosing the Recordkeeping System for Your Business |
46. Purchase small business accounting software |
47. Familiarize yourself with the general tax scheme for your business structure. | Paying Your Business Taxes Tax Savvy for Small Business |
48. Familiarize yourself with common business deductions and depreciation. | Business Tax Deductions Deduct It! Lower Your Small Business Taxes |
49. Obtain IRS Publications 334, Tax Guide for Small Business, and 583, Taxpayers Starting a Business. | Small Business Tax FAQ |
50. Obtain the IRS's Tax Calendar for Small Businesses. | IRS's Tax Calendar |
As you can see, starting a business involves making quite a few initial decisions and getting policies and paperwork in place. For more information about and help with starting a business, consult the following Nolo resources:
In California, like every other state, there are no formal filing or registration requirements needed to create a general partnership. However, you must still comply with registration, filing, and tax requirements applicable to any business.
Here are the steps you should take to form a partnership in California:
To read more about partnerships in general—including the difference between a general and limited partnership—see our section on partnerships. (And for information on other California business structures, review our section on starting a business in California.)
In California, a partnership can use the last names of the individual partners or a fictitious business name (FBN)—sometimes called a “trade name” or “DBA” (short for “doing business as”). For example, suppose Dick Grayson and Barbara Gordon form a partnership called “Nightwing Oracle Productions.” The name “Nightwing Oracle Productions” would be an FBN because it doesn’t include “Grayson” and “Gordon,” the partner’s last names (Cal. Bus. & Prof. Code §§ 17900 and following (2023).)
If you plan to use an FBN, it should be distinguishable from (not the same as) the name of any other company currently on record in California. It’s also a good idea to choose a name that’s not too similar to another registered business because of common law and federal trademark law protections. If you start using a name that’s too similar to another business’s name in a way that would confuse customers, you could be sued for trademark infringement and be forced to change your name anyway.
To make sure your proposed business name is available, run a search in the following government databases:
If you’re not sure whether your business name is available to use, consider talking to a trademark attorney. They can tell you the advantages and risks of using your business name, and they can also do a trademark search for you.
If you decide to use a trade name, California requires you to file an FBN statement in the office of the county clerk where you intend to do business. The California State Association of Counties provides a list of county websites where you can obtain more information and forms for filing an FBN statement. (Cal. Bus. & Prof. Code § 17913 (2023).)
Within 45 days of filing your FBN statement, you’ll need to publish the statement in a county newspaper for four weeks. (Cal. Bus. & Prof. Code § 17917 (2023).)
Filing fees vary by county. You’ll need to renew your statement every five years.
A partnership agreement isn’t a mandatory legal requirement for establishing a partnership. However, it’s a very important step to ensure there are no misunderstandings between you and your partners. A well-drafted agreement will help you decide in advance how to handle certain situations.
Here’s a list of some items that should be covered in your partnership agreement:
Even well-intentioned, honest partners can find themselves in a legal battle if they don’t have a written partnership agreement memorializing their initial purposes. Your agreement can always be changed at a later date should circumstances or conditions change. For help drafting this document, see our article on creating a partnership agreement.
Your business might need to obtain business or professional licenses depending on the type of business activity you’re engaged in. For example, if your partnership offers accounting services, you must comply with state licensing requirements for accountants.
California provides a comprehensive database of every profession that requires a license by a partnership. You can find this information by using CalGold, a service of the California Governor’s Office of Business and Economic Development.
In addition, local regulations—including licenses, building permits, and zoning clearances—might apply to your business. You’ll need to check with your city and county governments for more information. For additional guidance, read our article about the legal requirements for starting a small business.
As a business, you have multiple federal and state tax obligations.
Obtain an EIN. Partnerships must obtain an EIN from the Internal Revenue Service (IRS). An EIN is a nine-digit number issued by the IRS to keep track of businesses. If your partnership has employees, you’ll need to report wages to the IRS using your EIN. Registering for an EIN can be done online at the IRS website.
Register as an employer. If you have at least one employee, you must register with the California Employment Development Department (EDD) within 15 days of paying $100 or more in a calendar quarter. You can report and pay all employment-related taxes on a periodic basis using your EDD payroll tax account. The EDD also provides additional information on the different state payroll taxes on its website.
Register to pay sales tax. If you’re a retailer selling goods in California, you need to register with the California Department of Tax and Fee Administration (CDTFA) to pay sales tax. You might need to pay use tax for goods that are stored, used, or consumed in California that aren’t already taxed. You’ll also need to pay local sales tax in addition to state sales tax. You can use the CDTFA online services to register your tax account and apply for a seller’s permit.
You can find additional guidance on partnership taxes and filing requirements on the California Franchise Tax Board (FTB) website. Use the California Tax Service Center to navigate the various tax requirements, including income, payroll, sales, and use taxes.
It is important to consider doing the following once you’ve created your partnership:
If you have business experience and face simple legal requirements, you can probably start your partnership on your own. If you want to do the process yourself but are interested in some help and further education, check out Form a Partnership: The Complete Legal Guide, by Denis Clifford and Ralph Warner (Nolo). This book provides information on important topics like profit distribution and financial and tax liabilities as well as sample partnership agreements.
If you and your partners have any disagreements over how your partnership should be run or you run into obstacles applying for local licenses and registrations, you should talk to a business attorney. They can help you draft a partnership agreement, apply for local licenses and permits, and comply with employment and tax laws.
]]>Let’s walk through each step so you can become a professional dog walker.
As a dog walker, it might be possible to operate as a sole proprietor or, if more than one person is involved, as a partnership. However, like just about any business (large or small) walking dogs isn’t risk-free. If Mr. Henderson’s Chihuahua Lancelot is injured or killed while in your care, you’d want the business—not you personally—to be responsible for any liability.
Therefore, you should consider using a legal form for your business that provides you with some protection, such as a:
As part of your considerations, keep in mind that business entities that provide more protection from liability also require more time and expense to create and maintain. If you choose to be anything other than a sole proprietor or general partnership, you’ll need to register your business with your state.
In short, you’ll need to weigh the added time and expense against the risk to you personally if a dog or someone else is hurt or property damaged while a dog is in your care.
If you want to use a name for your business that’s different from your legal name—called a “DBA” (short for “doing business as”), a “trade name,” or a “fictitious business name”—you might need to register that name with your city, county, or state. Sole proprietors use DBAs when their business name is different from their personal legal name; LLCs and corporations use DBAs when their business name is different from the name they registered with the state when they formed their business.
For example, suppose Scott Turner is a sole proprietor with a dog walking business that he advertises under the name “Walks and Wags.” He might need to register his business name because it’s different from his legal name, Scott Turner. You should check with your state and local governments for specific rules.
For more information on the pros and cons of the different types of business entities, read about choosing a business structure.
Like any other business, you need to make sure you’re complying with all federal, state, and local laws. You could need to obtain:
Obtaining an EIN. If your business has more than one owner or you have employees, your business is required to have an EIN. If you’re a sole proprietor or single-member LLC without employees, then you only need an EIN if you elect to be taxed as a corporation. Even if it’s not required, you should consider getting an EIN. Some banks require you to have one to open a business account. The process is easy and can be completed online for free at the IRS website.
Applying for a general business license. You should check with your state and local government to see if you need to obtain a general business license. Sometimes, you’ll need to apply for a general business license at the state level, and other times, you’ll need to get one from your city or county. For example, most California cities don’t require any special license or permit to walk dogs.
Registering with the local tax authority. Depending on your business entity and where your business is located, you might need to register with the tax authority in your state, city, or county. The relevant authority could be your department of revenue or a similar taxing agency. As a dog walker providing services, you probably don’t need to worry about reporting or paying sales tax.
Complying with local zoning. Running a dog walking business likely doesn’t require you to abide by any zoning laws because your business probably doesn’t have a set location you operate from. But if you do have a headquarters, you should check the zoning ordinances for your city or town.
For more information, read our article on the legal requirements for starting your small business.
Walking Fido generally involves Fido stopping to relieve himself. You should be aware of your town or city’s rules about cleaning up after dogs. Dogs might only be allowed in specific areas, and you’ll probably be required to pick up after the dog you’re walking. Similarly, most local governments have laws requiring that all dogs in public places be leashed.
For example, in New York City, if you’re in a public place, you must clean up after your dog (or a dog in your care), and your dog must be leashed. Sometimes, you’ll see signs with rules regarding dogs. But don’t just rely on these signs for guidance.
Because your business will be based on dog walking, you should learn the details of your local government’s pet laws and make sure that you comply with them: You don’t want city or county fines cutting into your profits.
While word-of-mouth is often the best way to get new customers, with a new dog walking business you’ll probably need to do at least some advertising. To advertise your services, you could:
Regardless of how you choose to advertise, the best brief pieces of advice are:
If you offer the first walk for free, but there are conditions—perhaps that the customer must commit in advance to a minimum of five walks—you must state what those conditions are. If you offer a 10-walk discount, the discounted price must really be cheaper than your normal per-walk price.
Different customers can have different ideas about exactly what services you’ll provide. It’s in your own interest to make clear in advance—in writing—what you will and won’t do in a service agreement.
Before your client signs an agreement, it’s a good idea to provide your policies up front to minimize any misunderstandings and curb expectations. If you have a website, post your policies there. Regardless of whether you have a website, you should provide a printed document with the policy information to your clients before you reach an agreement and begin walking their dogs.
For example, you should indicate such things as:
Keep in mind that for a contract for services to be legally binding:
If the services involved will be completed in less than a year the contract need not be in writing; however, a written contract is always safer.
For contract tips, read our article about making a solid business agreement.
A dog walking business presents special risks because you’re dealing with live animals and engaged in physical activity. Dogs can be injured or even killed, and you, too, or someone else could be injured.
To protect you and your business, consider the following kinds of insurance coverage:
Insurance does exist specifically for businesses that deal with caring for pets. Probably the most relevant insurance, you can get coverage if a dog in your care gets hurt or sick—for example, if they eat something poisonous or are bit by a stray dog on their walk.
Some pet business insurance providers include:
For further guidance, read about what types of insurance your small business needs.
Starting a dog walking business involves less setup time than the average business. After investigating the steps you need to take and getting your name out there—a must for every business—you’re more or less ready to go. You generally don’t have to worry about getting a business loan or signing a commercial lease. In addition to the topics we’ve already covered, you might want to use client management software and payment processors like Square or Stripe.
Many dog walkers can launch their businesses on their own. They can register their business with the state, purchase prepared contracts online, and obtain liability insurance themselves. But if you have legal questions, are unsure whether you need specific licenses and permits, or want someone to review your business contracts, you should talk to a business lawyer. Meeting with an attorney just once might be enough to put you on the right track. You should also consider contracting out your bookkeeping to an accountant. They can make sure you’re ready in time for taxes and that you have a good idea of your profit margin.
If you want to start your business on your own but need some extra help, check out Legal Guide for Starting & Running a Small Business, by Fred S. Steingold (Nolo).
]]>Here, we answer common questions about providing dog walking services in California. To learn the general steps you need to take to launch your business anywhere, read our article on starting a dog walking business.
To learn about other California business opportunities, see our section on starting a business in California.
As a business owner in California, you have several business structures to consider, each with its advantages and disadvantages:
If you’re starting your business on your own, your best options are a sole proprietorship or single-member LLC (SMLLC). If you’re going into business with at least one other person, you’ll choose between a multi-member LLC (the same as an SMLLC but with more than one owner), a partnership, a limited partnership, or a corporation.
California sole proprietorships. If you don’t register your business with the California Secretary of State (SOS) and you’re running your company by yourself, then you’re automatically a sole proprietor in California. A sole proprietorship is less expensive and requires less work than an SMLLC. But you’ll be personally liable for anything that happens with your business—for example, you’ll be personally on the hook if your business is successfully sued to cover a vet bill. (For further guidance, read about forming a sole proprietorship in California.)
California LLCs. If you want to protect your personal assets, you’ll need to file Articles of Organization with the SOS to form an LLC. However, doing business as a California LLC comes at a cost. You’ll be responsible for paying an $800 minimum tax to the Franchise Tax Board (FTB). You’ll also be responsible for filing biennial statements and reporting other yearly taxes. (For more, read about how to start an LLC in California.)
California partnerships and limited partnerships. When you go into business with another person in California, you automatically create a partnership. There’s no need to file any forms with the state (though you should draft a partnership agreement to govern your business relationship). Like sole proprietors, general partners are personally liable for business debts. If you want to stay a partnership but limit your liability, you can form a limited partnership. You must file a Certificate of Limited Partnership with the SOS to form a limited partnership in California. California partnerships don’t need to pay the minimum $800 business tax but limited partnerships do. (For more information, read about how to create a partnership in California.)
California corporations. If you want limited personal liability and a structured management scheme, forming a California corporation could be a good option. To create your corporation, you’ll need to file Articles of Incorporation with the SOS. Your business will also need to pay the $800 minimum tax to the FTB. (To learn more, read about establishing a corporation in California.)
With your dog walking services, forming an LLC probably provides the most benefits. While California does impose a minimum tax on LLCs, your personal assets will be protected. You’ll also have flexibility in how your company is taxed and managed, which can be advantageous as your business grows.
You can register your California corporation, LLC, or limited partnership by mail or online at the SOS bizfile website.
For more information on the different business types, read California’s section on entity types on the SOS website or our article on choosing a business structure.
When you do business under a name that’s not your legal name, you’re using a fictitious business name (FBN)—also known as a “DBA” (short for “doing business as”) or a “trade name.” California requires you to file an FBN statement with the county clerk’s office in the county where your business is located if:
(Cal. Bus. & Prof. Code § 17913 (2023).)
For more help on choosing a business name and registering your DBA, see the FTB’s guide to DBAs.
No. You’re only required to have a seller’s permit if you’ll sell or lease taxable goods. For more information on state licenses and permits, visit the California Department of Tax and Fee Administration (CTDFA) website.
But you need to check with your city or county for local license requirements. Most California cities don’t require any special license or permit to walk dogs.
For more, read our article on how to get a small business license in California.
You have to register your business with the appropriate state department or agency for taxes only if you pay and report:
So, unless you have employees, you won’t have to register for taxes for your dog-walking business.
If your business is organized as a sole proprietorship, partnership, or LLC taxed as a partnership, it’s considered a pass-through entity. In that case, you’ll pay and report your business income on your personal tax return. If your business is organized as a corporation or as an LLC taxed as a corporation, your business will report and pay taxes.
State payroll taxes. If you have employees, you’ll need to register with the California Employment Development Department (EDD) to file state payroll taxes like wage withholding and unemployment insurance. You can manage your employer payroll tax account online using the EDD’s e-Services.
Sales and use tax. Because you’re only providing services, you don’t need to pay any sales and use tax in California. However, if you sell products—like leashes and collars—alongside your services, you’ll need to pay register with the CTDFA to report and pay sales tax on those items.
You should also check with your city or town for specific tax requirements.
Running a dog walking business likely doesn’t require you to abide by any zoning laws because your business probably doesn’t have a set location you operate from. But if you do have a headquarters, you should check the zoning ordinances for your city or town.
For more information, read our article on the legal requirements for starting your small business.
Dogs generally need to relieve themselves when you take them on walks. Many local governments have specific rules requiring people to clean up after their dogs. For example, San Diego’s municipal code says that you can’t let your dog pee or poop on any property that you don’t own, and if your dog does, you have to clean up after them. Similarly, most local governments have laws requiring that all dogs in public places be leashed.
For instance, Orange County has pet laws that cover issues like:
Review your local laws about pets before you start your business.
California generally doesn’t have specific insurance requirements for businesses. If you have employees, California does require that you get workers' compensation insurance.
Otherwise, it’s up to you whether you want to purchase insurance for your business. While not required, it’s a good idea to invest in good insurance coverage. The cost of your policy might depend on:
A business based on dog walking comes with special risks: You’re dealing with live animals and engaged in physical activity. So, you should really consider looking into some insurance coverage before you start taking customers. You should specifically look at the different types of pet insurance, which can give you coverage for vet bills, dog bites, and furniture damage.
For more general guidance, read about what types of insurance your small business needs.
In California, you can launch your dog walking business without much paperwork. You might even only be responsible for filing a couple of forms per year and paying a small fee. But it’s important that you do your due diligence before you start advertising your services. You don’t want to get your business up and running just to put it on hold to resolve compliance issues.
You can visit the SOS website and the California state website to research what your business needs. California also provides a starting a business checklist to help get you started. You can also read our article on how to start a business in California. And if you have specific legal questions, talk to a California business lawyer.
If you’re interested in educating yourself further, check out Legal Guide for Starting & Running a Small Business, by Fred S. Steingold (Nolo).
]]>Because most hookah mixtures contain tobacco, hookah lounges fall under the authority of the federal Bureau of Alcohol, Tobacco, Firearms and Explosives. States, cities, and counties also govern tobacco sales and use.
Examples of pertinent laws include prohibitions on smoking in public spaces, restrictions on the location or hours of operation for hookah lounges, smoke-free workplace laws, and bans on the sale of flavored tobacco.
Because of these regulations, it’s critical to check with the appropriate state and local government agencies (usually the department of health or alcohol and tobacco) before embarking on your venture. It can also be helpful to hire an attorney who can assist with navigating the laws, especially because the legal landscape is evolving. You might find a clear path to opening your hookah lounge today, but new regulations might affect your business in the future.
At its core, a hookah lounge is a retail business, requiring all the elements a retail business needs—a physical location, inventory, a process for collecting sales tax, and the like.
To begin, you’ll need to determine what you’ll sell. Some hookah lounges also serve alcohol, food, or both. Some sell hookah and smoking accessories like shisha and pipes. Others offer music, karaoke, or live performances.
Whether you also provide food, alcoholic beverages, or entertainment in addition to the smoking experience depends on your target market and your startup budget.
For example, if you are catering to college students, you might consider offering a menu of burgers, fries, chili, and the like. If your lounge targets older adults, you might serve alcohol. Remember, however, that a facility with a kitchen for cooking will be more costly to rent than one without a kitchen, and you’ll have to obtain a liquor license to serve alcohol. Some states charge a steep price for liquor licenses.
If you offer live entertainment, you’ll need additional equipment—a stage and sound system. If you provide recorded music, you’ll have to license the recordings from a company such as the American Society of Composers, Authors and Publishers (ASCAP). Services like Spotify and Pandora, which offer subscriptions for individuals to access recorded music on their iPhones, don’t license music for business use, and you can incur hefty fines for failing to obtain the appropriate license.
Ideally, hookah lounges should be located in retail storefronts, visible from the street in high-traffic areas close to other night-life establishments like night clubs and bars. Hookah lounges appeal to the same customers who frequent these types of businesses.
Many municipalities, however, place restrictions on where a hookah lounge can be located. Some limit hookah lounges to certain types of commercially zoned districts, or require that they be located a certain distance from schools, churches, residences, and other businesses.
Once you’ve reviewed the local laws that can affect your choice of location, you’ll need to consider the cost to lease space, the ease and availability of parking, proximity to public transportation, and the demographics of the area. Your municipality might also require that your facility have specific ventilation features beyond those needed for restaurants or bars.
Before finalizing your lease agreement, be certain that your property owner has obtained the appropriate Certificate of Occupancy (CO) for a hookah lounge. The CO must include a description of the property’s use, and confirm that it conforms to applicable building codes and zoning laws.
You’ll likely need more permits and licenses to operate a hookah lounge than you would for other types of retail establishments, because of the government agencies and laws connected with these operations. Some of the licenses and permits you might need include:
A tobacco license. You’ll need to register your lounge with the Food and Drug Administration (which governs tobacco sales on a federal level) and obtain a tobacco license or permit from applicable state and city agencies.
The governing agencies at the state and city level are typically the department of tobacco and alcohol, the health department, and the department of taxation. You must display your license prominently, and you might have to post signs warning of the dangers of tobacco use.
License fees vary by state. On average, a tobacco license will cost between $50 - $300 per year, and local cities and counties might impose additional permit fees.
A liquor license. If you serve alcoholic beverages, you’ll need a liquor license, usually from your state’s department of alcoholic beverages. Costs vary by state, by the type of establishment, and the types of alcoholic beverages you serve (for example, whether you offer only beer and wine or a full bar); and range from a few hundred dollars to as much as $400,000. Some states also impose quotas on the number of liquor licenses they grant per year.
A food service license. If you plan to serve food at your lounge, you’ll need a food service license, usually from the city or county health department. You might also need a food handler’s permit for employees who are preparing or serving food.
The city or county health department will conduct an inspection to ensure that your restaurant complies with their requirements for health and safety.
A fire department permit. Local municipalities usually require that you obtain a fire safety certificate that sets limits on the number of occupants allowed in the lounge at any given time. You’ll need certain equipment, such as fire extinguishers.
Parking, entertainment, dumpster, and signage permits. Some cities and counties impose additional permit requirements if you offer valet parking, live entertainment, or place prominent signage outside your lounge. You might also need a dumpster placement permit to place dumpsters in easy reach of the kitchen.
A business license. Many states require a general business license in addition to the specific licenses required by alcohol and tobacco authorities.
A sellers permit. Sellers permits are issued by states to allow them to track and collect sales tax.
A resale permit. If you are going to sell hookah pipes or other smoking accessories at retail, you’ll need a resale permit so you don’t have to pay sales tax on the goods you purchase for resale.
Startup costs for a hookah lounge can vary from as little as $30,000 to over $200,000, depending on many factors, such as whether you also have a restaurant or bar, the size and location of the space you lease, and the number of employees.
Most hookah lounges compete based on the variety of pipes and shisha they offer, the décor, restaurant and bar offerings, and entertainment.
Some of the costs you’ll need to consider in addition to permits and licenses include:
Most hookah lounges charge by the bowl of shisha and the type of water pipe. Charges for fancy pipes that offer special filtration systems can be as high as $50, and the shisha can range between $15 per bowl, for a basic tobacco blend, to $30 or more per bowl for exotic tobaccos and flavors.
On average, the wholesale cost of shisha ranges between $1.25 - $25.00 per 250 grams (the average bowl takes about 25 grams of shisha), yielding relatively high margins for the lounge owner, provided that the hookah lounge attracts robust traffic.
But it’s also important to consider that some of the more successful hookah lounges offer a full restaurant and bar along with entertainment. High-end hookah lounges can require a lot of marketing dollars to garner a steady clientele, and other startup and operating costs for these businesses can be quite high. It can take six months or more for a hookah lounge to break even, and one or more years to be profitable.
Aside from the industry-specific issues you’ll need to address, the steps required to set up a hookah lounge are much the same as starting any other retail business.
A business plan helps you to think through the startup funding you’ll need, how much revenue it will take to break even and turn a profit, and your strategy for achieving your goals.
You can structure your business as a sole proprietorship, limited liability company (LLC), general partnership, or corporation. Each differs in the personal liability protection offered and the way the business is taxed.
LLCs and corporations offer the greatest personal liability protection because the law treats the business as a separate entity from the individual owners. Owners are usually not held responsible for the debts and obligations incurred by the business.
Owners of these business types pay individual taxes on income they receive from the business, like wages and profit distributions. The business pays taxes on the income it earns, but owners only pay taxes on the portion of income the business distributes to them.
The owners of sole proprietorships and general partnerships are personally responsible for their business debts and for paying taxes on the business’s income.
An EIN, which is issued by the IRS, is like a Social Security Number for your business. You need an EIN to apply for many permits and licenses, a business bank account, and to employ workers.
Your business name helps customers readily recognize your lounge. It should be unique and memorable, and it must conform to the requirements in your state. Check the website of the Secretary of State for rules about naming your business.
Unless you want to spend a lot of money marketing your lounge, choose a name that describes what you offer, such as Aladdin’s Hookah Den and Cocktail Lounge. (If you choose a name that isn’t immediately recognizable, like Time Out, you’ll have to spend your marketing budget on teaching customers what it is you offer.)
LLCs and corporations must provide a business name with their registration application. Sole proprietorships and general partnerships are automatically registered under the owner’s name. If you want to use a different name from your own, you’ll have to register a fictitious business name or DBA (the abbreviation for “doing business as”).
LLCs and corporations must register with the Secretary of State or similar agency where they operate. Regulations for registering vary by state, but most state websites provide details about the process and allow you to register on their website.
If you structure your business as an LLC or corporation, you’ll also need to designate a registered agent on your registration application. A registered agent is someone who can receive legal documents on your behalf. It can be someone within your organization or a third party, but keep in mind that whomever you choose must be reliable and available during business hours.
Retail businesses typically carry insurance to protect the physical premises and the personal assets of the owner.
The types of insurance retail establishments carry will depend somewhat on whether the business owns the property or rents. Owners who rent most typically carry:
You’ll need a separate business bank account if you structure your company as an LLC or corporation, but even sole proprietorships and partnerships can benefit from a separate bank account to help with recordkeeping. Any business will need a business bank account to apply for a loan.
]]>Walk into any department store or browse the internet and you’ll quickly see there’s no shortage of apparel design ideas. With so much competition for consumers’ dollars, your clothing line must stand out from the competition, and you’ll need a strategy for doing that.
Begin to formulate your strategy by researching the competition and looking for gaps in the types of customers served, the sizing available, the price points, or other characteristics. For example, you might notice that activewear designs are mostly aimed at younger consumers and identify a need for designs that appeal to an over 40 demographic.
Be careful, though, about fashioning an entire clothing line from something you, yourself, would like to wear. While fashion is a form of personal expression, your clothing line must appeal to many customers to be successful.
A target market is the group of consumers you want to attract with your product.
Create a profile of your target customer by asking yourself questions such as these:
How you define your target market will inform not only the way you market to your customers, it will also play a role in product development.
For example, if you are designing T-shirts for millennials (age 26-41), you might choose to use eco-friendly cottons because this demographic tends to be more environmentally conscious than consumers in other age groups.
When you know what you are making and who you are making it for, it’s time to start designing.
Designers typically start with a sketch of the piece they want to create, and use computer-aided design (CAD) software such as Adobe Photoshop or Adobe Illustrator to develop their ideas.
Many design software programs allow you to do everything from creating sketches to making patterns and experimenting with the fit of a garment, using virtual models.
A collection typically includes ten to 12 styles, each with several variations. But as a beginner, you might want to start with a much smaller collection of three or four styles and debut them in a soft launch to establish what’s called proof of concept. These initial designs will allow you to test the demand for your designs. If you advertise on social media, you can also use tools like Google Analytics to better understand your customer and refine your designs.
The type of manufacturing facility you’ll need depends on the kinds of garments you want to make. Most clothing is manufactured in one of these three ways:
Print on demand. Clothing like T-shirts is often manufactured using a print-on-demand process. Print-on-demand factories provide the garment itself, and you provide the design, such as a logo, that you’ve created.
Print-on-demand shops usually allow you to manufacture small quantities at a time, and they ship the finished items directly to the customer, so you don’t have to store inventory or fulfill orders yourself.
Custom wholesale. To manufacture a custom wholesale product, you’d buy a pre-existing garment and customize it with embellishments such as appliques, embroidery, fringes, or other decorations.
For example, you might purchase a denim jacket, and add an embroidered design to the back.
Making custom wholesale garments requires a manufacturing facility with more capabilities than a print-on-demand shop, and you will usually have to store inventory and fulfill orders yourself.
You might also need another third-party vendor to apply your own label for branding and care instructions to these types of garments.
Cut and sew. With cut-and-sew manufacturing, you control the entire process, from designing the garment to selecting and buying the fabrics and notions (zippers, buttons, and such), and overseeing the manufacturing. These types of factories are often located overseas in countries such as Vietnam and Sri Lanka.
You’ll need to choose and buy your own fabrics and make the pattern for the garment (although some factories supply pattern makers) and oversee the entire manufacturing process.
Before you can set pricing for your clothing line, you’ll need to know the cost of the materials that go into the garment, the cost to manufacture and ship it from the factory, and all your business and administrative costs, including employee wages, marketing, and sales.
The retail price you set should cover your costs to make the garment and allow for a profit on your sales. You’ll also need to evaluate the retail price you set to determine whether it’s competitive with comparable garments on the market.
Designers measure costs in cost per unit—CPU. Once you know how much it costs to make each unit, you can add an additional amount for profit, usually 30 percent to 50 percent on top of the CPU.
Keep in mind that the CPU and profit add-in will tell you what your garment should sell for if you are selling directly to consumers (such as through an online store). If you are selling your line through other retailers, their retail price will be higher than what you would charge for selling directly to consumers because these stores will add on a profit margin for themselves. As a rule, retailers add another 40-50 percent onto what they paid you to buy the goods to arrive at a retail price.
You’ll need to research the sale price of comparable items to determine whether your design and manufacturing plan is viable, and you might have to make changes to the fabrics you use or other cost factors to arrive at a price that the market will bear.
Once you’ve completed the design and manufacturing of your clothing line, you’ll have to let consumers know about it and start selling it.
To market your clothing line, you’ll have to:
Creating your clothing line is only half the battle. The other half is forming a company to manage your business and support its growth. Before you put your clothing line on the market, you’ll need to don your entrepreneur’s hat and follow these steps to turn your designs into a business:
A business plan is the roadmap you will use to get your company off the ground and make it succeed. It includes research on the size of the market for your clothing line, how you’ll differentiate it from the competition, the cost of making your clothing, the method you’ll use to sell it, your sales goals, and milestones for meeting those goals.
One of the most essential elements of a business plan is the financial analysis. It should tell you whether you’ll have enough funding to finance your clothing line company until it starts to generate enough revenue to cover your expenses, and it should include a plan for getting outside funding if needed. If you intend to borrow money to get your business up and running, or rent store space, you’ll need a business plan to show lenders and landlords.
You can structure your business as a sole proprietorship, limited liability company (LLC), limited or general partnership, or corporation. Each carries its own level of risk and tax obligations.
LLCs and corporations offer the most protection from personal liability from debts and obligations your company might incur, an especially important consideration in the apparel industry.
Manufacturers might fail to ship goods, or the merchandise might arrive damaged. Orders might be canceled due to shipping delays, or you can find yourself with inventory that doesn’t sell. These events can result in unexpected loss of revenue, making it hard for you to meet the business's financial obligations. When your business entity is an LLC or a corporation, you won’t have to dip into your personal finances to pay for financial liabilities that can arise from these events.
Sole proprietorships and partnerships don’t require as much recordkeeping and are easier than LLCs and corporations to set up and run, but they don’t provide the same personal liability protections.
The website of the Secretary of State will have information on the requirements for each type of business entity in your state.
If you choose an LLC or corporation, you’ll have to register your business with the state where you operate. Sole proprietorships and general partnerships are automatically registered when they begin to conduct business.
LLCs and corporations must choose a business name when they register with the state. State rules for naming a business vary, though all states require you to choose an original name that’s not already in use by another company.
Sole proprietorships and general partnerships are automatically registered under the names of their owners. If you want to use a different name, you’ll have to register a DBA (also called a fictitious business name) with the state or your locality.
If you plan to sell your clothing online, you’ll also need a domain name, an address that allows consumers to find you on the internet. Unlike company names, which are registered with the state, domain names are issued by private companies like GoDaddy, for a fee.
Copyrights, trademarks, and patents protect works of art and intellectual property from copycats. The laws give the owners of these protected products and designs legal recourse if someone else tries to copy them.
For the most part, though, the law considers clothing designs utilitarian, and not entitled to the same protections. (That’s why you see so many knock-offs—copies of existing designs—in the fashion industry.)
Some rare exceptions do exist. You might be able to claim a copyright for an original artwork design you created and printed onto a garment (not the garment itself), and you might be able to obtain a patent for an article of clothing that has a unique function that is not already known or obvious.
For example, some zippers have been patented, as has a unique shoe lacing system designed by Nike. The designer of the 100-Way Strapless Brassiere also was able to obtain a utility patent for her design, and sued the parent company of Victoria’s Secret for patent infringement in a case that settled out of court.
While you will be hard-pressed to copyright a garment design, you can often protect certain elements of your clothing line and have legal recourse if someone else uses it.
Logos and brand names can be copyrighted if they are unique, original, and can stand alone. A unique logo or brand name can be instrumental in promoting a fashion company, and you should conduct a search with the U.S. Patent and Trademark Office to make sure the logo or brand name you want to use for your clothing line hasn’t been trademarked by someone else. Infringing on someone else’s trademark can cost dearly in penalties and even a lawsuit.
Every state that collects sales tax (there are just a few that don’t) taxes clothing sales, and you’ll need a seller’s permit to do business in those states.
If you are going to be purchasing products for resale, you’ll also need a resale license to avoid paying taxes on products you purchase for resale (such as garments you plan to print designs on or embellish).
An EIN, issued by the IRS, is like a social security number for businesses It isn’t required for every business entity type, but you’ll need one regardless of your business entity, if you want to apply for a loan, hire workers, or apply for permits.
LLCs and corporations must get a business bank account because these businesses are considered separate entities from their owners. Sole proprietors and general partners can use their personal bank accounts for business transactions, but having a business bank account can simplify recordkeeping, and you’ll be required to have one if you apply for a loan or other types of credit.
You aren’t required to carry insurance by law, but you’ll want to be certain you have adequate coverage to avoid paying out of pocket for things like inventory lost due to fire or customers who slip and fall on your store premises. Consider the nature of your business to determine the types of protection you need.
Online businesses that store inventory, whether in a home, garage, or warehouse, will need property insurance to protect against loss from circumstances like theft or fire. If you store business items in your personal residence, check with your homeowners’ insurance carrier to make sure that it will cover the loss of business, not just personal, property.
If you are selling your clothing line in your own retail shop, you’ll also need property insurance to cover items like inventory, store fixtures, furnishings, and equipment; and you’ll want general liability insurance to protect against injuries to outsiders who enter your premises.
If your business employs workers, you are required to carry workers’ compensation insurance as well.
]]>This article will get you started. To learn more about running a home-based business, see Nolo's section on Your Home Business.
In California, you may register your home kitchen to make the following food products for sale:
You can find this list and more information about the foods you can legally prepare in a home kitchen by visiting the website of the California Department of Public Health.
Many home-based food businesses are intended to be small. California restricts cottage food businesses to an individual operator with no more than one full-time employee. The state also limits the amount of money a home-based food business can earn each year. In 2022, the limit for gross annual revenue is $75,000 for Class A operations, and $150,000 for Class B operations. (California Health and Safety Code § 113758 (2022).)
If your business is very small, running it as a sole proprietorship may be the only economically viable option. Keep in mind, however, that as a sole proprietor, you are personally responsible for every aspect of the business – from paying taxes to absorbing the risks of a lawsuit if your food products cause illness or injury to a customer. If you operate as a sole proprietor, you should purchase liability insurance to protect your personal assets (see below).
If you can afford it, consider choosing a business entity that protects you from personal liability, such as a California limited liability company or corporation. These business structures ensure that your food business, not you personally, would be responsible for any damage if someone were sickened or otherwise harmed by your product.
For more information, see Choose Your Business Structure.
You must get a permit from the county health department to operate a home-based food business in California. You can choose from two types of permits, depending on whether you want to sell products directly to customers or through other local businesses like shops or restaurants.
Class A permit. You can get a Class A permit in California if you want to sell only directly to customers within the state of California. With a Class A permit, you can sell at farmers' markets, festivals, from your home, or in other ways that allow individuals to purchase products directly from you. To get a Class A permit, you must complete a self-certification checklist, but there will be no physical inspection of your kitchen.
Class B permit. You need a Class B permit if you want to sell indirectly to customers – for example, through stores, restaurants, or other venues that will sell your products for you. In California, you may not sell indirectly outside of your own county, unless the county where you want to sell has specifically stated that they will allow indirect sales of cottage food products. To get a Class B permit, your kitchen must pass an annual physical inspection.
(California Health and Safety Code § 113758 (2022).)
Required information. When you apply for a Class A or Class B permit, you will be asked to provide information such as the following:
You must also obtain the licenses and permits required of all businesses, such as a local business license and – if your business uses a name other than your own – a fictitious business name registration.
To operate a home-based food business in California, you must complete a California Department of Public Health food processor course within three months of obtaining your cottage food permit. After you complete the course, hold onto the food handler card or certificate as proof that you completed the training.
In addition, before you are permitted to sell food from home, your business must comply with extensive health and safety rules, including the following:
For detailed rules and regulations, see California Health & Safety Code § § 114365 (2022) and 114365.2 (2022).
There are unique risks associated with food businesses, from food-borne illnesses to foreign objects like glass or plastic in food. These are added to typical business hazards such as fire, theft, or an employee who slips and falls on the job. Don’t assume that your homeowners' or renters' insurance policy will cover your home business operations; it probably won’t. You must carefully evaluate your existing policies and then contact a qualified insurance agent to purchase the additional insurance you’ll need.
To find a good insurance agent, ask other food-business owners for recommendations. Look for an agent who has experience writing policies for food businesses and make sure all major risks are covered. General commercial liability insurance should cover everything from an employee burned by boiling water to a customer who gets sick from eating your food.
If you use a car or truck for deliveries or other business travel, be sure it is also properly insured.
In California, other members of your household or your immediate family members may help you with your cottage food business. Beyond that, the law allows you to hire only one full-time employee. (California Health and Safety Code § 113758 (2022).)
If you decide to hire an employee, you should learn about basic employment law issues such as hiring rules, how to avoid discrimination in California, and how to handle money matters like California state business income taxes and workers' compensation.
For more information, see Nolo’s Human Resources Law Center.
In 2018, California passed the Homemade Food Operations Act, which expands on the cottage food law and legalizes "microenterprise home kitchen operations." The law allows individuals to essentially operate a restaurant out of a private home, but there are a number of restrictions, including:
It's up to individual counties to opt into the program, so you'll need to check with your county government agencies to see if it's available.
The laws surrounding home-based food businesses are continuing to evolve, especially at the county level. You should check the most current regulations before you sell products to the public. Often, the best source of information will be your city or county licensing offices.
As your business grows, you might decide to open a traditional restaurant, which is more regulated. Be sure to research the licensing and permitting requirements for restaurants before you move forward.
]]>This article will get you started. To learn more about running a home-based business, see Nolo's section on Your Home Business.
In Texas, beginning on September 1, 2013, you may register your home kitchen to make the following food products for sale:
You can find this list and learn more about allowed foods by reading Texas Health & Safety Code § 437.001 (2022).
Many home-based food businesses are intended to be small. Texas limits the amount of money a home-based food business can earn to $50,000 per year. (Texas Health & Safety Code § 437.001 (2022.)
If your business is very small, running it as a sole proprietorship may be the only economically viable option. Keep in mind, however, that as a sole proprietor, you are personally responsible for every aspect of the business – from paying taxes to absorbing the risks of a lawsuit if your food products cause illness or injury to a customer. If you operate as a sole proprietor, you should purchase liability insurance to protect your personal assets (see below).
If you can afford it, consider choosing a business entity that protects you from personal liability, such as a Texas limited liability company or corporation. These business structures ensure that your food business, not you personally, would be responsible for any damage if someone were sickened or otherwise harmed by your product.
For more information on choosing a business structure, see LLC or Corporation?
You do not need a permit from the local health department to start a home-based food business in Texas. In fact, the health department is prohibited from interfering with your cottage food business unless a customer files a complaint. (Texas Health & Safety Code § 437.0192 (2022).)
To run a cottage food business, you must follow the guidelines of the state cottage food law, which allows you to sell food only from the following locations:
You are not allowed to sell at privately sponsored events such as craft fairs or flea markets, nor are you allowed to sell wholesale, through the Internet, or by mail.
(Texas Health & Safety Code § § 437.001 and 437.0194 (2022).)
To operate a home-based food business in Texas, you must complete a food safety training course and obtain a food handler’s card. (Texas Health & Safety Code § 437.0195 (2022).)
In addition to the food handler permit, the food you sell must be packaged in a way that prevents contamination (there are exceptions for large items like wedding cakes) and is properly labeled. Your labels must include:
To learn more about labeling requirements, see Texas Administrative Code § 229.661 (2022).
There are unique risks associated with food businesses, from food-borne illnesses to foreign objects like glass or plastic in food. These are added to typical business hazards such as fire, theft, or an employee who slips and falls on the job. Don’t assume that your homeowners' or renters' insurance policy will cover your home business operations; it probably won’t. You must carefully evaluate your existing policies and then contact a qualified insurance agent to purchase the additional insurance you’ll need.
To find a good insurance agent, ask other food-business owners for recommendations. Look for an agent who has experience writing policies for food businesses and make sure all major risks are covered. General commercial liability insurance should cover everything from an employee who is burned by boiling water to a customer who gets sick from eating your food.
If you use a car or truck for deliveries or other business travel, be sure it is also properly insured.
In Texas, other members of your household may help you with your cottage food business. You are also allowed to hire employees. If your employees are not directly supervised by you, they must obtain a food handler’s card. (Texas Health & Safety Code § 437.0195 (2022).)
If you decide to hire an employee, you should learn about basic employment law issues such as hiring rules, how to avoid discrimination in Texas, and how to handle money matters like Texas state income taxes and workers' compensation.
For more information, see Nolo’s Human Resources Law Center.
]]>Choosing the Business Entity
While you could operate your clothing store as a sole proprietorship or partnership, you should consider using a legal form that protects you from personal liability, such as a corporation or a limited liability company. A clothing store is not the most dangerous business, but a successful store will have a significant number of customers coming through every day, and in many cases employees engaged in at least some physical activity. Consequently, there is some possibility that a person could be injured, or his or her property damaged, on the premises—in which case you would want the business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
Naming the Business
In naming your business it is important not to violate trademark laws. This means naming your store in a way that avoids creating a “likelihood of confusion” with a preexisting commercial enterprise in the same field. Such confusion might arise if the name you choose is identical or very similar to the name of another clothing store, or similar business or product.
In a pre-Internet age it was easier for people starting small, local businesses to investigate the uniqueness of the names they wanted to use because it was assumed that there were certain geographic limitations on business names. Now, however, you need to be concerned about trademarks and trade names that may be in use by just about anyone just about anywhere in the country. If you name your Syracuse-based sporting apparel store Sammy’s Track Shack and there is already a popular store in San Diego that also sells online named SammiesTrakShak, you may well find yourself looking at a trademark infringement suit. You should not expect the geographic separation to protect you.
The best approach to avoiding trademark issues is to try to make a thorough search of existing business names before settling on a name for your own business. This may include:
In addition, if you want greater certainty you can hire a professional service to do a more thorough investigation of the name in which you are interested; the cost is usually a few hundred dollars.
To learn more, see Choosing a Business Name FAQ, Make Sure Your Proposed Business Name Is Available, and How to Register Your Business Name.
Licenses and Permits
Even if you operate as a sole proprietor, you should consider obtaining a federal tax ID number, known formally as an Employer Identification Number (EIN); for other forms of business, an EIN is a requirement. The process is easy and can be completed online at the IRS website at www.irs.gov.
New York’s web-based “Online Permit Assistance and Licensing” (OPAL) system can generate basic license and permit information for any of nearly 450 types of businesses—including “Clothing and Accessory Store.” At a minimum, you will need to obtain a certificate of authority to collect sales tax, which you can do through the OPAL website. Depending on the details of your business, other permits or licenses may also be necessary. For example, you may need to obtain a certificate of occupancy from a local building department in relation to the building where your store is located.
Leasing Space
For retail businesses, location is an important consideration, as you want to be convenient to customers and thus maximize customer traffic. It is sometimes worthwhile to spend time physically in areas you think might work for your store. You can observe how many people shop in the area, and talk to businesses currently located there to find out about possible open spaces. Online searches, through real estate-specific websites, as well as sites like craigslist, are also potentially useful.
If you find a location you’re interested in, try to investigate the space as thoroughly as possible. Look for things like indications of past water leakage. Try to get a sense of how responsive the landlord will be to requests for repairs—perhaps by talking with other of the landlord’s tenants.
When reaching the point of signing a commercial lease, several key elements to keep in mind are:
Learn more from the Nolo article Commercial Leases: Negotiate the Best Terms.
Insurance
As the operator of a clothing store, at a minimum you need to be concerned about at least two areas of risk:
For potential injuries to customers, you should obtain a good general liability policy that will protect you from customers who slip and fall or suffer other personal injuries at your place of business.
For potential damage to your business property, make sure that you have coverage for all property of any importance, such as building fixtures, furniture, equipment, personal property used in the business like books and computer discs, and—certainly important in a retail store—inventory.
The list of coverage areas could easily be extended over what is briefly described here. Try to work with an insurance agent who has previous experience writing policies for clothing stores.
For more information, see Nolo's article on Obtaining Business Insurance.
Employees
Most clothing stores have employees and, in many cases, there can be relatively frequent turnover, particularly among the sales staff. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website. Guidance on New York-specific labor and employment laws may be found on the website for the New York Department of Labor.
Additional Information
For more thorough information about opening a clothing store or similar small business, including issues not covered here, a excellent resource is Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo). You can also learn more from other Nolo articles, such as Shipping and Refund Rules for Businesses.
]]>To learn about other California business opportunities, see Nolo's section on Starting a Business in California.
While you could operate your cleaning business as a sole proprietorship or partnership, you should consider using a legal form that protects you from personal liability, such as a corporation or a limited liability company. Unlike many other types of businesses, such as certain professional or consulting businesses, your cleaning business will operate in other people’s offices or homes, and you likely will have employees engaged in a significant amount of physical activity. These facts increase the likelihood that an employee or other person could be injured, or that a customer’s property could be damaged by you or one of your workers—in which case you would want the business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
Even if you operate as a sole proprietor, you should consider obtaining a federal tax ID number, known formally as an Employer Identification Number (EIN). The process is easy and can be completed online at irs.gov.
Various other licenses and permits will also be necessary; these may include:
To find out more about what licenses and permits you may need, you should check out the easy-to-use CalGOLD website, which is maintained by the Governor’s Office of Business and Economic Development; it will show you most of the various licenses and permits that may be necessary for any of nearly 150 business types, including Janitorial Cleaning Maintenance Services.
Cleaning offices or homes may not be the most dangerous activity, but the people doing the cleaning may be working with cleaning supplies that are somewhat toxic, and when people are moving around a home or office accidents can happen. If you will have employees, California requires that you prepare an Injury and Illness Prevention Plan; more information is available through the Division of Occupational Health and Safety (DOSH) of California’s Department of Industrial Relations.
The federal Occupational Safety & Health Administration (OSHA) also has a variety of regulations relating to, among other things, eye and face protection, hand and foot protection, toxic and hazardous substances, and ventilation. For more details on federal safety and health rules, check the cleaning industry section of the OSHA website.
While word-of-mouth is often the best way to get new customers, with a new cleaning business you will probably need to do at least some advertising. Regardless of how you choose to advertise (your own website, posting flyers in public spaces, Craigslist, the phone book), the best brief pieces of advice are (a) be accurate and (b) be very careful about describing special discounts or saying that something is “free.” If you offer something for free, but there are conditions, you must state what those conditions are; if you offer something at a discount, it must really be cheaper than your normal price. Prohibitions on false advertising are incorporated into California law as part of the State’s Business and Professions Code.
Policy Statements and Contracts
Different customers may have different ideas about exactly what services your cleaning business will provide. It is in your own interest to make clear in advance—in writing—what you will and won’t do for your clients. If you have a website, you should post your policies there. Regardless of whether you have a website, you should provide a printed document containing the policy information to all of your clients before you reach an agreement and begin work.
For example, if you clean homes, you should indicate such things as:
Many of these same types of rules would also apply to cleaning offices and other commercial areas. Beyond a general set of rules, it is useful to work with each particular client to create a written plan for the specific services to be provided.
In order for a contract for services to be legally binding, (a) you and your client must agree on what the contract is for (there must be a “meeting of the minds”) and (b) there must be an exchange of value (also known as “consideration”—in the case of a cleaning business, usually the exchange of cleaning services for money). If the services involved will be completed in less than a year, the contract need not be in writing; however, a written contract is always safer. You should consider drafting—or having a lawyer draft—a standard contract that you can modify for individual clients.
To learn more about policy statements, business contracts, and related matters, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo)
There are particular risks associated with running a cleaning business, such as employees slipping and falling on the job, and inadvertent damage to, or destruction of, customers’ property. These are on top of more generic business risks to your own business property, such as through fire or theft.
Try to work with an insurance agent who has previous experience writing policies for cleaning companies. You will want excellent general liability coverage in case of damage or destruction to your clients’ property—or injury to clients themselves. For property coverage, try to make sure that all property of importance to your business, such as supplies and equipment, is fully covered. You will also want proper vehicle insurance to cover you and your employees travelling between work locations. And, finally, depending on local regulations and standards, you may want to investigate bonding for your business.
For more information, see Nolo's article on Obtaining Business Insurance.
Most cleaning businesses have employees and, in many cases, there can be relatively frequent turnover. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
Keep in mind that there are some employment laws that may be particularly relevant to cleaning businesses, such as those related to minimum hourly wages, child labor, and required documentation of eligibility to work.
Also, if you are thinking of treating some people who do the actual cleaning work as independent contractors, proceed with extreme caution. The IRS has very particular rules about who can be classified as an independent contractor, and individuals obtaining cleaning jobs through your cleaning business may, at the very least, fall into a grey area. One specific document worth reviewing is IRS Form SS-8 (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding), which lays out the many potential criteria used by the IRS to determine worker status; it is available at irs.gov.
The State of California also has its own rules and guidelines regarding independent contractors; information is available on webpages of the Department of Industrial Relations and the California Tax Service Center.
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website.
]]>To learn about other California business opportunities, see Nolo's section on Starting a Business in California.
While you could operate your catering business as a sole proprietorship or partnership, you should probably consider using a legal form that protects you from personal liability, such as a corporation or a limited liability company. Catering generally involves being in other people’s businesses and homes on a regular basis, dealing face-to-face with significant numbers of people eating food that you have prepared, and employees engaged in a lot of physical activity. This increases the likelihood that a person could be injured, or his or her property damaged—in which case you would want your catering business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
Generally speaking, all catering businesses must obtain some form of permit from a city or county health authority in order to operate. The details will vary depending on the health authority involved. California law also requires an on-duty catering employee or manager to have state food safety certification.
You may be asked to provide various types of information with your health permit application, such as:
If you intend to serve alcohol as part of your catering operation, you will also need to obtain a special permit, known as a caterer’s permit, from the California Department of Alcoholic Beverage Control, as well as licenses for each event you cater at which you serve alcohol.
Because catering is all about providing people with ready-to-eat food, it is subject to significant regulations regarding food health and safety, and more specifically to the California Retail Food Code. Just a few of the many dozens of matters the Code covers are handwashing, timing and temperature for food storage and cooking, ventilation, liquid waste, employee storage areas, and floors and other surfaces.
With the retail food code in mind, you can expect regular monitoring from your local health department. Local health authorities generally have a lot of latitude regarding what they can inspect, and health department inspections can cover many aspects of your catering business. Inspections may cover not only the food itself, raw and prepared, but also refrigeration systems, cooking equipment, waste disposal, and many other areas.
Apart from state regulations regarding the health and safety of restaurant workers, the federal Occupational Safety & Health Administration (OSHA) also has a variety of regulations relating to, among other things, eye and face protection, hand protection, and walking-working surfaces.
Policy Statements and Contracts
Different customers may have different ideas about exactly what services your catering business will provide. It is in your own interest to make clear in advance—in writing—what you will and won’t do for your clients. If you have a website, you should post your policies there. And, regardless of whether you have a website, you should provide a printed document containing the policy information to all of your clients before you reach an agreement and begin work.
For example, if you cater in people’s homes, you should indicate such things as:
Many of these same types of rules would also apply to catering to businesses.
Beyond a general set of rules, it is also useful to work with each individual client to create a written plan for the specific services to be provided.
Policy statements aside, keep in mind that in order for a contract for services to be legally binding, (a) you and your client must agree on what the contract is for (there must be a “meeting of the minds”) and (b) there must be an exchange of value (also known as “consideration”—in the case of a catering business, usually the exchange of catering services, including food, for money). If the services involved will be completed in less than a year the contract need not be in writing; however, a written contract is always safer. You should consider drafting—or having a lawyer draft—a standard contract that you can modify for individual clients.
To learn more about policy statements, business contracts, and related matters, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo)
There are particular risks associated with catering, such as employees slipping and falling on your premises while preparing food, diners or employees getting hurt from hot liquid or broken glass, or someone becoming seriously ill from the food itself. These are on top of more generic business risks such as fire, theft, or other sources of property damage or personal injury.
Try to work with an insurance agent who has previous experience writing policies for people involved in preparing and serving food. For property coverage, try to make sure that all business property of any importance, from plates to stoves, is fully covered. For injuries to people, make sure you have an excellent general liability policy. This should cover not only spilling boiling coffee on a diner, but also damages from someone who becomes gravely ill from eating the food you have prepared. In addition, make sure you have proper vehicle insurance to cover yourself and any employees while traveling to and from your clients’ businesses and homes.
Most catering operations have at least a few employees and, in many cases, there can be relatively frequent turnover. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
Also, keep in mind that there are some employment laws that may be specifically relevant to catering businesses, such as minimum wages for tipped employees, as well as rules regarding various training and certifications related to food handling and preparation. Many of the training and certification rules are addressed in Chapter 3 of the California Retail Food Code, which covers Management and Personnel.
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website.
]]>An LLC is a business entity, which means it is separate from its members—the term used for people who own the LLC. The LLC, not the members, owns and manages the business and real estate. One advantage of an LLC is that you have a great deal of flexibility in deciding how to manage the company and how to split profits among co-owners.
Another option is a corporation, which—like an LLC—provides liability protection for its owners. However, a corporation is generally more complicated to form, operate, and maintain than an LLC. Additionally, depending on your situation, corporations may not provide as many tax benefits for your business as an LLC.
If you decide you don’t want to create a separate legal structure, you can operate your business as a sole proprietor, or as a partnership if you are in business with others. While both a sole proprietorship and partnership are the easiest businesses to own and operate, they don’t provide owners with personal protection from the debts and liabilities of the business. Business insurance provides some protection, but many real estate company owners want more because of the level of risk involved with owning and operating a real estate company.
One of the main reasons to form an LLC or a corporation is to limit your personal liability. In the absence of a business structure, your personal assets could be on the line if the business is sued, or if money is needed to satisfy the debts of the business. With an LLC and a corporation, personal assets—like your home or individual bank account—are not at risk and business creditors can only go after the business entity and its holdings and assets.
The only exception would be if there was some type of wrongdoing or a real lack of separation between the business and its owners. In those situations, a court can “pierce the corporate veil” and hold the LLC or corporation owners personally responsible for the debts of the business.
One benefit of LLCs for many businesses is pass-through taxation. With LLCs, profits “pass through” the business to the members who report their individual share of earnings on their personal income tax returns. The LLC itself does not pay any tax on those earnings. Moreover, owners of LLCs may benefit from the new qualified business income (QBI) deduction, which allows taxpayers to deduct 20% of LLC income from their personal taxes.
Corporations, on the other hand, face two layers of taxation. The business pays a tax on earnings at the corporate level, and then the same earnings are taxed again when distributed as income or dividends to the owners or shareholders. Income from regular corporations does not qualify for the QBI deduction.
Another potential benefit of an LLC is that there are no tax consequences when you transfer property into the LLC. This is unlike a corporation where you have to pay a corporate tax when you transfer property into the corporation. The amount taxed is the difference between the value of the property when you originally purchased it and the value at the time of the transfer to the corporation.
To gain all the protections and tax benefits of an LLC for your real estate investment business, it is best to legally form the company before acquiring your first piece of property. The benefits of limited liability begin once the business is legally formed. If you already have property, it is possible to form the LLC and then transfer the property to the business. However, this is more complicated and you should consult with an attorney if you are in this situation.
You will also have to decide where to form your LLC, particularly if you plan to invest in real estate located in different states. It is common to form the LLC in the state where you live or where your business is located, but there can be benefits to forming your LLC in a different state. Delaware, Nevada, and Wyoming, for example, are known for lower taxes, reduced business formalities, and simpler filing processes. Registering your LLC in a different state from where you live complicates the process though so it is best to consult with an attorney in the state where you want to file.
]]>This article will get you started. To learn more about running a home-based business, see Nolo's section on Your Home Business.
In New York, you may apply for a “home processing exemption” that allows you to make the following food products in your home kitchen:
You are not allowed to make:
You can find this list and more information about the foods you can legally prepare in a home kitchen by visiting the website of the New York Department of Agriculture and Markets.
Many home-based food businesses are intended to be small. Unlike many states, New York does not set a limit on the amount of money your cottage food business may earn in a year, but the restrictions on what you can make and where you can sell (see below) are likely to constrain your income.
If your business is very small, running it as a sole proprietorship may be the only economically viable option. Keep in mind, however, that as a sole proprietor, you are personally responsible for every aspect of the business – from paying taxes to absorbing the risks of a lawsuit if your food products cause illness or injury to a customer. If you operate as a sole proprietor, you should purchase liability insurance to protect your personal assets (see below).
If you can afford it, consider choosing a business entity that protects you from personal liability, such as a limited liability company or corporation. These business structures ensure that your food business, not you personally, would be responsible for any damage if someone were sickened or otherwise harmed by your product.
For more information, see Choose Your Business Structure.
To start a home-based food business in New York, you must apply for an exemption to the licensing laws that usually apply to food manufacturers. This exemption is commonly called a “home processing exemption” or “20-C exemption.” You can download the application from the website of the New York Department of Agriculture and Markets.
If your home is on a private water system, your water must be tested for potability and you must include the results of the test with your application. Your kitchen is also subject to inspection by the Department of Agriculture.
If your exemption is approved, there will be a number of restrictions on how you may operate, including the following:
In addition, before you launch your venture, you should check with your city or town to be sure that local zoning laws allow you to run a business from home.
To operate a home-based food business in New York, you must follow the rules of safe food handling and processing described in the relevant publications listed on the Good Manufacturing Practices page of the New York Department of Agriculture website.
In addition, there are certain rules that apply only to home processors, including:
There are unique risks associated with food businesses, from food-borne illnesses to foreign objects like glass or plastic in food. These are added to typical business hazards such as fire, theft, or an employee who slips and falls on the job. Don’t assume that your homeowners or renters insurance policy will cover your home business operations; it probably won’t. You must carefully evaluate your existing policies and then contact a qualified insurance agent to purchase the additional insurance you’ll need.
To find a good insurance agent, ask other food-business owners for recommendations. Look for an agent who has experience writing policies for food businesses and make sure all major risks are covered. General commercial liability insurance should cover everything from an employee who is burned by boiling water to a customer who gets sick from eating your food.
If you use a car or truck for deliveries or other business travel, be sure it is also properly insured.
New York’s home processors law does not prevent you from hiring employees to work in your home kitchen, but you should check with your local zoning authorities to find out whether employees are allowed and, if so, how many you may hire.
If you decide to hire an employee, you should learn about basic employment law issues such as hiring rules, how to avoid discrimination, and how to handle money matters like taxes and workers compensation.
For more information, see Nolo’s Human Resources Law Center.
]]>To learn about other California business opportunities, see Nolo's section on Starting a Business in California.
While you could operate your clothing store as a sole proprietorship or partnership, you should consider using a legal form that protects you from personal liability, such as a corporation or a limited liability company. A clothing store is not the most dangerous business, but a successful store will have a significant number of customers coming through every day, and in many cases employees engaged in at least some physical activity. Consequently, there is some possibility that a person could be injured, or his or her property damaged, on the premises—in which case you would want the business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
In naming your business it is important not to violate trademark laws. This means naming your store in a way that avoids creating a “likelihood of confusion” with a preexisting commercial enterprise in the same field. Such confusion might arise if the name you choose is identical or very similar to the name of another clothing store, or similar business or product.
In a pre-Internet age it was easier for people starting small, local businesses to investigate the uniqueness of the names they wanted to use because it was assumed that there were certain geographic limitations on business names. Now, however, you need to be concerned about trademarks and trade names that may be in use by just about anyone just about anywhere in the country. If you name your Anaheim-based sporting apparel store Jenny’s Joggers and there is already a popular store in Atlanta that also sells online named JennieJoggers, you may well find yourself looking at a trademark infringement suit. You should not expect the geographic separation to protect you.
The best approach to avoiding trademark issues is to try to make a thorough search of existing business names before settling on a name for your own business. This may include:
In addition, if you want greater certainty you can hire a professional service to do a more thorough investigation of the name in which you are interested; the cost is usually a few hundred dollars.
To learn more, see Choosing a Business Name FAQ, Make Sure Your Proposed Business Name Is Available, and How to Register Your Business Name.
Even if you operate as a sole proprietor, you should consider obtaining a federal tax ID number, known formally as an Employer Identification Number (EIN); for other forms of business, an EIN is a requirement. The process is easy and can be completed online at the IRS website.
In conjunction with collecting sales tax on the clothing you sell, California requires you to obtain a seller’s permit through the state’s Board of Equalization.
Depending on the details of your business, other permits or licenses may also be necessary. To find out more, you should check out the easy-to-use CalGOLD website, which is maintained by the Governor’s Office of Business and Economic Development. It provides information on the various licenses and permits that may be necessary for any of nearly 150 business types, including “Clothing and Clothing Accessories Store.” Sticking with the example of Jenny’s Joggers in Anaheim, the CalGOLD website indicates, among other things, that any business in Anaheim must obtain a business license from the City’s Planning Department, and file a doing-business-as (DBA) certificate (also known as a fictitious business name certificate) with the Orange County Clerk.
For retail businesses, location is an important consideration, as you want to be convenient to customers and thus maximize customer traffic. It is sometimes worthwhile to spend time physically in areas you think might work for your store. You can observe how many people shop in the area, and talk to businesses currently located there to find out about possible open spaces. Online searches, through real estate-specific websites, as well as sites like craigslist, are also potentially useful.
If you find a location you’re interested in, try to investigate the space as thoroughly as possible. Look for things like indications of past water leakage. Try to get a sense of how responsive the landlord will be to requests for repairs—perhaps by talking with other of the landlord’s tenants.
When reaching the point of signing a commercial lease, several key elements to keep in mind are:
Learn more from the Nolo article Commercial Leases: Negotiate the Best Terms.
As the operator of a clothing store, at a minimum you need to be concerned about at least two areas of risk:
For potential injuries to customers, you should obtain a good general liability policy that will protect you from customers who slip and fall or suffer other personal injuries at your place of business.
For potential damage to your business property, make sure that you have coverage for all property of any importance, such as building fixtures, furniture, equipment, personal property used in the business like books and computer discs, and—certainly important in a retail store—inventory.
The list of coverage areas could easily be extended over what is briefly described here. Try to work with an insurance agent who has previous experience writing policies for clothing stores.
For more information, see Nolo's article on Obtaining Business Insurance.
Most clothing stores have employees and, in many cases, there can be relatively frequent turnover, particularly among the sales staff. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website. Guidance on California-specific labor and employment laws may be found on the website for the state’s Department of Industrial Relations (DIA).
For more thorough information about opening a clothing store in California, including issues not covered here, an excellent resource is The Small Business Start-Up Kit for California, by Peri Pakroo (Nolo). You can also learn more from other Nolo articles, such as Shipping and Refund Rules for Businesses.
]]>A franchise is an independently owned business that operates under the brand and business model of a large--usually well-known--corporation. The corporation sets many procedures and policies for operations, purchasing, marketing, and other aspects of running the business.
Call it entrepreneurship lite. Franchise business owners don’t have many of the struggles typically associated with a startup. But they also don’t have complete control over decision-making.
McDonald’s restaurants, H&R Block tax preparation offices, and Ace Hardware stores are all franchises. The owners of the individual outlets are called franchisees and the corporations are called franchisors.
Under a franchise agreement, the business owner pays a franchise fee plus a percentage of revenues in royalties to the corporation, typically 4% to 6%. Franchisees may also have to kick into an advertising fund and contribute to other common expenditures.
Franchisees usually are also responsible for other costs such as rent, the build-out of the facility, equipment, and inventory. The initial investment to own a franchise can range from under $10,000 for a home-based business to $2 million or more for a McDonald’s or Pizza Hut franchise.
Fast food franchises might be the best known, but you can find a franchise for just about every product or service including:
Buying a franchise has many advantages. A franchise gives you a leg up on the competition, removes many of the unknowns of starting a business, and provides a support system you typically don’t have as an independent business owner.
A franchise is a proven business model with a track record of sales. While you should certainly do your due diligence on the franchisor, the question of whether the business idea works has already been answered for you.
A franchise gives you ready-made name recognition. The franchisor has already spent a lot to establish the company brand and develop a customer base. You get the benefit of instant customer recognition as well as ongoing marketing and advertising support, though the franchisor might charge an additional fee for these services.
As a franchisee you don't have to go it alone. Franchisors offer many types of support including training your employees, a roadmap for the design and build-out of your facility, inventory management, and other operational processes, and someone to call if you run into trouble or have questions.
You get the buying power of a big corporation. As a startup, you would likely buy your materials at the lowest volume levels and prices would be higher as a result. But a franchise is backed by the buying power of the corporation, giving you the most advantageous pricing from the start.
Owning a franchise puts you in business with both the franchisor and the other franchisees in the organization, so you are not in control of many aspects of the business.
You’re not the boss of everything. Franchisees control some aspects of day-to-day operations like scheduling employees, but they are also required to follow many rules and procedures set by the franchisor including hours of operation, location, facility design, the territory you can serve, and product and service offerings.
Suppose, for example, you own a donut shop franchise and your customers are asking for gluten-free donuts. You might not be allowed to make changes or additions to your product offerings even if you spot a trend that could mean more sales.
You get a brand for better or worse. The branding you get as a franchise owner is a big plus, but if something happens that negatively affects the brand anywhere in the organization, your business might be painted with the same brush. If there’s a salmonella outbreak in another restaurant in the franchise or the franchisor is involved in a scandal, for instance, it might affect your reputation even if your location is not involved.
You can’t shop around for the best prices. The franchisor might require that you buy inventory, supplies, and equipment from specific suppliers, and you won’t be able to take advantage of a better deal if you find one.
Royalties are forever. If you buy a business or start one from scratch, you get to keep all your profits. Nearly all franchise businesses must continue to pay royalties to the franchisor for the duration of the franchise agreement.
Your franchise agreement only lasts for a specified time period, and the franchisor can choose to terminate the agreement when the term is up, or you might be required to make expensive upgrades in order to renew.
The franchise agreement may also put restrictions on your ability to sell your business. The franchisor may have the right of first refusal or the right to approve or deny a potential buyer.
Make sure you do your homework before you buy a franchise. Among the sources available to you are the Better Business Bureau, franchise trade associations, and current and former franchisees of the franchisor you choose. The Federal Trade Commission (FTC) also offers a guide to buying a franchise.
Know your skills and abilities. Some franchises don’t require any previous experience. But you can’t expect a franchisor to train you to be a hair stylist, for instance, or to give you a crash course in auto repair. Some occupations may also require special licensing in your state, so begin by determining what types of franchises are a match with your skills, experience, and abilities.
Do the research. Your due diligence should include research into the franchisor, the industry, and competitive environment in the location where you will operate. The franchisor will likely provide some market research, but you also want to look at the local market demand and competition.
Read the franchise disclosure document (FDD) carefully. Franchisors are required to provide you with an FDD that contains the franchisor’s business and legal history, itemized costs for starting and running the franchise, income expectations, restrictions on the territories where you may operate and the goods and services you may sell, training and advertising services provided, financial information, and more. Be certain you have received the most updated FDD before you sign a franchise agreement.
Talk to other franchisees. Talking to other franchisees can help you evaluate the claims made by the franchisor and give you additional information such as how long it may take your business to break even.
Read the franchise agreement carefully before signing up. The franchise agreement is the actual contract between you and the franchisor. You should make sure the contract matches up with the FDD and you are comfortable with all the terms included.
]]>Running a home business is convenient and cost effective. Start-up costs are much less than opening a traditional brick and mortar business. You don’t have rent, utilities, or commuting expenses. Low overhead means less risk and more opportunities to make a profit.
Home businesses also offer owners freedom and flexibility. You can work on your business in your free time and in your pajamas. And there are tax advantages to running a home business.
The options for a home business are endless. Photography, dog walking, house painting, or home décor are a few ideas. You could become a virtual assistant, graphic designer, or social media specialist. Think about your hobbies and interests. What are you good at? What do you do for fun? What do people always ask you for advice on? The answers to these questions can help point you in the right direction.
Many people join an established company as an associate or consultant. This “business in a box” option helps new business owners with marketing and messaging. You also have access to experienced mentors.
Once you’ve identified your business, you need to select a business structure. Most home businesses are sole proprietorships, limited liability companies (LLCs), or S corporations. If you have two or more owners, you can form a partnership.
A sole proprietorship is the easiest option for many business owners. However, with a sole proprietorship you don’t have personal liability protection from your business’s debts and other obligations. If your business has the potential for legal liability, you should consider an LLC instead. Make sure you do research on business entity choices and what's best for you.
Licensing and permit requirements vary based on location. For a list of state specific requirements, visit the Small Business Administration. In general, home businesses need a business license from the local municipality. You can get the required license from your city’s business or tax offices.
You should also check zoning regulations. Homeowner’s associations or zoning ordinances may prohibit operating a business from your home. If this is the case, you may be able to get a variance. Be sure to secure whatever permissions you need before you open.
Some businesses may need additional licenses. If you invite customers into your home or store flammable inventory, you might need a fire permit.
Businesses that produce or sell food and personal care products are often subject to health inspections. You may need to secure a health or environmental safety permit. Check with your local business office for more information.
Businesses like salons, legal and financial advisors, and home daycares centers also require professional certification. Visit your state business website for a complete list of businesses subject to professional licensing requirements.
If you sell products or services, you may need a sales tax license. Sometimes this is part of the business license; sometimes it is a separate document.
Your homeowner’s insurance will not protect your business. Running a business from your home may even nullify your policy. It’s a good idea to let your homeowner’s insurance company know about your business venture.
You should secure business insurance to protect against business losses. All businesses need general liability insurance. You can also buy coverage for property damage, inventory and product damage, and personal injuries. Any businesses that store sensitive information digitally will also need insurance for data breaches. Business interruption insurance replaces income in case of a disaster. Be sure to read the fine print, so you know what the policy excludes.
Keep track of your business’s income and expenses. You can use a simple Excel spreadsheet or accounting software, but you need to document all the money flowing in and out of your business.
Open a separate banking account for your business so you can keep your personal and business finances separate. It is also helpful to use a different credit card for your business.
Make copies of all receipts and income statements so that you have a record of your finances. Keep up with your paperwork. Set aside one day a week to work on invoicing, paying bills, and updating your records.
When you run a home business, you are self-employed. You are responsible for your own taxes, including Social Security and Medicare. You usually must make estimated quarterly payments to the IRS.
All home business owners may deduct ordinary and necessary business expenses. These include:
Keep track of when you use personal items--like laptops, cell phones, and your vehicle--for business so you can calculate the correct percentage to deduct.
You may qualify for the home office deduction. This deduction only applies to spaces used exclusively for business purposes. If you work out of your bedroom or kitchen, you cannot claim the deduction. There are limited exceptions for the storage of inventory and samples and home daycares.
Under the home office deduction, you can deduct a percentage of your homeowner’s insurance, homeowners’ association fees, cleaning fees, mortgage and interest, and utilities. You can also deduct home repair costs, although the amount varies depending on whether the repairs are direct or indirect.
]]>You might be able to operate a recording business as a sole proprietorship or partnership. However, you should think about using a legal form that protects you from personal liability for both damage to people or property and for financial debts. Consider, for example, what would happen if you incurred a lot of expenses recording and marketing multiple new artists, and then found that their music did not sell well enough to cover those expenses—and the label did not have enough money to stay in business. In such circumstances, you would probably want the business, not you personally, to be responsible for any debts.
Keep in mind, though, that legal structures that provide you with more protection from liability will also require more time and effort to maintain. For example, they generally involve more complicated tax returns and frequently involve preparing annual filings with the state. You will need to weigh the added time against the risk to you personally if the business runs out of cash—or some other liability arises.
Learn more about choosing a business structure.
Even if you operate as a sole proprietor, you should consider obtaining a federal tax ID number, known formally as an Employer Identification Number (EIN); for other legal forms of business, an EIN is a requirement. The process is easy and can be completed online at the IRS website. Moreover, even if you operate as a sole proprietor, you may need a general business license from a state or local government office. For example, if your record label will operate under a business name different from your own name, you may need to file a “doing-business-as” (DBA) certificate (sometimes known as a fictitious business name certificate).
Most states will also require you to obtain a sales tax permit in order to sell CDs or other goods in that state. Note, however, that sales tax on Internet-based sales is a more complicated matter—you can find more information about Internet sales tax, including the rules in every state under eCommerce Law on Nolo's website.
Even if your recording business is “low-key,” keep in mind that there may be local zoning laws that would prohibit your business in certain locations. This generally is more likely to be an issue if you are thinking of operating the business out of your home and you live in a clearly residential, as opposed to commercial, area. Even if the business is permissible under the local zoning ordinance, you may be required to obtain a compliance certificate from the local zoning authority.
In naming your business it is important not to violate trademark laws. This means not naming your label in a way that might create a “likelihood of confusion” with a preexisting commercial enterprise in the same field. Such confusion might arise if the name you choose is identical or very similar to the name of another business or product.
In the Internet age, avoiding trademark violations means avoiding the same or a similar name of a recording label or similar business anywhere in the country. If you name your Seattle-based label Blue Shock Music and there is already a popular label in Atlanta named Bleu Shox Sounds, you may well find yourself looking at a trademark infringement suit. You should not expect the geographic separation to protect you.
The best approach for avoiding this type of trademark issue is to try to make a thorough search of existing record labels, recording companies, entertainment companies, and other businesses before settling on a name for your own label. This may include:
In addition, if you want greater certainty you can hire a professional service to do a more thorough investigation of the name in which you are interested. The cost is usually a few hundred dollars.
To learn more, see Choosing a Business Name FAQ, Make Sure Your Proposed Business Name Is Available, and How to Register Your Business Name on Nolo's website.
Copyright is a form of legal protection for "original works of authorship," a term which covers, among many other things, music, lyrics, performances, and sound recordings. Copyright protection is crucial to a record label. Without it, anyone could make pirated copies of the label’s recordings, and then sell them or give them away, thus eliminating all of the label’s potential profits.
Most music that ends up being recorded involves the following copyrights:
All of these types of copyrights may come into play for a recording company. However, your record label is likely to be most concerned about the last of these items--the copyright on the sound recording. In general terms, a record company usually owns or obtains the copyright on a sound recording through a contract with the recorded performer. In one common scenario, a label will have a band sign a contract stating that the label owns the copyrights to any master recordings the label makes of the band’s performances. This is usually accomplished by stating in the contract that the band is making the recordings on a “work-for-hire” basis.
Copyright law surrounding sound recordings is complicated. Consider, for example, that:
With these sorts of facts in mind, you should strongly consider consulting with an experienced copyright attorney before you start trying to sign up performers.
For more detailed information on copyrights of sound recordings, including the process for registering those copyrights, see the United States Copyright Office’s website. For more information on piracy of sound recordings, see the website for the Recording Industry Association of America (RIAA).
At a minimum, you need to be concerned about at least two areas of risk: (1) injuries to visitors to your business; and (2) damages to business property through fire, theft, or other causes.
For potential injuries to visitors, you should obtain a good general liability policy that will protect you from visitors who slip and fall or suffer other personal injuries at your place of business.
For potential damage to your business property, make sure that you have coverage for all property of any importance, starting with your recording equipment and recordings, and also including the building, fixtures, and furniture.
For more information, see Nolo's article on Types of Insurance Your Small Business Needs.
Nolo has various resources that provide more detailed information about starting small businesses, covering such issues as dealing with employees and working with business contracts. These include Legal Guide for Starting & Running a Small Business and The Employer’s Legal Handbook, both by Fred Steingold, and The Small Business Start-Up Kit, by Peri Pakroo.
]]>Before you file LLC formation paperwork for your rental company, take time to consider the needs of your business and the cost to form and maintain an LLC. If you rent out one or two properties, you might decide to avoid the fees and paperwork involved in forming an LLC, and instead manage your financial risk with adequate insurance. On the other hand, if you manage dozens of commercial properties, the increased risk of debts that insurance will not cover (such as unpaid business bills and lawsuits that exceed your policy limits) might make an LLC the ideal business structure. Overall, the larger the rental business, and the lower your tolerance for risk, the more you should consider forming an LLC.
One of the main reasons to form an LLC is to protect your personal assets, like your car, bank accounts and your home, from the debts of the business. But forming an LLC is not the only way owners can protect their personal assets. All rental companies (LLCs or not) should have adequate insurance.
Insurance can protect you and your company against financial loss resulting from accidents, natural disasters, and defending (and losing) lawsuits. Depending on the nature of your business, the types of insurance you should ask an insurance agent about include:
Keep in mind that insurance does not provide the same protection as that provided by an LLC because you will be personally responsible for business obligations that insurance does not cover.
Depending on your state you could end up paying more or less in taxes if you form an LLC. Consult with an accountant or tax attorney for information on how forming an LLC could affect your tax liability. Some of the taxes you should consider include:
Franchise tax: Some states impose a minimum franchise tax on all LLCs for the privilege of doing business in the state, which is either a percentage of your revenue or a set minimum (such as $800 in California).
Pass-through taxation: LLCs enjoy “pass-through taxation,” which means that the LLC does not pay corporate tax (as corporations do). Instead, the income passes through the company, and the owners pay tax for the first time on their personal tax returns. In addition, LLC owners can take advantage of the 20% pass-through deduction on their personal tax returns, which you can read more about here. If you run your business as a sole proprietorship (meaning you do not register the business), you can take advantage of pass-through taxation and the deduction without forming an LLC. You cannot take this deduction if you form a C Corporation.
Title transfer tax: If you transfer property into an LLC, you might be responsible for title transfer tax. See below for more information on transferring property.
To form an LLC, file formation paperwork with your Secretary of State and pay a filing fee. To learn more about the registration process, see our article How to Form an LLC. Many states, counties, and cities require rental company owners to apply for a business license, as well as other permits such as a certificate of occupancy, a housing business license, or both. Check with your local licensing division to determine the requirements for your company.
If you purchased rental property before you formed your LLC or purchased the property in your own name after formation, you must transfer the property rights to the company to avoid personal liability for anything that happens to the property. If you have a mortgage on the property you want to transfer, you must first contact your bank. Your bank might require you to pay the full mortgage amount before transfer, allow the transfer but only if you remain personally responsible for the mortgage, or permit you to refinance the mortgage and list the LLC as the borrower. Pay special attention to the possibility that the bank might require a personal guarantee: If you’re forming the LLC in order to shield your personal assets, the personal guarantee will destroy that protection, which means you’ll have spent a lot of time and money in pursuit of protection that you won’t have.
To transfer the title of the property, you must prepare a deed form, sign the deed, and record it in your county or city. Check with your state’s tax agency to determine if you must pay a title transfer tax. Because the rules for deed creation and title transfer vary by state, check your local laws or consult with an attorney.
After you have transferred the title, review, and update all existing leases to reflect the change. You should list the LLC as the landlord and ask tenants to pay rent to the LLC.
]]>Within the marijuana industry, there are a variety of regulated activities, including cultivation, testing, manufacturing, distribution, and dispensaries. The dispensary is the final step in the supply chain--getting the product to the customer. Marijuana dispensaries include retailors that have a store-front where customers can visit, as well as delivery-only operations. Each type of marijuana dispensary activity has its own licensing requirements.
While marijuana dispensaries are legal on the state level in California, they are not allowed in every town and county. Some places completely ban any establishment that sells cannabis. So before you take any steps towards opening your marijuana dispensary, make sure to check that it is legal to have one in your area.
If selling cannabis is allowed, you will have to obtain a license from the town or county where you are located and follow the local zoning laws. Some cities and counties only permit a limited number of licenses or only allow dispensaries in certain locations. California has a statewide ban that prohibits anyone from opening a dispensary within a 600-foot radius of a school, daycare center, or youth center.
Make sure you check the licensing requirements in your area and follow all the rules--running an unlicensed dispensary is a crime and may prohibit you from opening a legal dispensary in the future. You also may face criminal penalties, including jail time up to 6 months and a $500 fine.
Starting a marijuana dispensary begins with the same steps as any other California business. You’ll decide on a legal structure, choose a name, and file the appropriate organizational documents with the state. For more information on the basics of starting a business, see our article, Start Your Own Business In California.
Every city and county in California has different regulations to open a marijuana dispensary. These can be far more onerous than what’s typically required to open a business. You may face several rounds of applications, fees, hearings, and opportunities for community input. You should be prepared to provide detailed information during the application process. Some of the requirements for the application may include:
Zoning Verification Letter: You may be required to get a letter from your local development department verifying that the location where you want to open your dispensary complies with zoning laws.
Live Scan and Criminal History Check: Every business owner must submit a Live Scan for fingerprints and agree to a criminal background check. If any business owner has a criminal background, your application may be denied depending on the circumstances.
Business Plans: Here you will fully describe how you plan to operate the business, including information such as financial forecasts, start-up costs and timeline, and details of day-to-day operations.
Safety and Security Plans: You may be asked to provide detailed information for how you will keep the premises safe and secure, including issues such as fire prevention, alarm systems, and security policies.
Community and Neighborhood Assessment: You should be prepared to provide information on how your dispensary will benefit the local community and impact the neighborhood.
Payment of Hefty Fees: The total fees to undergo the application process can be in the thousands of dollars.
If you plan on selling cannabis or products with cannabis in it, you must obtain both a seller’s permit and a cannabis tax permit from the California Department of Tax and Fee Administration. You must have the seller’s permit in place before you can apply for other required state licenses.
Next, you must apply for state licenses. Note that the state licensing bureaus recommend that you first acquire your county or city permits before starting your state applications.
All distributors and retailers must have a license from the Bureau of Cannabis Control. You may apply for an Adult Use License (A-License) or a Medicinal License (M-License). To apply for either license you must submit the following:
If you will be growing your own cannabis, you need a license from the CalCannabis Cultivation Licensing Program. Finally, if you are manufacturing cannabis products, such as edibles, you need a license from the Manufactured Cannabis Safety Branch.
]]>Across the country, more and more cities and counties are passing regulations on short-term rentals. These rules are usually found in a city’s zoning or administrative code and often apply only to unhosted listings (where the owner is not present during the stay) and to rentals of 30 days or less.
Some cities limit the number of days a property can be rented out for short stays. This can range from anywhere of a maximum of 30 nights per year to 180, depending on where the rental is located. There also may be restrictions on how many people can stay at the property at one time, such as only two adults per bedroom or ten guests total. Some cities only allow short-term rentals of a primary residence and, in some places, short-term bookings are prohibited altogether. Before getting started, you’ll need to look into what’s permitted in your area.
Cities that allow short-term rentals often require you to apply for a permit before you rent your property. This typically involves paying an annual fee and undergoing a home inspection to verify that your home is safe and habitable. Failure to follow these permit or other short-term rental rules can result in hefty fines so don’t ignore them.
If you don’t own the property that you want to rent out, you will also need to check your lease for any restrictions. Many leases prohibit short-term rentals and sublets. If you are part of a Homeowner’s Association (HOA), your HOA rules and regulations may limit the number of guests you can have, impose pet restrictions, or prohibit vacation or short-term rentals altogether. Again, violations of these rules can have serious consequences, including possibly being evicted from your home.
Being a short-term rental host is a profit-making venture, and as such should be treated like any other business. Consider how you will protect your personal assets, like your personal bank account, should you be sued by one of your Airbnb guests. One way to do this is with insurance, but beware that renter’s insurance and homeowner’s insurance often do not cover short-term or vacation rentals. Check with your insurance agent to make sure you obtain proper coverage.
You may also consider forming a separate business entity for your Airbnb business, such as a limited liability company (LLC) or a corporation. When done properly, only the money you invest in the business can be reached to satisfy the debts of the business. In addition, LLCs may provide certain tax benefits depending on your situation. However, if you only have one rental, you may want to use insurance to protect your assets and wait until you have additional properties or are looking to bring in investors to form a separate business entity. Consult with an attorney to determine the best option for you.
If create a separate business entity, you may be required to apply for an Employment Identification Number (EIN). This is a simple IRS application and provides a unique number for your business that you use for tax filings. Even if you’re not required to have one, you may decide that for privacy reasons you prefer to use an EIN instead of your social security number on your business bank account, tax filings, and licenses.
The laws of your state may mandate that you register with your state tax department. This may be a requirement for all businesses operating in your city, or there may be particular rules that only apply to short-term or vacation rentals. For example, you may be responsible for occupancy tax or sales tax, which is a percentage of the listing price set by the city. While the rules differ on whether this is paid by the host or the guest, the host is typically responsible for reporting the amount and submitting payment to the tax department on a quarterly or annual basis. Check with your county and state tax departments to learn how to register and whether you must pay state or local business tax.
Before listing your rental or spending money on preparing your home, determine what system you will use to keep track of your income and expenses and organize receipts. Most of the expenses will be tax deductible, so it is important to have a tracking and organization system in place from the start. Consult with an accountant or bookkeeper for assistance.
To put you on track to making a profit as a short-term rental host, take some time to determine how to price your rental. First, look at all the costs associated with renting out your home, which may include:
Next, take a look at how the hotels and other vacation rentals in the area are priced and compare these listings to yours based on the size and other considerations. Consider how much of a demand there is for vacation rentals in your area, and look at whether prices change seasonally or on the weekends. In the beginning, you may consider listing your space at a lower rate, and increase the rate once you have a number of positive reviews.
]]>To learn about other California business opportunities, see Nolo's section on Starting a Business in California.
While you could operate your restaurant as a sole proprietorship or partnership, you should probably consider using a legal form that protects you from personal liability, such as a corporation or a limited liability company. Unlike some other types of business, such as certain professional or consulting offices, restaurants have a significant number of customers coming through every day, and in many cases also a significant number of employees engaged in a lot of physical activity. This increases the likelihood that a person could be injured, or his or her property damaged, on the premises—in which case you would want the business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
California law requires anyone who prepares, stores, or serves food in a restaurant to obtain a California Food Handler Card. The card is issued only after mandatory training and assessment. You can obtain the card from one of a list of state-certified organizations. Training and testing can be completed online. The card is valid for work in restaurants throughout California except for Riverside, San Bernardino, and San Diego counties, which have their own card programs. The cards for the latter three counties are valid only in the counties in which they were issued.
A frequently-asked-questions (FAQ) sheet with more information about the California food handler card is available online from the California Conference of Directors of Environmental Health (CCDEH).
If you intend to serve alcohol in your restaurant, you will also need to obtain a liquor license. In California, liquor licensing is handled by California Department of Alcoholic Beverage Control. Keep in mind that the liquor licensing process can be complicated and you may require outside legal assistance.
If your restaurant will be serving large numbers of people you may have crowd control issues and, therefore, need to obtain a license or permit from a fire or police department. Similarly, you probably will also need a permit or license from a local building department relating to adequacy of exits from the restaurant and related emergency issues.
Because restaurants are all about people eating food, they are subject to significant regulations regarding food health and safety. An excerpt from the current California Retail Food Code prepared by the California Association of Environmental Health Administrators, which covers restaurants and other retail food businesses, runs over 150 pages. Just a few of the many matters the code covers are handwashing, timing and temperature for food storage and cooking, ventilation, liquid waste, employee storage areas, and floors and other surfaces.
With the food code in mind, you can expect regular monitoring from your county health department. Local health authorities generally have a lot of latitude regarding what they can inspect, and health department inspections can cover a wide array of items in your restaurant. As suggested by the state code, inspections may cover not only the food itself, raw and prepared, but also refrigeration systems, cooking equipment, waste disposal, and many other areas.
Each California county has its own rating system for inspections and the State of California had made some of this information available online.
Apart from state regulations regarding the health and safety of restaurant workers, the federal Occupational Safety & Health Administration (OSHA) also has a variety of regulations relating to, among other things, eye and face protection, hand protection, and walking-working surfaces. On the state level, the Labor Occupational Health Program (LOHP) at the University of California, Berkeley, using funds provided by State of California, has produced a short, readable restaurant safety training guide that can help you protect both your employees and your customers. The guide is available online through the LOHP website.
There are particular risks associated with operating a restaurant, such as customers or employees slipping and falling on the premises, someone getting hurt from hot liquid or broken glass, or someone becoming seriously ill from the food itself. These are on top of more generic business risks such as fire, theft, or other sources of property damage or personal injury.
Try to work with an insurance agent who has previous experience writing policies for restaurants. For property coverage, try to make sure that everything of importance, from plates to stoves, is fully covered. For injuries to people, make sure you have an excellent general liability policy. This should cover not only a patron who slips at your restaurant’s front door, but also one who becomes gravely ill from eating the restaurant’s food. And, if you do outside catering, make sure you have proper vehicle insurance, as well.
If you’re thinking of opening a restaurant that is part of a franchise, keep in mind that you will have to operate under far more restrictions than if you opened your own independent restaurant. You will be subject to a franchise contract which you should expect to favor the franchisor, and which likely will give the franchisor rights to:
Along with the restrictions contained in the franchise contract, you should keep in mind the additional financial costs of a franchise. In exchange for being given a preexisting business plan, getting certain help as needed when running the restaurant, and benefitting from group marketing, you will be required to pay out a substantial amount of your profit to the franchisor. More specifically, apart from a large initial franchise fee, expect to be required to pay the franchisor:
If you are considering starting a restaurant as part of a franchise, investigate the franchise as thoroughly as you can, including reviewing closely the federally-required franchise disclosure statement.
Most restaurants have employees and, in many cases, there can be relatively frequent turnover, particularly among waitstaff, bussers, and similar positions. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
Keep in mind that there are some employment laws that are specifically relevant to restaurants, such as minimum wages for tipped employees, as well as rules regarding various training and exams related to food handling and preparation. Many of the training and testing rules are addressed in Chapter 3 of the California Retail Food Code, which covers Management and Personnel.
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website.
]]>A sole proprietorship is low maintenance. It doesn’t typically require you to file any creation documents or submit renewal filings or fees, and you can usually report your income on your personal tax return. But sole proprietors are personally liable for the business’s debts and obligations, so you might need to dip into your personal funds to satisfy any debts your business can’t pay.
In California, you can establish a sole proprietorship without filing any legal documents with the California state government. Though no action is required to legally create a sole proprietorship, you should follow four simple steps to start your business:
For more information, read our article on how to start a business in California.
In California, a sole proprietor can use their own legal name or a trade name—also sometimes known as a “fictitious business name” (FBN) or “doing business as” (DBA)—to conduct business. If you plan to use an FBN or trade name for your business, it can't be the same name as any other company currently registered with the state.
It’s also a good idea to choose a name that’s not too similar to another registered business to avoid trademark infringement. Under trademark law, your trade name can't be used by someone else in a way that would cause confusion among consumers. So, if you use a name that’s the same as or too similar to someone else’s trademark and you both provide similar goods or services, then you could be infringing on their trademark. If you find a competitor company already exists with a similar name, then it’s best to choose another name.
For example, suppose you want to operate a dude ranch under the business name Gold Dig Ranch. But across town another dude ranch is operating under the name Gold Digging Ranch Vacations. Because the dude ranches have such similar names, you'll probably cause some confusion if you start using your name. In that case, you'll probably need to find another name.
To make sure your business name is available, you should run a search in the following government databases:
For more information, read our FAQ on how to choose and register a business name.
If you use a business name that's different from your legal name, California requires you to register your FBN with the county recorder’s office where the business is located.
For example, suppose Ben Matlock has a hotdog shop called Mustard and Ketchup. Because Ben's business name isn't the same as his legal name, he needs to register his business name, Mustard and Ketchup, in his business's county.
Many FBN Statements are downloadable from the county website. Business owners have 40 days from the business start date to file an FBN Statement (Cal. Bus. & Prof. Code § 17910 (2023).)
As of 2023, the filing fee generally is $40 but can vary from county to county. In order to complete the application process for registering an FBN, the business owner must publish the FBN Statement in a well-known newspaper within the county for four consecutive weeks. (Cal. Bus. & Prof. Code § 17917 (2023).)
Depending on your business activities, you could need to apply for business or professional licenses. California provides a comprehensive database of every license and permit a business might need. You can search for the required licenses and permits for your business activity on the California Governor’s Office of Business and Economic Development (CalGold) website.
You can also type in your county or city name and business type to get information about licenses and permits that might apply to you. For instance, if you have a restaurant in Los Angeles County, you can find information on the following topics:
You might also need to comply with local regulations, building permits, and zoning laws. Check with your city and county governments for more information.
Sole proprietors who wish to have employees need to obtain an EIN. This is a nine-digit number issued by the IRS for tax reporting purposes. All businesses with employees are required to report wages to the IRS using their EIN. You can register for an EIN online with the IRS.
Sole proprietors without employees aren’t required to have an EIN. Instead, you can use your Social Security number to report taxes. Nevertheless, you might want to obtain an EIN. Some banks require an EIN to open a bank account, and having an EIN can reduce the risk of identity theft.
In California, businesses that pay at least $100 to employees in a given quarter are also required to register for a California employer account number. You can register online with the California Employment Development Department (EDD) website.
You should consider taking the following additional steps once you’ve started your sole proprietorship:
To find out how to form a sole proprietorship in any other state, see our 50-state guide to establishing a sole proprietorship.
You might not need to submit paperwork to start a sole proprietorship in California. But your specific circumstances could require you to file forms at the state and local level and comply with various rules and regulations. As a business owner, it’s important to understand what steps you need to take to legally start and operate your sole proprietorship.
If you have business experience and only need to meet a few requirements to establish your sole proprietorship, you can probably do the work yourself. But if you need specific guidance or run into a complicated issue when starting your business, you should talk to a small business lawyer. They can help you register your business name, file your taxes, and obtain licenses and permits.
]]>As we review some of these considerations, keep in mind that the terms “day care” and “child care” are largely interchangeable in New York; many of the state’s laws, publications, and websites refer to “child care” rather than “day care.”
Choosing the Business Entity
While you could operate your day care business as a sole proprietorship or partnership, you should consider using a legal form that protects you from personal liability, such as a limited liability company or corporation. A day care center may not be the most dangerous business, but you will be taking care of the most precious thing in the lives of your clients: their children. You will be responsible for the health and safety of those children, many of whom may be toddlers, for hours every day. There is always a possibility that a child could be injured while on the premises of your day care business—in which case you would want the business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
Licenses and Permits
In the State of New York, licensing of child care businesses is handled through the New York State Office of Children and Family Services (OCFS). Generally speaking, you need a license (for a day care center) or registration certificate (for a day care home) if you will be caring for three or more children who are non-family members for more than three hours per day. Operating without the required license or registration can result in significant penalties, including fines of up to $500 per day.
New York’s child care regulations define several different types of child care situations, which are referred to in the regulations as “Child Day Care Center,” “Small Day Care Center,” “Group Family Day Care Home,” “Family Day Care Home,” and “School Age Child Care.” The general rules for these situations are as follows:
Except for School Age Child Care, the ages of children being cared for may range from six weeks to 12 years. Other, more specific rules also apply. For example, a Small Day Care Center may not care for more than two children under age two at any one time; and, in exceptional cases, such as children under court supervision, children 13 and older may also receive care from day care centers or day care homes. Also, be aware that, in some instances, there are different rules for child care programs located in New York City.
OCFS has handbooks for family day care and group family day care providers, as well as sample applications for all types of care facility licenses, available on its website.
The license applications are extensive, running dozens of pages; some of the information that may be required includes:
Your application will need to be notarized and you will need to pay a State Central Register (SCR) fee.
Apart from preparing, submitting, and obtaining approval for your application, you will also need to complete a minimum of 15 hours of training within the first six months of being licensed, and at least 30 hours of training within the first two years. Depending on what type of care facility you have, the same training requirements may also apply to other employees. There are various options for how to receive this training, such as through EarlyChildhood.org and OCFS-sponsored video teleconferences.
Extensive information on licensing and training is available on the OCFS website.
Apart from state licensing, you should keep in mind that there may be local zoning laws that would prohibit running a child care business in a particular location. This is more likely to be an issue if you are thinking of operating the business out of your home and you live in a clearly residential, as opposed to commercial, area. Even if a child care center is permissible under the local zoning ordinance, you may be required to obtain a compliance certificate from the local zoning authority. In short, your best bet is to investigate zoning regulations before you open for business.
Health and Safety
The government is very concerned about the health and safety of infants and small children, and New York’s child care regulations are extensive. With some variation depending on whether you are operating out of your home or an independent child care center, key areas of state regulation include:
As the last item on the list indicates, the state has the authority to inspect or investigate your child care home or center. These inspections may occur at any time during hours of operation, and may include interviews of children and staff. They may also include inspecting any part of the child care center, or those parts of a home in which child care services are provided, as well as any records. Similarly, you should expect that a fire marshal or other fire prevention official will make an inspection to ensure there are adequate routes of escape in case of fire and that other fire safety regulations are being complied with. Parents of children under care also have the right to inspect all parts of a center or home used for child day care, and unlimited and on-demand access to their own children.
Tax Deduction
If you run your day care business out of your home, you may be able to deduct expenses for the business. To qualify, you must (a) provide day care to children and (b) be licensed by the state or exempt from the state’s licensing requirement. Details about how to figure the deduction can be found on IRS Publication 587, available at irs.gov.
Insurance
There are particular risks associated with operating a child care center, primarily those related to the health and safety of infants and small children. These are on top of more generic business risks such as fire, theft, or other sources of property damage or personal injury.
Try to work with an insurance agent who has previous experience writing policies for child care providers. Consider coverage for sexual abuse or molestation, for corporal punishment, and for employees who are child care providers. In general, make sure you have an excellent general liability policy.
For more information, see Nolo's article on Obtaining Business Insurance.
Employees
Most day care centers have employees and, in many cases, there can be relatively frequent turnover. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
Keep in mind that there are some employment laws that are specifically relevant to day care workers, such as state training requirements and rules relating to criminal records and fingerprinting. As noted above, New York requires at least one on-duty staff member at a child care center to be trained in pediatric CPR and First Aid.
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website.
]]>Keep in mind that the term “consulting business” can cover a broad range of activities. Some consultants primarily work in their own offices; others work in other people’s offices or at indoor or outdoor job sites. Moreover, some consultants are, in one or another legal sense, “professionals;” for example, they may be licensed by the State. In reading through this article, you should make allowances for your particular kind of consulting.
Choosing the Business Entity
Depending on the details of your particular consulting business, you might well be able to operate as a sole proprietorship or partnership. However, you should at least consider using a legal form that protects you from personal liability. In this regard, if you are a member of a recognized profession you not only have more common options, such as a limited liability company or corporation, but also additional options, such as a professional corporation or professional limited liability company.
In many cases, consulting work may not seem particularly dangerous, and situations involving personal liability may seem unlikely. However, if at any point you are responsible for the handling of valuable data, physical property, or perhaps even individual people, you could be at risk of something being damaged or lost, or someone being injured. This might occur at your own business location or it might occur elsewhere—but, in any case, you would want the business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
Licenses and Permits
Even if you operate as a sole proprietor, you should consider obtaining a federal tax ID number, known formally as an Employer Identification Number (EIN); for other legal forms of business, an EIN is a requirement. The process is easy and can be completed online at the IRS website. Moreover, even if you operate as a sole proprietor, you may need a general business license from a state or local government office. For example, if your consulting business will operate under a business name different from your own name, you may need to file a “doing-business-as” (DBA) certificate (also known as a fictitious business name certificate).
In addition, in each state there are at least some occupations and professions that require state licenses, ranging from traditional professions such as physicians, lawyers, dentists, and accountants through occupations such as barbers, cosmetologists, real estate agents, and insurance agents. You should make sure you have the proper professional or occupational licensing before putting yourself forward as a consultant.
If you will be selling goods as part of your consulting business, most states require you to obtain a sales tax permit for sale of most products.
Finally, even if your consulting business is “low-key” or office-oriented, there may be local zoning laws that would prohibit your business in certain locations. This generally is more likely to be an issue if you are thinking of operating the business out of your home and you live in a clearly residential, as opposed to commercial, area. Even if the business is permissible under the local zoning ordinance, you may be required to obtain a compliance certificate from the local zoning authority. In short, your best bet is to investigate zoning regulations before you open for business.
Health and Safety
For office-based consultants, health and safety is not likely to be a primary concern. However, if you will be working “in the field” in situations that are potentially dangerous, such as construction sites; or if you are otherwise working with hazardous materials, you should investigate federal Occupational Safety & Health Administration (OSHA) and Environmental Protection Agency (EPA) regulations, as well as your state’s occupational health and safety regulations and environmental regulations.
Tax Matters
Your tax situation will vary depending on the legal form of your business (corporation, professional limited liability company, partnership). Even with a sole proprietorship, you need to attach a separate schedule (Schedule C) to your personal income tax return. In more complicated arrangements, such as an S Corporation or a multimember LLC, you will generally have to work with entirely different tax forms. If you previously are used to working as an employee, this added level of complexity can be confusing, at least at first; in which case, the services of a good accountant may be a worthwhile investment.
Consultants are typically self-employed. If you are transitioning from an employed position, you will be working with a new tax form provided by clients paying for your services: IRS Form 1099-MISC. While there can be some exceptions depending on the legal form of your business, you should also be aware that generally, as a self-employed individual, you personally will be subject to the federal self-employment tax. With this additional tax obligation comes the requirement that you make quarterly estimated tax payments; information and instructions regarding these payments is available on IRS Form 1040-ES.
One other matter that is often grouped with tax issues is your status as an independent contractor. The very term “consultant” may seem to imply that you are self-employed rather than an employee. However, it can be useful to review the IRS guidelines regarding independent contractors, such as those contained as part of IRS Form SS-8, as well as parallel state guidelines where available.
Finally, if you run your consulting business out of your home, you may be able to claim a deduction for business use of your home. Details about how to figure the deduction can be found in IRS Publication 587.
Insurance
Appropriate insurance for a consulting business will vary depending on the business’s details. Even if you will work mainly out of your own office, you will at least want adequate premises liability insurance, just in case a client or other business-related visitor slips and falls or is otherwise injured at your business location. You will also want adequate property coverage for your physical business equipment; insurance for loss of your own business data is also worth considering. And, depending on your area of expertise, you should also seriously consider – or may even be required to have – professional liability insurance.
If you will work in situations that are more clearly physically dangerous, you should also look more closely at insurance that covers personal injury – both to yourself, and, as necessary, to others. Similarly, if you will be driving between various job sites, you should make sure you have appropriate vehicle insurance.
You may well find that, to get the best information and best coverage, you will need to work with several different insurance agents with different areas of expertise. Try to find agents who have previous experience writing policies in the areas relevant to your business. For example, if you will be consulting on hazardous chemicals, try to find an agent who knows something about coverage for hazardous substances.
For more information, see Nolo's article on Obtaining Business Insurance.
Policy Statements and Contracts
By its very nature, “consulting” is frequently a very flexible business, and different clients may want at least somewhat different services from you; in turn, you may very well be interested in accommodating the varying needs of these different clients. While you do not want to unduly limit what you can offer to potential clients, it still may be in your own interest to formulate and provide in advance—and in writing—at least general policies regarding how you work. If you have a website, you should consider posting your policies there. Regardless of whether you have a website, you may want to create a printed document containing general policy information that you give to each of your clients before you reach any agreements and begin work.
General policy elements could vary widely depending on what kind of consulting you are involved in. They might include billing issues (whether you bill by the job or by the hour; any minimum charges or minimum hourly billing increments; how you charge for travel time; whether you bill bi-weekly, monthly, or only at the end of a project), how you deal with payments (do you take retainers; do you expect monthly or other periodic payments), and who pays for certain expenses (such as special equipment, airfare, or hotels).
At least as important as general policies, however, are the specific agreements you reach with each individual client. Ideally, these will take the form of contracts for service and will spell out in detail a range of matters, including those already mentioned (billing, payments, expenses) as well as the details of the work you are expected to perform.
Keep in mind that, under basic contract law, in order for a contract for services to be legally binding, (a) you and your client must agree on what the contract is for (there must be a “meeting of the minds”) and (b) there must be an exchange of value (also known as “consideration”—in the case of a consulting business, usually the exchange of your services for money from your client). If the services involved will be completed in less than a year the contract need not be in writing; however, most consultants would not take the risk of providing services without first getting a written, signed agreement. In fact, you should consider drafting—or having a lawyer draft—a standard contract that you can modify for individual clients.
To learn more about policy statements, business contracts, and related matters, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo)
Employees
To the extent you will have employees, you should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website.
]]>Choosing the Business Entity
While you could operate your clothing store as a sole proprietorship or partnership, you should consider using a legal form that protects you from personal liability, such as a corporation or a limited liability company. A clothing store is not the most dangerous business, but, with a little luck, you will have a significant number of customers coming through every day, and in many cases employees engaged in at least some physical activity. Consequently, there is some possibility that a person could be injured, or his or her property damaged, on the premises—in which case you would want the business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
Naming the Business
In naming your business it is important not to violate trademark laws. This means naming your store in a way that avoids creating a “likelihood of confusion” with a preexisting commercial enterprise in the same field. Such confusion might arise if the name you choose is identical or very similar to the name of another clothing store, or similar business or product.
In a pre-Internet age, it was easier for people starting small, local businesses to investigate the uniqueness of the names they wanted to use because it was assumed that there were certain geographic limitations on business names. Now, however, you need to be concerned about trademarks and trade names that may be in use by just about anyone just about anywhere in the country. If you name your Austin-based sporting apparel store Adaline’s for Athletes and there is already a popular store in Anchorage that also sells online named AdalinesAthletics, you may find yourself looking at a trademark infringement suit. You should not expect the geographic separation to protect you.
The best approach to avoiding trademark issues is to try to make a thorough search of existing business names before settling on a name for your own business. This may include:
In addition, if you want greater certainty you can hire a professional service to do a more thorough investigation of the name in which you are interested; the cost is usually a few hundred dollars.
To learn more, see Choosing a Business Name FAQ, Make Sure Your Proposed Business Name Is Available, and How to Register Your Business Name.
Licenses and Permits
Even if you operate as a sole proprietor, you should consider obtaining a federal tax ID number, known formally as an Employer Identification Number (EIN). For other forms of business, an EIN is a requirement. The process is easy and can be completed online at the IRS website at www.irs.gov.
The State of Texas does not have a general business license or permit requirement. However, the State recommends that you check with local governments at the city and county levels to learn about license or permit requirements for your particular type of business. At a minimum, you will need to obtain a state sales tax permit, which you can do online through the Texas Comptroller of Public Accounts website. Depending on the details of your business, other licenses and permits may also be necessary. For example, many Texas cities require you to obtain a permit if your store has an audible security alarm.
For additional guidance on other licensing issues, as well as on starting a small business in Texas generally, check out the State’s Texas Wide Open For Business website.
Leasing Space
For retail businesses, location is an important consideration, as you want to be convenient to customers and thus maximize customer traffic. It is sometimes worthwhile to spend time physically in areas you think might work for your store. You can observe how many people shop in the area, and talk to businesses currently located there to find out about possible open spaces. Online searches, through real estate-specific websites, as well as sites like craigslist, are also potentially useful.
If you find a location you’re interested in, try to investigate the space as thoroughly as possible. Look for things like indications of past water leakage. Try to get a sense of how responsive the landlord will be to requests for repairs—perhaps by talking with other of the landlord’s tenants.
When reaching the point of signing a commercial lease, several key elements to keep in mind are:
Learn more from the Nolo article Commercial Leases: Negotiate the Best Terms.
Insurance
As the operator of a clothing store, at a minimum you need to be concerned about at least two areas of risk:
For potential injuries to customers, you should obtain a good general liability policy that will protect you from customers who slip and fall or suffer other personal injuries at your place of business.
For potential damage to your business property, make sure that you have coverage for all property of any importance, such as building fixtures, furniture, equipment, personal property used in the business like books and computer discs, and—certainly important in a retail store—inventory.
The list of coverage areas could easily be extended over what is briefly described here. Try to work with an insurance agent who has previous experience writing policies for clothing stores.
For more information, see Nolo's article on Obtaining Business Insurance.
Employees
Most clothing stores have employees and, in many cases, there can be relatively frequent turnover, particularly among the sales staff. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website. Additional information about both federal and state regulations in such areas as equal employment, safety, wages, and labor posters for Texas employers is available on the Texas Wide Open For Business website.
Additional Information
For more thorough information about opening a clothing store or similar small business, including issues not covered here, a excellent resource is Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo). You can also learn more from other Nolo articles like this one, Shipping and Refund Rules for Businesses.
]]>While you could operate your catering business as a sole proprietorship or partnership, you should probably consider using a legal form that protects you from personal liability, such as a corporation or a limited liability company. Catering generally involves being in other people’s businesses and homes on a regular basis, dealing face-to-face with significant numbers of people eating food that you have prepared, and employees engaged in a lot of physical activity. This increases the likelihood that a person could be injured, or his or her property damaged—in which case you would want your catering business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
With extremely limited exceptions, the Texas Department of State Health Services (DSHS) requires all “food establishments” — which includes caterers — to obtain a permit from the appropriate health authority. This either will be a city or county health department, or, in those cases where there is no local authority responsible for issuing the permit, the DSHS itself. Permits are issued for two-year terms; fees, which vary based on the gross annual volume of sales, range from $250 to $750.
You will need to have at least one on-duty employee who is a certified food manager, and you may also need employees to obtain food handler cards. In order to become a certified food manager, a person must pass a DSHS-approved certified food manager examination, which can be taken as part of a certification training program at a test site or online. The certification is valid for five years. If you obtain your food establishment permit from a local health authority as opposed to DSHS, that same local authority may also require employees to get food handler training. There are various ways to acquire this training, including online.
If you intend to serve alcohol as part of your catering operation, you will also need to obtain an appropriate permit from the Texas Alcoholic Beverage Commission (TABC). There are several types of liquor permits. Depending on your particular circumstances, you may need to pay for a separate permit for each catering function where you provide alcohol. Additional information is available online at the TABC’s website.
Because catering is all about providing people with ready-to-eat food, it is subject to significant regulations regarding food health and safety, and more specifically to the DSHS’s food establishment rules. Just a few of the many dozens of matters these rules cover are:
With these rules in mind, you may be subject to monitoring from your local health department (or, if there is no local inspection authority, from the DSHS). Health department inspections can cover many aspects of your catering business, including not only the food itself, raw and prepared, but also refrigeration systems, cooking equipment, waste disposal, and many other areas.
Apart from state regulations regarding the health and safety of restaurant workers, the federal Occupational Safety & Health Administration (OSHA) also has a variety of regulations relating to, among other things, eye and face protection, hand protection, and walking-working surfaces.
Policy Statements and Contracts
Different customers may have different ideas about exactly what services your catering business will provide. It is in your own interest to make clear in advance—in writing—what you will and won’t do for your clients. If you have a website, you should post your policies there. And, regardless of whether you have a website, you should provide a printed document containing the policy information to all of your clients before you reach an agreement and begin work.
For example, if you cater in people’s homes, you should indicate such things as:
Many of these same types of rules would also apply to catering to businesses.
Beyond a general set of rules, it is also useful to work with each individual client to create a written plan for the specific services to be provided.
Policy statements aside, keep in mind that in order for a contract for services to be legally binding, (a) you and your client must agree on what the contract is for (there must be a “meeting of the minds”), and (b) there must be an exchange of value (also known as “consideration”—in the case of a catering business, usually the exchange of catering services, including food, for money). If the services involved will be completed in less than a year the contract need not be in writing. However, a written contract is always safer. You should consider drafting—or having a lawyer draft—a standard contract that you can modify for individual clients.
To learn more about policy statements, business contracts, and related matters, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo)
There are particular risks associated with catering, such as employees slipping and falling on your premises while preparing food, diners or employees getting hurt from hot liquid or broken glass, or someone becoming seriously ill from the food itself. These are on top of more generic business risks such as fire, theft, or other sources of property damage or personal injury.
Try to work with an insurance agent who has previous experience writing policies for people involved in preparing and serving food. For property coverage, try to make sure that all business property of any importance, from plates to stoves, is fully covered. For injuries to people, make sure you have an excellent general liability policy. This should cover not only spilling boiling coffee on a diner, but also damages from someone who becomes gravely ill from eating the food you have prepared. In addition, make sure you have proper vehicle insurance to cover yourself and any employees while traveling to and from your clients’ businesses and homes.
Most catering operations have at least a few employees; moreover, in many cases there can be relatively frequent turnover. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
Keep in mind that there are some employment laws that are specifically relevant to restaurants, such as minimum wages for tipped employees, as well as rules regarding various training and exams related to you and your employees.
Information regarding food handler certification is available on a page of the DSHS website. Limited information about both federal and state regulations in such areas as equal employment, safety, wages, and labor posters for Texas employers is available on the Texas Wide Open For Business website.
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website.
]]>Keep in mind that the term “consulting business” can cover a broad range of activities. Some consultants primarily work in their own offices; others work at other people’s businesses or at indoor or outdoor job sites. Moreover, some consultants are, in one or another legal sense, “professionals;” for example, they may be licensed by the state. In reading through the rest of this article, you should make allowances for your particular kind of consulting.
Choosing the Business Entity
Depending on the details of your particular consulting business, you might well be able to operate as a sole proprietorship or partnership. However, you should at least consider using a legal form that protects you from personal liability. In this regard, if you are a member of a recognized profession you not only have more common options, such as a limited liability company or corporation, but also additional options, such as a professional corporation or professional limited liability company.
In many cases, consulting work may not seem particularly dangerous, and situations involving personal liability may seem unlikely. However, if at any point you are responsible for the handling of valuable information, physical property, or perhaps even individual people, you could be at risk of something being damaged or lost, or someone being injured. This might occur at your own business location or it might occur elsewhere—but, in any case, you would want the business, not you personally, to be responsible for any liability.
See Nolo's section on choosing a business structure to learn more.
Licenses and Permits
Even if you operate as a sole proprietor, you should consider obtaining a federal tax ID number, known formally as an Employer Identification Number (EIN). For most other forms of business, an EIN is a requirement. The process is easy and can be completed online at irs.gov.
The State of Texas does not have any general business license or permit requirement. However, the State recommends that you check with local governments at the city and county levels to learn about license or permit requirements for your particular type of business. General information related to starting a small business in Texas is available through the State’s Texas Wide Open For Business website. Even the most limited consulting business may need a license from a state or local government office; this may be something as simple as a doing-business-as (DBA) certificate filed with the county, or it may be something more significant.
In addition, there are various occupations and professions for which Texas requires some form of state licensing or certification. These include not only traditional professions such as physicians, lawyers, dentists, and accountants, but also occupations such as dietitians, real estate brokers, and insurance agents. Some licensing information is available through the Occupational Licenses & Permits section of the Texas.gov website.
If you will be selling goods as part of your consulting business, the State of Texas also requires you to obtain a sales and use tax permit, which you can do online.
Finally, even if your consulting business is “low-key” or office-oriented, keep in mind that there may be local zoning laws that would prohibit your business in certain locations. This generally is more likely to be an issue if you are thinking of operating the business out of your home and you live in a clearly residential, as opposed to commercial, area. Even if the business is permissible under the local zoning ordinance, you may be required to obtain a compliance certificate from the local zoning authority. In short, your best bet is to investigate zoning regulations before you open for business.
Health and Safety
For office-based consultants, health and safety is not likely to be a primary concern. However, if you will be working “in the field” in situations that are potentially dangerous, such as construction sites; or if you are otherwise working with hazardous materials, you should investigate federal Occupational Safety & Health Administration (OSHA) and Environmental Protection Agency (EPA) regulations.
Additional information regarding worker health and safety is available through Texas’s Occupational Safety and Health Consultation Program (OSHCON), which operates within the Texas Department of Insurance. Also, the Texas Department of Insurance’s Division of Workers’ Compensation (TDI-DWC) has resources for both employers and employees regarding workplace safety.
Tax Matters
Your tax situation will vary depending on the legal form of your business (e.g., corporation, professional limited liability company, partnership). Even with a sole proprietorship, you need to attach a separate schedule (Schedule C) to your personal income tax return. In more complicated arrangements, such as an S Corporation or a multimember LLC, you will generally have to work with entirely different tax forms. If you are used to working as an employee, this added level of complexity can be confusing. If that's the case, the services of a good accountant may be a worthwhile investment at least at first.
Consultants are typically self-employed. If you are transitioning from an employed position, keep in mind that you will be working with a new tax form, IRS Form 1099-MISC. This form will be provided to you at the end of the year by those clients who are paying you for your services. While there can be some exceptions depending on the legal form of your business, you should also be aware that generally, as a self-employed individual, you personally will be subject to the federal self-employment tax. With this additional tax obligation comes the requirement that you make quarterly estimated tax payments; information and instructions regarding these payments are available on IRS Form 1040-ES.
One other matter that is often grouped with tax issues is your status as an independent contractor. The very term “consultant” may seem to imply that you are self-employed rather than an employee. However, it can be useful to review the IRS guidelines regarding independent contractors, such as those contained as part of IRS Form SS-8. In addition, the Texas Workforce Commission (TWC) has adapted an older set of IRS guidelines for determining whether a worker is an independent contractor. Information is available on the TWC’s form C-8.
Finally, if you run your consulting business out of your home, you may be able to claim a deduction for business use of your home. Details about how to figure the deduction can be found in IRS Publication 587.
Insurance
Appropriate insurance for a consulting business will vary depending on the business’s details. Even if you will work mainly out of your own office, you will at least want adequate premises liability insurance, just in case a client or other business-related visitor slips and falls or is otherwise injured at your business location. You will also want adequate property coverage for your physical business equipment. Insurance for loss of your own business data is also worth considering. And, depending on your area of expertise, you should also seriously consider – or may even be required to have – professional liability insurance.
If you will work in situations that are more clearly physically dangerous, you should also look more closely at insurance that covers personal injury – both to yourself, and, as necessary, to others. Similarly, if you will be driving between various job sites, you should make sure you have appropriate vehicle insurance.
You may well find that, to get the best information and best coverage, you will need to work with several different insurance agents with different areas of expertise. Try to find agents who have previous experience writing policies in the areas relevant to your business. For example, if you will be consulting on hazardous chemicals, try to find an agent who knows something about coverage for hazardous substances.
For more information, see Nolo's article on Obtaining Business Insurance.
Policy Statements and Contracts
By its very nature, “consulting” is frequently a very flexible business, and different clients may want at least somewhat different services from you. In turn, you may very well be interested in accommodating the varying needs of these different clients. While you do not want to unduly limit what you can offer to potential clients, it still may be in your own interest to formulate and provide in advance—in writing—at least general policies regarding how you work. If you have a website, you should consider posting your policies there. Regardless of whether you have a website, you may want to create a printed document containing general policy information that you give to each of your clients before you reach any agreements and begin work.
General policy elements could vary widely depending on what kind of consulting you are involved in. They might include billing issues (whether you bill by the job or by the hour; any minimum charges or minimum hourly billing increments; how you charge for travel time; whether you bill bi-weekly, monthly, at the end of a project, or on some other basis), how you deal with getting paid (do you take retainers; do you expect monthly or other periodic payments), and who pays for certain expenses (such as special equipment, airfare, or hotels).
At least as important as general policies, however, are the specific agreements you reach with each individual client. Ideally, these will take the form of contracts for service and will spell out in detail a range of matters, including those already mentioned (billing, payments, expenses) as well as the details of the work you are expected to perform.
Keep in mind that, under basic contract law, in order for a contract for services to be legally binding, (a) you and your client must agree on what the contract is for (there must be a “meeting of the minds”), and (b) there must be an exchange of value (also known as “consideration”—in the case of a consulting business, usually the exchange of your services for money from your client). If the services involved will be completed in less than a year, the contract need not be in writing. However, most consultants would not take the risk of providing services without first getting a written, signed agreement. In fact, you should consider drafting—or having a lawyer draft—a standard contract that you can modify for individual clients.
To learn more about policy statements, business contracts, and related matters, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo)
Employees
To the extent you will have employees, you should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor and there are a variety of informative webpages within the Department of Labor website. Finally, additional information about both federal and state regulations in such areas as equal employment, safety, wages, and labor posters for Texas employers is available on the Texas Wide Open For Business website.
]]>Choosing the Business Entity
While you could operate your cleaning business as a sole proprietorship or partnership, you should consider using a legal form that protects you from personal liability, such as a corporation or a limited liability company. Unlike many other types of businesses, such as certain professional or consulting businesses, your cleaning business will operate in other people’s offices or homes, and you likely will have employees engaged in a significant amount of physical activity. These facts increase the likelihood that an employee or other person could be injured, or that a customer’s property could be damaged by you or one of your workers—in which case you would want the business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
Licenses and Permits
Even if you operate as a sole proprietor, you should consider obtaining a federal tax ID number, known formally as an Employer Identification Number (EIN). The process is easy and can be completed online at irs.gov. You should also check with your local government office to see if you need to obtain a business permit.
The State of Texas does not have any general business license or permit requirement. However, the State recommends that you check with local governments at the city and county levels to learn about license or permit requirements for your particular type of business. General information related to starting a small business in Texas is available through the State’s Texas Wide Open For Business website.
Health and Safety
Cleaning offices or homes may not be the most dangerous activity, but the people doing the cleaning may be working with cleaning supplies that are somewhat toxic, and when people are moving around a home or office accidents can happen. The federal Occupational Safety & Health Administration (OSHA) has a variety of regulations relating to, among other things, eye and face protection, hand and foot protection, toxic and hazardous substances, and ventilation. For more details on federal safety and health rules, check the cleaning industry section of the OSHA website.
Additional information regarding worker health and safety is available through Texas’s Occupational Safety and Health Consultation Program (OSHCON), which operates within the Texas Department of Insurance. Also, the Texas Department of Insurance’s Division of Workers’ Compensation (TDI-DWC) has resources for both employers and employees regarding workplace safety.
Advertising
While word-of-mouth is often the best way to get new customers, with a new cleaning business you will probably need to do at least some advertising. Regardless of how you choose to advertise (your own website, posting flyers in public spaces, Craigslist, the phone book), the best brief pieces of advice are (a) be accurate and (b) be very careful about describing special discounts or saying that something is “free.” If you offer something for free, but there are conditions, you must state what those conditions are; if you offer something at a discount, it must really be cheaper than your normal price.
Policy Statements and Contracts
Different customers may have different ideas about exactly what services your cleaning business will provide. It is in your own interest to make clear in advance—in writing—what you will and won’t do for your clients. If you have a website, you should post your policies there. Regardless of whether you have a website, you should provide a printed document containing the policy information to all of your clients before you reach an agreement and begin work.
For example, if you clean homes, you should indicate such things as:
Many of these same types of rules would also apply to cleaning offices and other commercial areas. Beyond a general set of rules, it is useful to work with each particular client to create a written plan for the specific services to be provided.
In order for a contract for services to be legally binding, (a) you and your client must agree on what the contract is for (there must be a “meeting of the minds”) and (b) there must be an exchange of value (also known as “consideration”—in the case of a cleaning business, usually the exchange of cleaning services for money). If the services involved will be completed in less than a year the contract need not be in writing; however, a written contract is always safer. You should consider drafting—or having a lawyer draft—a standard contract that you can modify for individual clients.
To learn more about policy statements, business contracts, and related matters, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo)
Insurance
There are particular risks associated with running a cleaning business, such as employees slipping and falling on the job, and inadvertent damage to, or destruction of, customers’ property. These are on top of more generic business risks to your own business property, such as through fire or theft.
Try to work with an insurance agent who has previous experience writing policies for cleaning companies. You will want excellent general liability coverage in case of damage or destruction to your clients’ property—or injury to clients themselves. For property coverage, try to make sure that all property of importance to your business, such as supplies and equipment, is fully covered. You will also want proper vehicle insurance to cover you and your employees travelling between work locations. And, finally, depending on local regulations and standards, you may want to investigate bonding for your business.
For more information, see Nolo's article on Obtaining Business Insurance.
Employees
Most cleaning businesses have employees and, in many cases, there can be relatively frequent turnover. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
Keep in mind that there are some employment laws that may be particularly relevant to cleaning businesses, such as those related to minimum hourly wages, child labor, and required documentation of eligibility to work.
Also, if you are thinking of treating some people who do the actual cleaning work as independent contractors, proceed with extreme caution. The IRS has very particular rules about who can be classified as an independent contractor, and individuals obtaining cleaning jobs through your cleaning business may, at the very least, fall into a grey area. One specific document worth reviewing is IRS Form SS-8 (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding), which lays out the many potential criteria used by the IRS to determine worker status; it is available at irs.gov.
The Texas Workforce Commission (TWC) has adapted an older set of IRS guidelines for determining whether a worker is an independent contractor; information is available on the TWC’s form C-8.
Additional information about both federal and state regulations in such areas as equal employment, safety, wages, and labor posters for Texas employers is available on the Texas Wide Open For Business website.
Finally, a good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the federal Department of Labor (DOL), and there are a variety of informative webpages within the DOL website.
]]>Keep in mind that the term “consulting business” can cover a broad range of activities. Some consultants primarily work in their own offices; others work at other people’s businesses or at indoor or outdoor job sites. Moreover, some consultants are, in one or another legal sense, “professionals;” for example, they may be licensed by the state. In reading through the rest of this article, you should make allowances for your particular kind of consulting.
Choosing the Business Entity
Depending on the details of your particular consulting business, you might well be able to operate as a sole proprietorship or partnership. However, you should at least consider using a legal form that protects you from personal liability. In this regard, if you are a member of a recognized profession you not only have more common options, such as a limited liability company or corporation, but also additional options, such as a professional corporation or professional limited liability company.
In many cases, consulting work may not seem particularly dangerous, and situations involving personal liability may seem unlikely. However, if at any point you are responsible for the handling of valuable information, physical property, or perhaps even individual people, you could be at risk of something being damaged or lost, or someone being injured. This might occur at your own business location or it might occur elsewhere—but, in any case, you would want the business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
Licenses and Permits
Even if you operate as a sole proprietor, you should consider obtaining a federal tax ID number, known formally as an Employer Identification Number (EIN); for other forms of business, an EIN is a requirement. The process is easy and can be completed online at the IRS website at www.irs.gov.
Even the most limited consulting business may need a license from a state or local government office. This may be something as simple as a doing-business-as (DBA) certificate, or it may be something more significant. New York’s web-based “Online Permit Assistance and Licensing” (OPAL) system can generate basic license and permit information for any of nearly 450 types of businesses— including many categories relevant to various types of consulting.
In addition, there are various occupations and professions for which New York requires some form of state licensing. These include not only traditional professions such as physicians, lawyers, dentists, and accountants, but also occupations such as barbers, cosmetologists, real estate brokers, and insurance agents. Further information is available through the labor statistics section of the New York State Department of Labor’s website, and the Office of the Professions webpages within the New York State Education department website.
If you will be selling goods as part of your consulting business, the State of New York also requires you to obtain a certificate of authority to collect sales tax, which you can do online through the OPAL system.
Finally, even if your consulting business is “low-key” or office-oriented, keep in mind that there may be local zoning laws that would prohibit your business in certain locations. This generally is more likely to be an issue if you are thinking of operating the business out of your home and you live in a clearly residential, as opposed to commercial, area. Even if the business is permissible under the local zoning ordinance, you may be required to obtain a compliance certificate from the local zoning authority. In short, your best bet is to investigate zoning regulations before you open for business.
Health and Safety
For office-based consultants, health and safety is not likely to be a primary concern. However, if you will be working “in the field” in situations that are potentially dangerous, such as construction sites; or if you are otherwise working with hazardous materials, you should investigate federal Occupational Safety & Health Administration (OSHA) and Environmental Protection Agency (EPA) regulations, as well as occupational health, safety, and environmental information available from New York’s Department of Health.
Tax Matters
Your tax situation will vary depending on the legal form of your business (corporation, professional limited liability company, partnership). Even with a sole proprietorship, you need to attach a separate schedule (Schedule C) to your personal income tax return. In more complicated arrangements, such as an S corporation or a multimember LLC, you will generally have to work with entirely different tax forms. If you previously are used to working as an employee, this added level of complexity can be confusing, at least at first; in which case, the services of a good accountant may be a worthwhile investment.
Consultants are typically self-employed; therefore, if you are transitioning from an employed position, keep in mind that you will be working with a new tax form, IRS Form 1099-MISC, which will be provided to you at the end of the year by those clients who are paying you for your services. While there can be some exceptions depending on the legal form of your business, you should also be aware that generally, as a self-employed individual, you personally will be subject to the federal self-employment tax. With this additional tax obligation comes the requirement that you make quarterly estimated tax payments; information and instructions regarding these payments is available on IRS Form 1040-ES.
One other matter that is often grouped with tax issues is your status as an independent contractor. The very term “consultant” may seem to imply that you are self-employed rather than an employee. However, it can be useful to review the IRS guidelines regarding independent contractors, such as those contained as part of IRS Form SS-8, as well as New York’s state guidelines and information, some of which are available through the Department of Labor website’s section on unemployment insurance.
Finally, if you run your consulting business out of your home, you may be able to claim a deduction for business use of your home. Details about how to figure the deduction can be found in IRS Publication 587.
Insurance
Appropriate insurance for a consulting business will vary depending on the business’s details. Even if you will work mainly out of your own office, you will at least want adequate premises liability insurance, just in case a client or other business-related visitor slips and falls or is otherwise injured at your business location. You will also want adequate property coverage for your physical business equipment; insurance for loss of your own business data is also worth considering. And, depending on your area of expertise, you should also seriously consider – or may even be required to have – professional liability insurance.
If you will work in situations that are more clearly physically dangerous, you should also look more closely at insurance that covers personal injury – both to yourself, and, as necessary, to others. Similarly, if you will be driving between various job sites, you should make sure you have appropriate vehicle insurance.
You may well find that, to get the best information and best coverage, you will need to work with several different insurance agents with different areas of expertise. Try to find agents who have previous experience writing policies in the areas relevant to your business. For example, if you will be consulting on hazardous chemicals, try to find an agent who knows something about coverage for hazardous substances.
For more information, see Nolo's article on Obtaining Business Insurance.
Policy Statements and Contracts
By its very nature, “consulting” is frequently a very flexible business, and different clients may want at least somewhat different services from you. In turn, you may very well be interested in accommodating the varying needs of these different clients. While you do not want to unduly limit what you can offer to potential clients, it still may be in your own interest to formulate and provide in advance—in writing—at least general policies regarding how you work. If you have a website, you should consider posting your policies there. Regardless of whether you have a website, you may want to create a printed document containing general policy information that you give to each of your clients before you reach any agreements and begin work.
General policy elements could vary widely depending on what kind of consulting you are involved in. They might include billing issues (whether you bill by the job or by the hour; any minimum charges or minimum hourly billing increments; how you charge for travel time; whether you bill bi-weekly, monthly, at the end of a project, or on some other basis), how you deal with getting paid (do you take retainers; do you expect monthly or other periodic payments), and who pays for certain expenses (such as special equipment, airfare, or hotels).
At least as important as general policies, however, are the specific agreements you reach with each individual client. Ideally, these will take the form of contracts for service and will spell out in detail a range of matters, including those already mentioned (billing, payments, expenses) as well as the details of the work you are expected to perform.
Keep in mind that, under basic contract law, in order for a contract for services to be legally binding, (a) you and your client must agree on what the contract is for (there must be a “meeting of the minds”) and (b) there must be an exchange of value (also known as “consideration”—in the case of a consulting business, usually the exchange of your services for money from your client). If the services involved will be completed in less than a year the contract need not be in writing. However, most consultants would not take the risk of providing services without first getting a written, signed agreement. In fact, you should consider drafting—or having a lawyer draft—a standard contract that you can modify for individual clients.
To learn more about policy statements, business contracts, and related matters, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo)
Employees
To the extent you will have employees, you should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website. Finally, guidance on New York-specific labor and employment laws may be found on the website for the New York Department of Labor.
]]>Choosing the Business Entity
While you could operate your restaurant as a sole proprietorship or partnership, you should probably consider using a legal form that protects you from personal liability, such as a corporation or a limited liability company. Unlike some other types of business, such as certain professional or consulting offices, restaurants have a significant number of customers coming through every day, and in many cases also a significant number of employees engaged in a lot of physical activity. This increases the likelihood that a person could be injured, or his or her property damaged, on the premises—in which case you would want the business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
Licenses and Permits
The New York Department of Health requires all food service establishments to obtain and display a permit from the appropriate local health authority. Generally, this will be a health commissioner or health officer of a county or large city. You must apply for the permit at least 21 days before opening your restaurant. The maximum amount of time for which a permit may be valid is two years; the fee is generally several hundred dollars.
Other state-, county-, or city-issued permits and licenses are also necessary, and will vary depending on exactly what kind of restaurant you want to open. The State of New York has an online system called “Online Permit Assistance and Licensing” or “OPAL” that takes you through a series of questions about the details of your restaurant, such as how many people you expect to employ and whether you expect to sell beer or other alcohol, and then provides you with information about the necessary permits and licenses.
Examples of some permits or licenses you may need, apart from the food service establishment permit, are:
In New York, liquor licensing is handled by the New York State Liquor Authority’s Division of Alcoholic Beverage Control. Licensing information is available online at the Liquor Authority’s website; there you will find multiple categories of licenses, such as for eating place beer, restaurant wine, and club liquor. Keep in mind that the liquor licensing process can be complicated and you may require outside legal assistance.
If your restaurant will be serving large numbers of people you may have crowd control issues and, therefore, need to obtain a license or permit from a fire or police department. Similarly, you probably will also need a permit or license from a local building department relating to adequacy of exits from the restaurant and related emergency issues.
The New York State Restaurant Association has prepared a helpful list of required signs and permits for restaurants, including where each needs to be displayed. Among the many items on the list are exit signs, wash hands signs, department of health permit, department of health letter grade, commercial recycling regulations, federal and state labor notices, and choking poster.
Health and Safety
Because restaurants are all about people eating food, they are subject to significant regulations regarding food health and safety. One portion of the New York Department of Health’s regulations for food service establishments contains several dozen sections. Just a few of the many matters covered are:
The Department of Health has a brief guide that can help you ensure you are meeting regulatory requirements.
With the food establishment regulations in mind, you can expect regular monitoring from your local health department. Local health authorities generally have a lot of latitude regarding what they can inspect, and health department inspections can cover a wide array of items in your restaurant. As suggested by the DOH regulations, inspections may cover not only the food itself, raw and prepared, but also refrigeration systems, cooking equipment, waste disposal, and many other areas. Be aware that, in many localities, you are not only required to display your current inspection grade, but the local health authorities publish the results of their inspections online.
Apart from state regulations regarding the health and safety of restaurant workers, the federal Occupational Safety & Health Administration (OSHA) also has a variety of regulations relating to, among other things, eye and face protection, hand protection, and walking-working surfaces.
Insurance
There are particular risks associated with operating a restaurant, such as customers or employees slipping and falling on the premises, someone getting hurt from hot liquid or broken glass, or someone becoming seriously ill from the food itself. These are on top of more generic business risks such as fire, theft, or other sources of property damage or personal injury.
Try to work with an insurance agent who has previous experience writing policies for restaurants. For property coverage, try to make sure that everything of importance, from plates to stoves, is fully covered. For injuries to people, make sure you have an excellent general liability policy. This should cover not only a patron who slips at your restaurant’s front door, but also one who becomes gravely ill from eating the restaurant’s food. And, if you do outside catering, make sure you have proper vehicle insurance, as well.
Franchising
If you’re thinking of opening a restaurant that is part of a franchise, keep in mind that you will have to operate under far more restrictions than if you opened your own independent restaurant. You will be subject to a franchise contract which you should expect to favor the franchisor, and which likely will give the franchisor rights to:
Along with the restrictions contained in the franchise contract, you should keep in mind the additional financial costs of a franchise. In exchange for being given a preexisting business plan, getting certain help as needed when running the restaurant, and benefitting from group marketing, you will be required to pay out a substantial amount of your profit to the franchisor. More specifically, apart from a large initial franchise fee, expect to be required to pay the franchisor:
If you are considering starting a restaurant as part of a franchise, investigate the franchise as thoroughly as you can, including reviewing closely the federally-required franchise disclosure statement.
Employees
Most restaurants have employees and, in many cases, there can be relatively frequent turnover, particularly among waitstaff, bussers, and similar positions. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
Keep in mind that there are some employment laws that are specifically relevant to restaurants, such as minimum wages for tipped employees (in New York State, $4.65 per hour), as well as local rules regarding various training and exams related to food establishment personnel (for example, the New York City Health Code requires that a supervisor with a Food Protection Course certificate be present at all times that a restaurant is open).
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website.
]]>While you could operate your catering business as a sole proprietorship or partnership, you should probably consider using a legal form that protects you from personal liability, such as a corporation or a limited liability company. Catering generally involves being in other people’s businesses and homes on a regular basis, dealing face-to-face with significant numbers of people eating food that you have prepared, and employees engaged in a lot of physical activity. This increases the likelihood that a person could be injured, or his or her property damaged—in which case you would want your catering business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
The New York Department of Health requires all food service establishments, including caterers, to obtain a permit from the appropriate local health authority. Generally, this will be a health commissioner or health officer of a county or large city. You must apply for the permit at least 21 days before starting your catering business. The maximum amount of time for which a permit may be valid is two years. The fee can vary, but likely will range somewhere between $75 and $175.
Other state, county, or city-issued permits and licenses may also be necessary depending on exactly what kind of catering operation you want to start. The State of New York has an online system called “Online Permit Assistance and Licensing” or “OPAL” that can generate basic license and permit information for any of nearly 450 types of businesses, including catering. The system asks you for a few details of your planned business, such as the legal structure (sole proprietorship, limited partnership, corporation) and how many people you will employ, and then provides you with guidance on permits.
If you intend to serve alcohol as part of your catering operation, you will also need to obtain some form of liquor license or catering permit from the Division of Alcoholic Beverage Control of the New York State Liquor Authority. Keep in mind that you may need to pay for a separate permit for each catering function where you provide alcohol.
Because catering is all about providing people with ready-to-eat food, it is subject to significant regulations regarding food health and safety, and more specifically to the New York Department of Health’s regulations for food service establishments. Just a few of the many dozens of matters these regulations cover are:
With these regulations in mind, you can expect monitoring from your local health department. Health department inspections can cover many aspects of your catering business, including not only the food itself, raw and prepared, but also refrigeration systems, cooking equipment, waste disposal, and many other areas.
Apart from state regulations regarding the health and safety of restaurant workers, the federal Occupational Safety & Health Administration (OSHA) also has a variety of regulations relating to, among other things, eye and face protection, hand protection, and walking-working surfaces.
Policy Statements and Contracts
Different customers may have different ideas about exactly what services your catering business will provide. It is in your own interest to make clear in advance—in writing—what you will and won’t do for your clients. If you have a website, you should post your policies there. And, regardless of whether you have a website, you should provide a printed document containing the policy information to all of your clients before you reach an agreement and begin work.
For example, if you cater in people’s homes, you should indicate such things as:
Many of these same types of rules would also apply to catering to businesses.
Beyond a general set of rules, it is also useful to work with each individual client to create a written plan for the specific services to be provided.
Policy statements aside, keep in mind that in order for a contract for services to be legally binding, (a) you and your client must agree on what the contract is for (there must be a “meeting of the minds”) and (b) there must be an exchange of value (also known as “consideration”—in the case of a catering business, usually the exchange of catering services, including food, for money). If the services involved will be completed in less than a year the contract need not be in writing; however, a written contract is always safer. You should consider drafting—or having a lawyer draft—a standard contract that you can modify for individual clients.
To learn more about policy statements, business contracts, and related matters, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo)
There are particular risks associated with catering, such as employees slipping and falling on your premises while preparing food, diners or employees getting hurt from hot liquid or broken glass, or someone becoming seriously ill from the food itself. These are on top of more generic business risks such as fire, theft, or other sources of property damage or personal injury.
Try to work with an insurance agent who has previous experience writing policies for people involved in preparing and serving food. For property coverage, try to make sure that all business property of any importance, from plates to stoves, is fully covered. For injuries to people, make sure you have an excellent general liability policy. This should cover not only spilling boiling coffee on a diner, but also damages from someone who becomes gravely ill from eating the food you have prepared. In addition, make sure you have proper vehicle insurance to cover yourself and any employees while traveling to and from your clients’ businesses and homes.
Most catering operations have at least a few employees and, in many cases, there can be relatively frequent turnover. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
Keep in mind that there are some employment laws that are specifically relevant to food service businesses, such as minimum wages for tipped employees (in New York State, currently $4.65 per hour).
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website.
]]>While you could operate your catering business as a sole proprietorship or partnership, you should probably consider using a legal form that protects you from personal liability, such as a corporation or a limited liability company. Catering generally involves being in other people’s businesses and homes on a regular basis, dealing face-to-face with significant numbers of people eating food that you have prepared, and employees engaged in a lot of physical activity. This increases the likelihood that a person could be injured, or his or her property damaged—in which case you would want your catering business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
You will need to obtain at least a few licenses or permits in order to start your catering business. In some cases, such as a health permit, you most likely will need to look to a local government office. In other cases, such as obtaining a liquor license, you will probably need to work with a state agency such as a liquor control commission. Keep in mind that the liquor licensing process can be complicated and may require outside legal assistance.
Because catering is all about providing people with ready-to-eat food, it is subject to significant regulations regarding food health and safety. Beyond needing to obtain a health permit, and possibly a further permit more specifically related to handling and preparing food, you can expect monitoring from your local health department similar to health inspections of restaurants. Local health authorities generally have a lot of latitude regarding what they can inspect, and health department inspections can cover many aspects of your catering business. Inspections may cover not only the food itself, raw and prepared, but also refrigeration systems, cooking equipment, and waste disposal, among other areas.
The health and safety of your workers is also an issue. The Occupational Safety & Health Administration (OSHA) has a variety of regulations relating to, among other things, eye and face protection, hand protection, and walking-working surfaces.
Policy Statements and Contracts
Different customers may have different ideas about exactly what services your catering business will provide. It is in your own interest to make clear in advance—in writing—what you will and won’t do for your clients. If you have a website, you should post your policies there. And, regardless of whether you have a website, you should provide a printed document containing the policy information to all of your clients before you reach an agreement and begin work.
For example, if you cater in people’s homes, you should indicate such things as:
Many of these same types of rules would also apply to catering to businesses.
Beyond a general set of rules, it is also useful to work with each individual client to create a written plan for the specific services to be provided.
Policy statements aside, keep in mind that in order for a contract for services to be legally binding, (a) you and your client must agree on what the contract is for (there must be a “meeting of the minds”) and (b) there must be an exchange of value (also known as “consideration”—in the case of a catering business, usually the exchange of catering services, including food, for money). If the services involved will be completed in less than a year the contract need not be in writing; however, a written contract is always safer. You should consider drafting—or having a lawyer draft—a standard contract that you can modify for individual clients.
To learn more about policy statements, business contracts, and related matters, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo)
There are particular risks associated with catering, such as employees slipping and falling on your premises while preparing food, diners or employees getting hurt from hot liquid or broken glass, or someone becoming seriously ill from the food itself. These are on top of more generic business risks such as fire, theft, or other sources of property damage or personal injury.
Try to work with an insurance agent who has previous experience writing policies for people involved in preparing and serving food. For property coverage, try to make sure that all business property of any importance, from plates to stoves, is fully covered. For injuries to people, make sure you have an excellent general liability policy. This should cover not only spilling boiling coffee on a diner, but also damages from someone who becomes gravely ill from eating the food you have prepared. In addition, make sure you have proper vehicle insurance to cover yourself and any employees while traveling to and from your clients’ businesses and homes.
Most catering operations have at least a few employees; moreover, in many cases there can be relatively frequent turnover. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
Also, keep in mind that there are some employment laws that may be specifically relevant to catering businesses, such as minimum wages for tipped employees.
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website.
]]>Choosing the Business Entity
While you could operate your cleaning business as a sole proprietorship or partnership, you should consider using a legal form that protects you from personal liability, such as a corporation or a limited liability company. Unlike many other types of businesses, such as certain professional or consulting businesses, your cleaning business will operate in other people’s offices or homes, and you likely will have employees engaged in a significant amount of physical activity. These facts increase the likelihood that an employee or other person could be injured, or that a customer’s property could be damaged by you or one of your workers—in which case you would want the business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
Licenses and Permits
Even if you operate as a sole proprietor, you should consider obtaining a federal tax ID number, known formally as an Employer Identification Number (EIN). The process is easy and can be completed online at irs.gov. You should also check with your local government office and the federal Small Business Administration (SBA) to see if you need to obtain a business permit.
Health and Safety
Cleaning offices or homes may not be the most dangerous activity, but the people doing the cleaning may be working with cleaning supplies that are somewhat toxic, and when people are moving around a home or office accidents can happen. The Occupational Safety & Health Administration (OSHA) has a variety of regulations relating to, among other things, eye and face protection, hand and foot protection, toxic and hazardous substances, and ventilation. You should investigate both these and other federal and state regulations relating to janitorial services to ensure you are taking the required measures to protect your workers and yourself.
For more details on federal safety and health rules, check the cleaning industry section of the OSHA website.
Advertising
While word-of-mouth is often the best way to get new customers, you will probably need to do at least some advertising if you are starting a new cleaning business. Regardless of how you choose to advertise (your own website, posting flyers in public spaces, Craigslist, the phone book), the best brief pieces of advice are (a) be accurate and (b) be very careful about describing special discounts or saying that something is “free.” If you offer something for free, but there are conditions, you must state what those conditions are; if you offer something at a discount, it must really be cheaper than your normal price.
Policy Statements and Contracts
Different customers may have different ideas about exactly what services your cleaning business will provide. It is in your own interest to make clear in advance—in writing—what you will and won’t do for your clients. If you have a website, you should post your policies there. Regardless of whether you have a website, you should provide a printed document containing the policy information to all of your clients before you reach an agreement and begin work.
For example, if you clean homes, you should indicate such things as:
Many of these same types of rules would also apply to cleaning offices and other commercial areas. Beyond a general set of rules, it is useful to work with each particular client to create a written plan for the specific services to be provided.
In order for a contract for services to be legally binding, (a) you and your client must agree on what the contract is for (there must be a “meeting of the minds”), and (b) there must be an exchange of value (also known as “consideration”—in the case of a cleaning business, usually the exchange of cleaning services for money). If the services involved will be completed in less than a year the contract need not be in writing; however, a written contract is always safer. You should consider drafting—or having a lawyer draft—a standard contract that you can modify for individual clients.
To learn more about policy statements, business contracts, and related matters, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo)
Insurance
There are particular risks associated with running a cleaning business, such as employees slipping and falling on the job, and inadvertent damage to, or destruction of, customers’ property. These are on top of more generic business risks to your own business property, such as through fire or theft.
Try to work with an insurance agent who has previous experience writing policies for cleaning companies. You will want excellent general liability coverage in case of damage or destruction to your clients’ property—or injury to clients themselves. For property coverage, try to make sure that all property of importance to your business, such as supplies and equipment, is fully covered. You will also want proper vehicle insurance to cover you and your employees travelling between work locations. And, finally, depending on local regulations and standards, you may want to investigate bonding for your business.
For more information, see Nolo's article on Obtaining Business Insurance.
Employees
Most cleaning businesses have employees and, in many cases, there can be relatively frequent turnover. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
Keep in mind that there are some employment laws that may be particularly relevant to cleaning businesses, such as those related to minimum hourly wages, child labor, and required documentation of eligibility to work.
Also, if you are thinking of treating some people who do the actual cleaning work as independent contractors, proceed with extreme caution. The IRS has very particular rules about who can be classified as an independent contractor, and individuals obtaining cleaning jobs through your cleaning business may, at the very least, fall into a grey area. One specific document worth reviewing is IRS Form SS-8 (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding), which lays out the many potential criteria used by the IRS to determine worker status; it is available at irs.gov.
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website.
]]>While you could operate your restaurant as a sole proprietorship or partnership, you should probably consider using a legal form that protects you from personal liability, such as a corporation or a limited liability company. Unlike some other types of business, such as certain professional or consulting offices, restaurants have a significant number of customers coming through every day, and in many cases also a significant number of employees engaged in a lot of physical activity. This increases the likelihood that a person could be injured, or his or her property damaged, on the premises—in which case you would want the business, not you personally, to be responsible for any liability.
Learn more about choosing a type business structure.
You will need to obtain a variety of licenses and permits in order to operate your restaurant. In some cases, such as obtaining a permit for handling food, you most likely will need to look to a local government office. In other cases, such as obtaining a liquor license, you will probably need to work with a state agency such as a liquor control commission. And, if you are thinking of serving liquor in your restaurant, keep in mind that the liquor licensing process can be complicated and may require outside legal assistance.
If your restaurant will be serving large numbers of people you may have crowd control issues and, therefore, need to obtain a license or permit from a fire or police department. Similarly, you probably will also need a permit or license from a local building department relating to adequacy of exits from the restaurant and related emergency issues.
Because restaurants are all about people eating food, they are subject to significant regulations regarding food health and safety. Beyond needing to obtain a permit to handle and prepare food, you can expect regular monitoring from your local health department. Local health authorities generally have a lot of latitude regarding what they can inspect, and health department inspections can cover a wide array of items in your restaurant. Inspections may cover not only the food itself, raw and prepared, but also refrigeration systems, cooking equipment, and waste disposal, among other areas.
The health and safety of restaurant workers is also an issue. The Occupational Safety & Health Administration (OSHA) has a variety of regulations relating to, among other things, eye and face protection, hand protection, and walking-working surfaces.
There are particular risks associated with operating a restaurant, such as customers or employees slipping and falling on the premises, someone getting hurt from hot liquid or broken glass, or someone becoming seriously ill from the food itself. These are on top of more generic business risks such as fire, theft, or other sources of property damage or personal injury.
Try to work with an insurance agent who has previous experience writing policies for restaurants. For property coverage, try to make sure that everything of importance, from plates to stoves, is fully covered. For injuries to people, make sure you have an excellent general liability policy. This should cover not only a patron who slips at your restaurant’s front door, but also one who becomes gravely ill from eating the restaurant’s food. And, if you do outside catering, make sure you have proper vehicle insurance, as well.
For more information, see Nolo's article on Obtaining Business Insurance.
If you’re thinking of opening a restaurant that is part of a franchise, keep in mind that you will have to operate under far more restrictions than if you opened your own independent restaurant. You will be subject to a franchise contract which you should expect to favor the franchisor, and which likely will give the franchisor rights to:
Along with the restrictions contained in the franchise contract, you should keep in mind the additional financial costs of a franchise. In exchange for being given a preexisting business plan, getting certain help as needed when running the restaurant, and benefitting from group marketing, you will be required to pay out a substantial amount of your profit to the franchisor. More specifically, apart from a large initial franchise fee, expect to be required to pay the franchisor:
If you are considering starting a restaurant as part of a franchise, investigate the franchise as thoroughly as you can, including reviewing closely the federally-required franchise disclosure statement.
To learn more, see Nolo's article, Want to Buy a Franchise? Ten Reasons Not to Do It.
Most restaurants have employees and, in many cases, there can be relatively frequent turnover, particularly among waitstaff, bussers, and similar positions. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
Keep in mind that there are some employment laws that are specifically relevant to restaurants, such as minimum wages for tipped employees.
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website.
]]>Here are some major concerns you must address before changing your wine-loving hobby into a wine-making business.
Home wine-making for personal consumption is legal in all fifty states since July 1, 2013 and has been allowed under federal tax laws since 1979. On a federal level, adults may make wine for personal consumption without a license or tax payments under the Internal Revenue Code. Home vintners may produce up to 100 gallons per year in one adult households and up to 200 gallons per year for homes with two or more adults. The U.S. Department of the Treasury’s Alcohol and Tobacco Tax and Trade Bureau (TTB) provides a helpful conversion chart that translates gallons into different bottle sizes.
Federal rules allow homemade wines to be transported outside of the home for wine tastings, demonstrations, contests, and organized meetings. Be mindful that if you wish to offer your wine for commercial purposes, a host of federal, state, and local rules will kick in, such as federal and state taxes, licensing requirements, bonding mandates, labelling approvals, and grape designations.
Determining the nature of your winemaking business is essential before starting operations. The TTB has federal authority over bonded wineries, bonded wine cellars, alternating proprietors, and custom crush clients. A bonded winery is a facility that produces and sells wines while bonded wine cellars do not make wine but are warehouse facilities that store, blend, and bottle wines. Other wine entrepreneurs, known as alternating proprietors, prefer to make wines for sale by sharing an existing bonded winery’s facility. Some wine wholesalers provide the grapes and other raw materials to bonded wineries which produce wines for these custom crush clients. Bonded wineries that make wines for sale for custom crush clients are referred to as custom crush wineries. The nature of your participation in the wine industry will determine what applications, forms, laws, and regulations apply to your activities.
Before starting operations, the TTB requires impacted wine businesses to submit various applications with supportive documentation under the terms of the Internal Revenue Service Code and the Federal Alcohol Administration Act (FAA Act). In general, bonded wineries and bonded wine cellars must complete an Application to Establish and Operate Wine Premises. Bonded wineries, bonded wine cellars planning to blend wines, and custom crush wholesalers must also also submit an Application for Basic Permit under the FAA Act.
Your wine business can begin the application process online using the TTB’s Permits Online system. The TTB application process seeks information about your business structure, signatory authority, wine-making premises, wine-making activities, trade name, grape designations, labelling approvals, and any alternating proprietor agreements. As part of the application process, you must provide a Wine Bond to underwrite your payment of federal taxes on your planned wine sales. Your application may also need to include environmental and water quality information to show compliance with applicable laws.
After filing your application, your submission and supporting documentation are entered into the TTB’s tracking system. A TTB Wine Applications Unit Specialist will review your application and will call you about your application and to obtain any further information needed to complete your application. Subsequently, the TTB’s Trade Investigations Division (TID) may undertake an on-site inspection of your wine operations. If appropriate, the TTB will then approve your application to start your wine business. Due to the complexity of this process, you might want to initially work through an approved bonded winery or bonded wine cellar until you are ready to seek approval for your own wine-making business.
Bonded wineries and bonded wine cellars that make beverages for human consumption must register as a food facility with the FDA. This federal registration scheme is intended to provide avenues for food facilities, such as wineries, to alert the FDA to cases of adulterated products or food-borne illnesses. This reporting mechanism aids the FDA in warning the public and impacted businesses about these food security concerns. Your wine-making operation can register online for free. The FDA’s What You Need to Know about Registration of Food Facilities: Small Entity Compliance Guide helps your wine-making enterprise to better understand this registration process.
State laws and regulations may further limit wine-making for both personal consumption and commercial purposes. For example, state laws may determine if your homemade wine may be shared with your house guests, transferred to other locations, or provided in public tastings, exhibits, and competitions. Alternatively, your wine business may operate a home winemakers’ center which provides facilities, material, and advice to the public on wine-making or may make and sell wine-making kits to those wishing to make homemade wine for personal consumption. Although the TTB does not regulate these businesses, they may be subject to state, county, and local laws. Even wine businesses approved by TTB must further comply with relevant laws and licensing requirements. Your wine business may need a general business license to operate locally along with beverage distribution and premises licenses. State laws on cleanliness, health and safety, zoning, and environmental rules may also impact your new wine-making business.
For further assistance on converting your home wine-making into a commercial enterprise, check out the TTB’s Frequently Asked Questions-Wine or the National Association of American Wineries for legal, policy, and market news on the wine-making industry.
]]>Keep in mind that the term “consulting business” can cover a broad range of activities. Some consultants primarily work in their own offices; others work at other people’s businesses or at indoor or outdoor job sites. Moreover, some consultants are, in one or another legal sense, “professionals;” for example, they may be licensed by the state. In reading through the rest of this article, you should make allowances for your particular kind of consulting.
To learn about other California business opportunities, see Nolo's section on Starting a Business in California.
Depending on the details of your particular consulting business, you might well be able to operate as a sole proprietorship or partnership. However, you should at least consider using a legal form that protects you from personal liability. In this regard, if you are a member of a recognized profession, you not only have more common options, such as a limited liability company or corporation, but also additional options, such as a professional corporation or professional limited liability company.
In many cases, consulting work may not seem particularly dangerous, and situations involving personal liability may seem unlikely. However, if at any point you are responsible for the handling of valuable information, physical property, or perhaps even individual people, you could be at risk of something being damaged or lost, or someone being injured. This might occur at your own business location or it might occur elsewhere—but, in any case, you would want the business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
Even if you operate as a sole proprietor, you should consider obtaining a federal tax ID number, known formally as an Employer Identification Number (EIN); for other forms of business, an EIN is a requirement. The process is easy and can be completed online at the IRS website.
Even the most limited consulting business may need a license from a state or local government office. This may be something as simple as a doing-business-as (DBA) certificate, or it may be something more significant. California’s CalGOLD website can help you find license information for your particular kind of consulting—it covers nearly 150 specific types of business, including many categories relevant to various types of consulting.
In addition, there are various occupations and professions for which California requires state licensing, certification, or registration. These include not only traditional professions such as physicians, lawyers, dentists, and accountants, but also occupations such as barbers, cosmetologists, real estate agents and brokers, and insurance agents and brokers. Further information is available in the licenses section of the CA.gov website.
If you will be selling goods as part of your consulting business, California also requires you to obtain a seller’s permit through the state’s Board of Equalization.
Finally, even if your consulting business is “low-key” or office-oriented, keep in mind that there may be local zoning laws that would prohibit your business in certain locations. This generally is more likely to be an issue if you are thinking of operating the business out of your home and you live in a clearly residential, as opposed to commercial, area. Even if the business is permissible under the local zoning ordinance, you may be required to obtain a compliance certificate from the local zoning authority. In short, your best bet is to investigate zoning regulations before you open for business.
For office-based consultants, health and safety is not likely to be a primary concern. However, if you will be working “in the field” in situations that are potentially dangerous, such as construction sites; or if you are otherwise working with hazardous materials, you should investigate federal Occupational Safety & Health Administration (OSHA) and Environmental Protection Agency (EPA) regulations, as well as California’s own health and safety code and environmental protection regulations.
Your tax situation will vary depending on the legal form of your business (corporation, professional limited liability company, partnership). Even with a sole proprietorship, you need to attach a separate schedule (Schedule C) to your personal income tax return. In more complicated arrangements, such as an S Corporation or a multimember LLC, you will generally have to work with entirely different tax forms. If you previously are used to working as an employee, this added level of complexity can be confusing, at least at first; in which case, the services of a good accountant may be a worthwhile investment.
Consultants are typically self-employed. If you are transitioning from an employed position, keep in mind that you will be working with a new tax form, IRS Form 1099-MISC. This form will be provided to you at the end of the year by those clients who are paying you for your services. While there can be some exceptions depending on the legal form of your business, you should also be aware that generally, as a self-employed individual, you personally will be subject to the federal self-employment tax. With this additional tax obligation comes the requirement that you make quarterly estimated tax payments. Information and instructions regarding these payments is available on IRS Form 1040-ES.
One other matter that is often grouped with tax issues is your status as an independent contractor. The very term “consultant” may seem to imply that you are self-employed rather than an employee. However, it can be useful to review the IRS guidelines regarding independent contractors, such as those contained as part of IRS Form SS-8, as well as California’s state guidelines and information, many of which are available on webpages of the Department of Industrial Relations and the California Tax Service Center.
Finally, if you run your consulting business out of your home, you may be able to claim a deduction for business use of your home. Details about how to figure the deduction can be found in IRS Publication 587.
Appropriate insurance for a consulting business will vary depending on the business’s details. Even if you will work mainly out of your own office, you will at least want adequate premises liability insurance, just in case a client or other business-related visitor slips and falls or is otherwise injured at your business location. You will also want adequate property coverage for your physical business equipment; insurance for loss of your own business data is also worth considering. And, depending on your area of expertise, you should also seriously consider – or may even be required to have – professional liability insurance.
If you will work in situations that are more clearly physically dangerous, you should also look more closely at insurance that covers personal injury – both to yourself, and, as necessary, to others. Similarly, if you will be driving between various job sites, you should make sure you have appropriate vehicle insurance.
You may well find that, to get the best information and best coverage, you will need to work with several different insurance agents with different areas of expertise. Try to find agents who have previous experience writing policies in the areas relevant to your business. For example, if you will be consulting on hazardous chemicals, try to find an agent who knows something about coverage for hazardous substances.
For more information, see Nolo's article on Obtaining Business Insurance.
By its very nature, “consulting” is frequently a very flexible business, and different clients may want at least somewhat different services from you; in turn, you may very well be interested in accommodating the varying needs of these different clients. While you do not want to unduly limit what you can offer to potential clients, it still may be in your own interest to formulate and provide in advance—and in writing—at least general policies regarding how you work. If you have a website, you should consider posting your policies there. Regardless of whether you have a website, you may want to create a printed document containing general policy information that you give to each of your clients before you reach any agreements and begin work.
General policy elements could vary widely depending on what kind of consulting you are involved in. They might include billing issues (whether you bill by the job or by the hour; any minimum charges or minimum hourly billing increments; how you charge for travel time; whether you bill bi-weekly, monthly, or only at the end of a project), how you deal with payments (do you take retainers; do you expect monthly or other periodic payments), and who pays for certain expenses (such as special equipment, airfare, or hotels).
At least as important as general policies, however, are the specific agreements you reach with each individual client. Ideally, these will take the form of contracts for service and will spell out in detail a range of matters, including those already mentioned (billing, payments, expenses) as well as the details of the work you are expected to perform.
Keep in mind that, under basic contract law, in order for a contract for services to be legally binding, (a) you and your client must agree on what the contract is for (there must be a “meeting of the minds”) and (b) there must be an exchange of value (also known as “consideration”—in the case of a consulting business, usually the exchange of your services for money from your client). If the services involved will be completed in less than a year the contract need not be in writing; however, most consultants would not take the risk of providing services without first getting a written, signed agreement. In fact, you should consider drafting—or having a lawyer draft—a standard contract that you can modify for individual clients.
There may be more specific state laws regarding contracts in your particular area of business; if so, they would appear in California’s business statutes, which are available online.
To learn more about policy statements, business contracts, and related matters, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo).
To the extent you will have employees, you should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website. Finally, some guidance on California-specific labor and employment laws may be found on the website for the state’s Department of Industrial Relations (DIA).
]]>Choosing the Business Entity
With a dog walking business, it may be possible to operate as a sole proprietor or, if more than one person is involved, as a partnership. However, walking dogs for money is not without some risks. If Mr. Fielders’s beagle Barney is injured or killed while in your care, you would want the business, not you personally, to be responsible for any liability.
Therefore, you should consider using a legal form for your business that provides you with some protection — such as a limited liability company or corporation. As part of your considerations, keep in mind that business entities that provide more protection from liability also require more time and expense to create and maintain. For example, if you want to set up your business as a Texas limited liability company (“LLC”), you will need to file a certificate of formation with, and pay a fee to, the secretary of state’s office. There are also additional taxes and reporting requirements involved. In short, you will need to weigh the added time and expense against the risk to you personally if a dog is hurt while in your care.
Get more information from Nolo about choosing a business structure and Texas LLCs.
Licenses, Permits, and Zoning
Obtaining a federal tax ID number, known formally as an Employer Identification Number (EIN), is often a good idea even if you are a sole proprietor. The process is easy and can be completed online at the IRS website. While you should check with your local government to see if you need to obtain a general business permit, most Texas cities do not require any special license or permit to walk dogs.
If you plan not only to walk your clients’ dogs but also to keep them at your home, you should also check your local zoning laws—and, if you rent, your lease. While it’s usually permissible for homeowners to have dogs as pets, there may be issues if you are keeping large numbers of dogs in conjunction with a business. Similarly, while rental agreements often specifically allow or prohibit pets, you should consider whether your landlord or management company is likely to allow you to keep other people’s dogs in your rented space. Also keep in mind that keeping other people’s dogs for an extended period in exchange for payment constitutes a different type of business than dog walking, and likely will require additional licenses or permits.
Health and Safety
Walking Rex generally involves Rex stopping to relieve himself. Many local governments have specific rules requiring that people clean up after their dogs. For example, the Dallas City Code states that it is an offense to allow a dog to defecate on private property or on property in a public place, and suggests that a person can avoid a violation by immediately removing the feces.
Similarly, many local governments have ordinances requiring all dogs in public places be leashed. In Dallas, unleashed dogs can be impounded. The City of Austin also has a leash law, but there are certain parks and other public areas where leashes are not required.
Because your business will be based on dog walking, you should learn the details of the pet laws in your area and make sure that you comply with them: You don’t want city or county fines cutting into your profits.
Advertising
While word-of-mouth is often the best way to get new customers, with a new dog walking business you will probably need to do at least some advertising. Regardless of how you choose to advertise (your own website, posting flyers in public spaces, Craigslist, the phone book), the best brief pieces of advice are (a) be accurate, and (b) be very careful about describing special discounts or saying that something is “free.” If you offer the first walk for free, but there are conditions—perhaps that the customer must commit in advance to a minimum of five walks—you must state what those conditions are. If you offer a ten-walk discount, the discounted price must really be cheaper than your normal per-walk price.
Policy Statements and Contracts
Different customers may have different ideas about exactly what services you will provide. It is in your own interest to make clear in advance—in writing—what you will and won’t do. If you have a website, post your policies there. Regardless of whether you have a website, you should provide a printed document containing the policy information to your clients before you reach an agreement and begin walking their dogs.
For example, you should indicate such things as:
Keep in mind that in order for a contract for services to be legally binding, (a) you and your client must agree on what the contract is for (there must be a “meeting of the minds”), and (b) there must be an exchange of value (also known as “consideration”—in the case of a dog walking business, usually the exchange of dog walking services for money). If the services involved will be completed in less than a year, the contract need not be in writing; however, a written contract is always safer.
To learn more about policy statements, business contracts, and related matters, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo)
Insurance
A dog walking business presents special risks because you are dealing with live animals and engaged in physical activity. Dogs may be injured or even killed, and you, too, or someone else could be injured. Insurance does exist specifically for businesses that deal with caring for pets. One way or another, you will want to obtain coverage in case of injury to your customers’ dogs or damage to other people’s person or property. Depending on the size and other details of your business, you may also need to investigate coverage for business property. And, if you will be using a car in conjunction with the business, make sure you have proper vehicle insurance, as well.
Additional general information on insurance is available in Nolo's article on Obtaining Business Insurance. Specific information on pet sitter insurance is available at petsits.com.
]]>Choosing the Business Entity
For a dog walking business, it may be possible to operate as a sole proprietor or, if more than one person is involved, as a partnership. However, like just about any business, large or small, walking dogs is not risk-free. If Ms. Tottenham’s blonde Labrador Charlie is injured or killed while in your care or injures someone else, you would want the business, not you personally, to be responsible for any liability.
Therefore, you should consider using a legal form for your business that provides you with some protection — such as a limited liability company or corporation. As part of your consideration, keep in mind that business entities that provide more protection from liability also require more time and expense to create and maintain. For example, if you want to set up your business as a New York limited liability company (“LLC”), you will need to file Articles of Organization with, and pay a fee to, the New York Secretary of State’s Office; you will also need to work with special LLC tax forms each year. In short, you will need to weigh the added time and expense against the risk to you personally if a dog is hurt or damages someone’s property while in your care.
Get more information from Nolo about choosing a business structure and New York LLCs.
Licenses, Permits, and Zoning
Obtaining a federal tax ID number, known formally as an Employer Identification Number (EIN), is often a good idea even if you are a sole proprietor. The process is easy and can be completed online at the IRS website at www.irs.gov. While you should check with your local government to see if you need to obtain a general business permit, most New York cities do not require any special license or permit to walk dogs.
If you plan not only to walk your clients’ dogs but also to keep them at your home, you should also check your local zoning laws—and, if you rent, your lease. While it’s usually permissible for homeowners to have dogs as pets, there may be issues if you are keeping large numbers of dogs in conjunction with a business. Similarly, while rental agreements often specifically allow or prohibit pets, you should consider whether your landlord or management company is likely to allow you to keep other people’s dogs in your rented space. Also keep in mind that keeping other people’s dogs for an extended period in exchange for payment constitutes a different type of business than dog walking, and likely will require additional licenses or permits.
Health and Safety
Walking Fifi generally involves Fifi stopping to relieve herself. Many local governments have specific rules requiring that people clean up after their dogs. As examples, Syracuse’s municipal code states that a dog is not allowed to defecate on property other than that of the dog’s owner, and the municipal code for White Plains states that a person caring for a dog must remove any feces from sidewalks and other public areas. New York City has various rules related to this issue, including one requiring that people clean up after dogs they are caring for while in City parks.
Similarly, many local governments have ordinances requiring all dogs in public places be leashed. Note, however, that New York City has approximately 40 city parks where dogs can be off-leash before 9 a.m. and after 9 p.m.
Because your business will be based on dog walking, you should learn the details of the pet laws in your area and make sure that you comply with them: You don’t want city or county fines cutting into your profits.
Advertising
While word-of-mouth is often the best way to get new customers, with a new dog walking business you will probably need to do at least some advertising. Regardless of how you choose to advertise (your own website, posting flyers in public spaces, Craigslist, the phone book), the best brief pieces of advice are (a) be accurate and (b) be very careful about describing special discounts or saying that something is “free.” If you offer the first walk for free, but there are conditions—perhaps that the customer must commit in advance to a minimum of five walks—you must state what those conditions are. If you offer a ten-walk discount, the discounted price must really be cheaper than your normal per-walk price.
Policy Statements and Contracts
Different customers may have different ideas about exactly what services you will provide. It is in your own interest to make clear in advance—in writing—what you will and won’t do. If you have a website, post your policies there. Regardless of whether you have a website, you should provide a printed document containing the policy information to your clients before you reach an agreement and begin walking their dogs.
For example, you should indicate such things as:
Keep in mind that in order for a contract for services to be legally binding, (a) you and your client must agree on what the contract is for (there must be a “meeting of the minds”) and (b) there must be an exchange of value (also known as “consideration”—in the case of a cleaning business, usually the exchange of cleaning services for money). If the services involved will be completed in less than a year the contract need not be in writing; however, a written contract is always safer. You should consider drafting—or having a lawyer draft—a standard contract that you can modify for individual clients.
To learn more about policy statements, business contracts, and related matters, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo)
Insurance
A dog walking business presents special risks because you are dealing with live animals and engaged in physical activity. Dogs may be injured or even killed, and you, too, or someone else could be injured. Insurance does exist specifically for businesses that deal with caring for pets. One way or another, you will want to obtain coverage in case of injury to your customers’ dogs or damage to other people or their property. Depending on the size and other details of your business, you may also need to investigate coverage for business property. And, if you will be using a car in conjunction with the business, make sure you have proper vehicle insurance, as well.
Additional general information on insurance is available in Nolo's article on Obtaining Business Insurance. Specific information on pet sitter insurance is available at petsits.com.
]]>Choosing the Business Entity
While you could operate your cleaning business as a sole proprietorship or partnership, you should consider using a legal form that protects you from personal liability, such as a corporation or a limited liability company. Unlike many other types of businesses, such as certain professional or consulting businesses, your cleaning business will operate in other people’s offices or homes, and you likely will have employees engaged in a significant amount of physical activity. These facts increase the likelihood that an employee or other person could be injured, or that a customer’s property could be damaged by you or one of your workers—in which case you would want the business, not you personally, to be responsible for any liability.
Learn more about choosing a business structure.
Licenses and Permits
Even if you operate as a sole proprietor, you should consider obtaining a federal tax ID number, known formally as an Employer Identification Number (EIN). The process is easy and can be completed online at irs.gov. You should also check with your local government office to see if you need to obtain a business permit.
New York’s Online Permit Assistance and Licensing (OPAL) website can generate license and permit information for any of nearly 450 types of business, including “Cleaning Service (Residential/Commercial).” After you answer a few questions about the details of your cleaning business, such as how many people you expect to employ and the legal form of your business (e.g., sole proprietorship, limited partnership, corporation), it will provide you with useful information and links.
Additional information related to starting a small business in New York is available through the Small Business Division of the Empire State Development website.
Health and Safety
Cleaning offices or homes may not be the most dangerous activity, but the people doing the cleaning may be working with cleaning supplies that are somewhat toxic, and when people are moving around a home or office accidents can happen. The federal Occupational Safety & Health Administration (OSHA) has a variety of regulations relating to, among other things, eye and face protection, hand and foot protection, toxic and hazardous substances, and ventilation. For more details on federal safety and health rules, check the cleaning industry section of the OSHA website.
Additional information regarding worker health and safety is available through New York’s Division of Safety and Health (DOSH), which operates within the State’s Department of Labor.
Advertising
While word-of-mouth is often the best way to get new customers, with a new cleaning business you will probably need to do at least some advertising. Regardless of how you choose to advertise (your own website, posting flyers in public spaces, Craigslist, the phone book), the best brief pieces of advice are (a) be accurate and (b) be very careful about describing special discounts or saying that something is “free.” If you offer something for free, but there are conditions, you must state what those conditions are; if you offer something at a discount, it must really be cheaper than your normal price.
Policy Statements and Contracts
Different customers may have different ideas about exactly what services your cleaning business will provide. It is in your own interest to make clear in advance—in writing—what you will and won’t do for your clients. If you have a website, you should post your policies there. Regardless of whether you have a website, you should provide a printed document containing the policy information to all of your clients before you reach an agreement and begin work.
For example, if you clean homes, you should indicate such things as:
Many of these same types of rules would also apply to cleaning offices and other commercial areas. Beyond a general set of rules, it is useful to work with each particular client to create a written plan for the specific services to be provided.
In order for a contract for services to be legally binding, (a) you and your client must agree on what the contract is for (there must be a “meeting of the minds”) and (b) there must be an exchange of value (also known as “consideration”—in the case of a cleaning business, usually the exchange of cleaning services for money). If the services involved will be completed in less than a year the contract need not be in writing; however, a written contract is always safer. You should consider drafting—or having a lawyer draft—a standard contract that you can modify for individual clients.
To learn more about policy statements, business contracts, and related matters, see Legal Guide for Starting & Running a Small Business, by Fred Steingold (Nolo)
Insurance
There are particular risks associated with running a cleaning business, such as employees slipping and falling on the job, and inadvertent damage to, or destruction of, customers’ property. These are on top of more generic business risks to your own business property, such as through fire or theft.
Try to work with an insurance agent who has previous experience writing policies for cleaning companies. You will want excellent general liability coverage in case of damage or destruction to your clients’ property—or injury to clients themselves. For property coverage, try to make sure that all property of importance to your business, such as supplies and equipment, is fully covered. You will also want proper vehicle insurance to cover you and your employees travelling between work locations. And, finally, depending on local regulations and standards, you may want to investigate bonding for your business.
For more information, see Nolo's article on Obtaining Business Insurance.
Employees
Most cleaning businesses have employees and, in many cases, there can be relatively frequent turnover. You should inform yourself about basic employment law issues such as illegal discrimination, workers compensation, and how to handle the hiring process. With regard to hiring in particular, learn how to:
Keep in mind that there are some employment laws that may be particularly relevant to cleaning businesses, such as those related to minimum hourly wages, child labor, and required documentation of eligibility to work.
Also, if you are thinking of treating some people who do the actual cleaning work as independent contractors, proceed with extreme caution. The IRS has very particular rules about who can be classified as an independent contractor, and individuals obtaining cleaning jobs through your cleaning business may, at the very least, fall into a grey area. One specific document worth reviewing is IRS Form SS-8 (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding), which lays out the many potential criteria used by the IRS to determine worker status; it is available at irs.gov.
The State of New York also has its own rules and guidelines regarding independent contractors; information is available through the Department of Labor website’s section on unemployment insurance.
A good resource for general employment issues is The Employer’s Legal Handbook, by Fred Steingold (Nolo). Also, many key employment laws are administered through the Department of Labor, and there are a variety of informative webpages within the Department of Labor website.
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