Starting a Small Business in Los Angeles (Updated In 2023)

So you have a great idea for a business in Los Angeles…

You’re excited to get the ball rolling. But you don’t know where to start.

You start asking around how you take the first steps.

If you find yourself on this page, that means you have already taken the first step toward starting your business in Los Angeles.

If you have any questions about starting your business in Los Angeles email me at sam@mollaeilaw.com

 

On this page, I will layout the 8 easy steps to starting a small business in Los Angeles:

1. Choose the Correct Business Type
2. Have a Business Lawyer Register with the Secretary of State
3. Draft Operating Agreement (for LLC) or Bylaws (for Corporation)
4. File a Fictitious Business Name Los Angeles
5. Apply for Los Angeles Business License
6. Apply for Los Angeles Business Tax
7. Apply for an EIN
8. Contact Business Lawyer If You Have Any Questions

Step 1: Choose the Correct Business Type

The first step in starting your business in Los Angeles in choosing the right business type.

There are a number of different business types and many factors to consider when determining the right business structure.

By choosing the right business type, you can reduce your personal liability protection and reduce your taxes.

As your business lawyer, I can assist you to choose the right business type by raising all of the necessary factors and I can also relieve you of the work of drafting and filing the proper forms with state authorities.

 

There are generally 4 main business types to choose from:

 

Sole Proprietorship

Sole Proprietorship is the simplest business structure to implement but also offers no personal liability protection. So if your business is sued, your personal assets also may be in jeopardy.

Filing requirements are minimal, and you simply report your business’s earnings on your personal taxes. No other state or federal business filings are required.

 

Partnership

The partnership is created automatically when two or more persons engage in a business enterprise for profit. By default, a business that begins with a verbal agreement or handshake is considered a general partnership.

All partners share in both the day-to-day management and business profits. However, I highly advise using a written partnership agreement to form a partnership.

A formal, written partnership agreement that lays out all of the partners’ rights and responsibilities is highly recommended as oral partnership agreements are easy ways to set yourself for disputes in the future.

I highly recommend having a Partnership Agreement in writing before you start a Partnership.

In the partnership agreement, the partners can dictate both the terms of how a partnership is managed and how profits and losses are allocated and distributed.

 

Limited Liability Company (LLC) (Most Recommended)

LLC offers liability protection of your personal assets by establishing your business as a separate legal entity — meaning members are not personally responsible for business debts and liabilities.

In other words, if someone sues your business or if your business is liable to debtors, then your personal possessions, such as car or home, can’t be touched by creditors.

So the members of an LLC have no personal liability for the obligations of the LLC.

Also, unlike corporations, LLCs enjoy pass-through taxation — meaning all the profits and losses are “passed through” the business to each member of the LLC.

Members report their share of the LLC’s profits and losses on their individual tax returns, and any tax due is paid at the individual level.

 

S-Corporation (Also Recommended, Most Tax-Friendly)

S-Corporation is a special type of corporation created through an IRS tax election.

An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation.

What makes the S Corporation different from a traditional corporation (C Corporation) is that profits and losses can pass through to your personal tax return. Consequently, the business is not taxed itself.

Only the shareholders are taxed. To be considered an S-Corporation, you must first form a business as a corporation in the state where it is headquartered. S Corporation limits the financial liability for which the owner is responsible.

And unlike LLCs, C-Corporations pays taxes on any profits from the corporate level, and from an individual level.

What if you can’t decide on which business structure is right for you?

Typically, LLC or S-Corporation is the best business type for most small businesses.

And if you have a partnership with someone, you should have a written Partnership Agreement in writing.

As a business lawyer, I can help you choose the right business type and register, organize, and draft the proper business type with state and local authorities.

Questions? Email me at sam@mollaeilaw.com

 

Step 2: Have a Business Lawyer Register Your Business With the Secretary of State

Once you decide the right business type for business, most typically an LLC or S-Corporation, then you should decide in which state you should register your business.

Unless you have a compelling reason otherwise, it’s generally best for you to incorporate in the state in which you will principally be doing business.

Consult with me if you have any questions about which state you should form your business in.

After you have decided which state you will be forming your LLC or S-Corporation, you will need a Registered Agent in that state.

Registered Agent is an individual or organization who resides in your state of formation who accepts important legal documents on behalf of your company.

Once you have a Registered Agent in your desired state, you will need to hire a business lawyer to form your LLC or S-Corporation.

 

Step 3: Draft an Operating Agreement (for LLC) or Bylaws (for Corporation)

Operating Agreement is an agreement among LLC members governing the LLC’s business, and member’s financial and managerial rights and duties. Think of this as a contract that governs the rules for the people who own the LLC.

Bylaws is necessary for Corporations which is a corporate document that set out the basic rules for operating your corporation.

While you can find templates of Operating Agreements online, these templates do not reflect any specific agreements that you have with your partners and may often be missing sections that will act as great protection for your long term.

Most template Operating Agreements are really not comprehensive. If you have partners, you want something that is customized to your business and your needs because this document can be very crucial in case one of the partners wants to sell his or her shares or dies. This document will also come in handy if you have disputes with your partners.

If you’re starting a business, I draft Operating Agreements and make sure that they are customized to exactly what you need and I also ensure that you understand this agreement.

Email me at sam@mollaeilaw.com to have me draft your Operating Agreement for your LLC or Bylaw for your Corporation.

 

Step 4: File a Fictitious Business Name (DBA) Los Angeles

You may also need to file a Fictitious Business Name (also known as DBA or Doing Business As).

What you need to do is visit the Los Angeles County Registrar-Recorder website which you can find here and click on “Online Business Filing & Registration System.” On this page, choose that you will be filing “In-Person.”

Through a series of steps, you will be choosing your business name and making sure that your company name is available. Note that if you are incorporating in California, you do not have to include the suffix Corporation, Corp., or Incorporated after your business name.

Once the online application for a Fictitious Business Name is completed and submitted online, you will be issued a confirmation number to take to any Los Angeles County Registrar-Recorder County Clerk’s Office to pay $26 dollars and complete the business filing process.

The following office locations are available for you to submit and pay for your Fictitious Business Name registration:

• Van Nuys Office – 14340 W. Sylvan Street, 1st Floor Van Nuys, CA 91401
• LAX (West Los Angeles) Office – 11701 S. La Cienega Blvd, 6th Floor, Los Angeles, CA 90045

After you make your payment for the application of a Fictitious Business Name, you will be required to publish a copy of the statement of your new business in a newspaper of general circulation in the county in which the principal place of business is located within 30 days. Most Registrar offices will have representatives who can help you with this process for approximately $40 dollars.

If you have questions concerning the filing of a Fictitious Business Name, please call the County of Los Angeles Registrar-Recorder County Clerk Business Filing & Registration Office at (562) 462-2177.

 

Step 5: Apply for Los Angeles Business License

The fifth thing you need to do to start a business in Los Angeles is to apply for a Los Angeles Business License.

For example, if you are conducting business in the city of San Fernando, you need to contact the City of San Fernando to obtain an application for Business License.

Please note that you need the following information to complete the application: business name & address, business telephone number, description of the business, the property owner’s name, address and telephone number, social Security Number, Federal Tax ID number, driver’s License, and Articles of Incorporation (if you are creating a corporation).

The Los Angeles County Business License program is regulation-based and requires licenses for those business activities that may impact the health, safety, and welfare of the public.

You can see a list of business activities that require a license.

If your business activity is listed on the list above, you must get a business license in Los Angeles before you can operate.

You must also verify the jurisdiction where your business is located. A County Business License is required only if your business is located in the County’s unincorporated area or in one of the following contracted cities: Malibu, Santa Clarita, and Westlake Village.

If you are unsure if your business is located in an area licensed by the County, you can check your business address on the Registrar-Recorder/County Clerk website for verification.

If you have any other questions, you can contact the Business License Office at (213) 974 – 2011, Monday through Friday 8:00 a.m. to 5:00 p.m.

More information regarding how to obtain a Business License in Los Angeles can be found on the City of Los Angeles’ Office of Finance website which you can find here: https://ttc.lacounty.gov/proptax/business_license.htm and https://latax.lacity.org/oofweb/eappreg/eappreg_criteria.cfm

 

Step 6: Apply for Los Angeles Business Tax

You should also apply for the Los Angeles Business Tax here.

Registration for Business Tax in Los Angeles is done online.

Through this on-line registration process, you will be asked to provide information about your business, including:

1. Social Security Number (if a business is a Sole Proprietorship) or Employment Identification Number (if a business is either Partnership, Corporation, Limited Liability Company or Trusts) (see below about how to apply for an EIN)
2. Description of your Business activities
3. Legal Business Name, including doing Business As (optional)
4. Business Start Date
5. Business Type (such as Sole Proprietorship, Partnership, Corporation, etc.)
6. Primary Business Address
7. Business Contact Information
8. Other information you may need to submit: Sales Tax Number and Business/Professional Activity Code

 

Step 7: Apply for an Employer Identification Number (EIN)

The seventh thing you need to do to start a business in Los Angeles is to apply an Employer Identification Number (EIN).

EIN is a number issued by the Internal Revenue Service (IRS) to identify a business.

Think of an EIN as the social security number for your business. Just as a social security number is important for U.S. citizens to have, an EIN is necessary for a business to lawfully conduct business in the United States.

You can use your EIN to open up a U.S. bank account, start a business, and apply for permits and licenses.

If you have a U.S. Social Security Number (SSN), you may apply for your EIN for free here.

However, if you need an EIN but do NOT have a U.S. Social Security Number, feel free to contact me at sam@mollaeilaw.com and I can help you get your EIN.

See here about how to apply for EIN without SSN.

 

Step 8: Other Requirements

If you’re looking to get a loan to buy a business, a Rollover for Business Startups (ROBS) is perhaps the best-kept secret in business acquisition financing. A ROBS lets you use retirement savings (from a 401k or IRA) without facing early withdrawal penalties or taxes. You can use the funds for an SBA loan down payment, in conjunction with seller financing, or to cover 100% of your purchase.

 

Step 9: Contact Me If You Have Any Questions

If you have any questions about starting your business in Los Angeles, email me at sam@mollaeilaw.com and I will be more than happy to assist you.

Before lunching your company, I can provide you with the legal advice needed to make the right decision.

Email me at sam@mollaeilaw.com to get started.