Legal Question in Business Law in California
What is the name of your state (only U.S. law)? California
I have a question about how to register my business. I'm strapped for cash and have minimal personal assets (less than 10k worth). I'm single & in my 20's so there are no other bank accounts tied to me - no children or wife involved. I'm starting a business for a workout plan which will be sold mostly online. Because there is a lot of running involved, its understandable some people may get injured...and although I will have many warnings and clauses which people must agree to, in the end I may get sued. A) I want to make sure I can't get sued for more than I'm worth (worse case scenario would be that I lose everything B) what the best type of business would be for me. From what I've read it looks like it will be an s-corp or sole prop. I live in CA so the corporate taxes are around $800 annually which I am trying to avoid. have looked into setting it up in Nevada too. Please help?!
2 Answers from Attorneys
You'll have to pay annual franchise taxes to (1) the state where your business (corporation or LLC) is chartered and (2) every state where it conducts regular operations. Setting up in Nevada is NO help unless you confine your significant operations to Nevada, which would be impossible for you given that you live in California and will be managing the business here.
As to getting sued, you have several things to think about: (1) Suing someone is easy, and the case doesn't have to be particularly meritorious or winnable to cause the defendant headaches and expenses, even if the defendant wins. (2) Assumption-of-risk clauses in contracts for potentially hazardous activities are NOT foolproof, but on the other hand are very worth while, and should be attorney-written. (3) A corporation or LLC would be safer for you personally than a sole proprietorship, but unless operated in a heads-up fashion with full understanding and appreciation of the entity's separate nature, the owner(s) may be liable under an "alter ego" or "lifting the corporate veil" theory. (4) Business insurance would be highly desirable, so see an insurance agent for recommendations.
You didn't describe the business sufficiently for me to guess, or do research, on whether you need a particular business or professional license, or particular training or certification, to do what you plan. You should make inquiries.
Just because you have little in the way of assets to lose today doesn't mean you should be incautious about lawsuits and judgments. They can stick around for years waiting for you to amass some assets or earn an income worth garnishing.
The other attorney is right on point here. Any attorney will say a review of all facts, documents, etc. regarding your personal and tax situation is required. This is not a simple bulletin board type question; in fact you ask multiple questions that span several areas of legal expertise. Consult with an attorney in your area for specifics.
Kevin B. Murphy, B.S., M.B.A., J.D. - Mr. Franchise
Franchise Attorney
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I am starting a company online that will be selling goods and services. I was... Asked 6/29/10, 6:09 am in United States California Business Law
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