Once you have selected a type of business entity and original name for your new company, it’s time to formally create the enterprise and ensure it is properly licensed. The first step to accomplish this goal is drafting your business’ governing documents.
Prepare and File the Right Documents
The documents to prepare and file depend on the business entity you chose for your family business.
Corporation
If your business is a corporation, you will prepare and file articles of incorporation with the Secretary of State of the jurisdiction where you wish to organize, and prepare bylaws to govern the day-to-day operations of the company.
Limited Liability Company
If you select a limited liability company (LLC), you will follow a similar path by filing articles of organization and preparing an operating agreement to govern the operation of the company.
General Partnership
If you choose a general partnership, you may file a statement of partnership authority with the secretary of state, and prepare a partnership agreement.
Limited Partnership or Limited Liability Partnership
If you select a limited partnership or limited liability partnership, you will file a certificate of limited partnership or application to register a limited liability partnership, respectively, and prepare an appropriate partnership agreement.
Once these tasks are completed, you will be ready to formally register your new entity with the Secretary of State. Registering with the Secretary of State is a relatively straight forward process that can be completed on-line in many jurisdictions.
Designate a Registered Agent
When you register your business, your company must select a “registered agent,” which can be either an individual or entity. It’s the person legally authorized to accept legal process, government notices, and tax documents on behalf of the company, and is obligated to forward those documents to the company. While your registered agent can be a founder, director, or officer of the company, it’s quite common for companies to pay a registered agent service to fulfill the role for them. This provides both anonymity from prying eyes who search through companies’ public records, and continuity as those individuals involved in the operation of the company may change over time. It’s also possible, and quite common, for a company’s lawyer to serve as the registered agent because frequently the documents received require an attorneys’ immediate attention.
Request a Tax Identification Number
The next step in the process is to apply for your federal and state tax identification numbers. These are essentially the equivalent of a social security number for your company. The federal tax identification number is called an Employer Identification Number (abbreviated as FEIN or EIN), while the name of the state number varies by state (e.g., CA State Employer ID Number (EIN), WA Unified Business Identifier (UBI), OR Business Identification Number (BIN)). Most businesses can apply for these numbers on-line in almost every state of the union.
Obtain All Necessary Licenses and Permits
The penultimate task when opening a business is to obtain the requisite licenses and permits. There are many different licenses and permits that a business may need. Broadly, they can be broken down into two groups: (1) geographic licenses & permits and (2) industry licenses & permits. Geographic licenses and permits are those required to conduct business in a particular location (e.g., state, county, municipality). Industry licenses and permits are those required to conduct a specific type of business in state, county or municipality (e.g., agriculture, commercial fishing, winery, practicing medicine). It is important to stay up to date with these licenses and permits as they generally must be renewed every year. Moreover, if your company chooses to enter new geographic or economic markets, you may very well need to obtain the proper licensing before doing so.
Open a Company Bank Account
Lastly, your company must open a business bank account. It is very important that the company do so before starting operations because mingling company and personal assets can lead to the loss of legal protections against personal liability, which is one of the main reasons you created a business entity in the first place. If you have engaged qualified legal counsel, they will be familiar with this process and able to help you navigate through it. With the exception of a few tasks, they can even do it for you. With that in mind, if you are thinking of starting a family business, be sure to work with an experienced business lawyer and business accountant early and often.
Contact Finkel Law Group for Assistance With Your Family Business
Finkel Law Group, with offices in San Francisco and Oakland, has provided business counsel to many different types of business enterprises, including family businesses, in many different types of industries for more than 25 years. We have the knowledge and experience to help your company navigate the delicate legal and family issues associated with starting and growing a family owned business, and ensuring it succeeds from one generation to the next. When you need intelligent, insightful, conscientious and cost-effective legal counsel to assist you with managing and planning for the future of your business enterprise, please contact us at (415) 252-9600, (510) 344-6601, or info@finkellawgroup.com to speak with one of our attorneys about your matter.