Startup Advice: Santa Rosa Business Attorney, James F. DeMartini
Ed Note: This is the first part of a detailed discussion with Santa Rosa Business Attorney Jim DeMartini which covers the main issues you must consider when starting a new business in Sonoma County. This interview was conducted in April 2016.
Opening Your Own Business
Hi Jim. I want to talk to you about opening a new business. I’ve worked in IT for eleven years now and I just moved to Sonoma County and I would like to start my own IT business. I plan to target small and medium companies but I’d like you, as a Sonoma County business lawyer, to help me understand what I need to consider from a legal perspective for starting my business.
Thanks for coming in, Bill. I take it from what you’ve told me you’re going to be operating as a family business. That being the case, you’d likely be operating as a sole proprietor, under your own name. That’s a fairly simple operation. You’ve indicated to me also that you may involve your spouse. That may lead to you acting as a partnership. Acting as a partnership has its benefits and potential problems.
If you intend to act as a partnership, or if you choose to operate under a name other than yours, you will need to contact the Sonoma County Clerk and file a fictitious business name statement. In any case, whether you’re operating under your own name or a partnership name, you need to contact the Board of Equalization to get a sales permit and, if you’re operating as a partnership, you’ll need a separate, federal employer identification number.
If you have employees, you will need to contact the Employment Development Department as well and obtain a federal Employer Identification Number.
I’ve asked you to discuss any potential liability you may have to other people, any exposure to lawsuits brought against you based on your operation. The answer to that is important because it will help to determine the kind of entity we would create for you.
What do I consider as liabilities? Clarify that for me, I’m not sure what you mean.
I’m referring to claims made against you for something you may have done that somehow injured someone else, or for debts incurred by the business. I don’t specifically know what kind of liability or debt come out of an IT job but I expect there are potential violations of intellectual properties or the possibility of lost customer data. There is also a potential for debts due to vendors or customers.
Before we go any further, I want to make sure that sooner rather than later you to talk to two people, your accountant and your insurance agent. Your accountant because virtually every decision you make at this stage will have a tax ramification at one point or another and your insurance agent because we need to make sure that your assets are protected in case you get sued.
Consult a Business Lawyer
Now, when you mention liabilities, clarify for me, do liabilities include some of my own personal assets, for example, my home, or my vehicles, or any other things that I own?
Are those susceptible to some sort of legal action through my company?
Absolutely, if you’re operating as an individual or as a partnership, any damages you, or your partner cause anybody else can be recovered from your personal assets. Basically, your assets are all on the line if you’re operating as a partnership or individual, which leads me to the second question.
Please watch the next educational video in my “Starting a Business” series