California is a popular state to do business in, but it has many regulations you need to follow carefully. Otherwise, you could face some serious legal problems.
Keep reading if you want to verify your business following the necessary legal parameters. Below you’ll discover some of these requirements and how they work.
4 Legal Parameters for California Companies
If you need to take out a business loan, you’ll want to carefully examine the state’s interest rate law. As of now, California requires no more than a 10% interest rate on consumer investments.
There are some exceptions to this. For example, you don't always need to pay this rate if you’re a lender, such as a bank. Also, if your loan is over $300,000, this usury law often doesn’t apply to you.
This legal parameter is designed to ensure that every business in an industry has a chance to succeed. In other words, if you’re in the construction industry, California antitrust laws work to make sure that you can compete alongside major corporations without them dominating the market.
If a business is taking advantage of this, lawsuits can be taken, especially if there were serious injuries or damages.
Many property managers require potential clients to provide a security deposit. This is done to protect them should you cause damage to the building or move on before paying the full fee.
There isn’t a cap on the security deposit fee so it could be anywhere from $100 to $5,000. This will depend on where you’re moving into and the owner’s requirements. However, in most cases, a security deposit will cover about six months’ worth of regular fees.
Businesses can receive this fee back 21 days after they properly end the lease. But, a property manager may deduct certain amounts from this for repairs. If this is done, they need to provide you with a written explanation for their actions.
California requires most of its companies to obtain at least workers’ compensation if they have employees. This provides monetary help to your employees should they be injured on the job. It also safeguards you from a major lawsuit.
While not always legally necessary, it’s also good to have insurance to cover you should something serious happen during business. If someone falls at your company’s headquarters or if one of your workers accidentally breaks a priceless piece of art, insurance will protect you from legal issues.
Getting insurance in California isn’t as daunting as it might seem. Often, you can get it within seconds if you apply online. If you’re not sure if you can afford it or what package is ideal, you can chat with a representative who will walk you through the best options and provide a quote. Some they might suggest include:
- General liability
- Professional liability
- Tools & equipment
- Commercial auto
Many times, certain clients won’t work with you if you don’t show proof of insurance. This could be a major setback that can lose you business. Because of this, it’s better to be prepared and have insurance on hand.
Other Important Legal Requirements
Besides the legal needs above, there are a few other aspects you’ll need to focus on.
Set Up a Business Bank Account
It’s usually recommended that you create a separate business bank account. While not always legally required (except in the case of an LLC), this can help you better sort your finances. It will also protect you from potential legal issues should there be questions about your finances.
Register Under a Legal Structure
You can’t just buy or rent a space and then open up a shop in California. You must always register your company under a specific legal structure. This won’t only financially benefit you but can stop your company from getting major financial and legal fees.
Some options you can choose from are:
The right one will depend on your business’s needs and what tax benefits you’re looking for. If you’re not sure, it would be wise to chat with a lawyer who can better guide you through the process.
Acquire the Necessary Permits
Another vital thing to confirm is that your business has all the needed permits and licenses. If you plan to sell products, California requires you to register with the Board of Equalization, which will supply you with a seller’s permit.
You’ll also need to obtain a general business license which is required for every company. This gives you legal confirmation that you can operate your company in the state.
Besides these, you might need to get a:
- Professional/occupational license
- Employer identification number (EIN)
- Building permit
- Health permit
- Proof of residency permit
California companies must follow many legal parameters if they want to continue doing business here. By keeping this information in mind, you can better prepare yourself for what’s required.
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