Staying compliant and managing your finances
Congratulations you now own a small business in California. Now it’s time to run your California business the day to day running a small business can get complicated and even seem overwhelming at times? We are here to let you know there is help.
We have listed some of the most important aspects of running your business below. Learn the processes of running your business effectively in the state of California with these helpful tips
- Staying in compliance with permits and deadlines
- Buying assets for your new business in California
- What is a Tangible Asset?
- What are Intangible Assets?
- Business and marketing plans for your LLC
- 10 Steps to hiring your 1st employees
- Small business taxes
Running Your California Business and Keeping Your Business Compliant
We help your business stay in compliance and continue operating in the State of California. Having started your business you now have to ensure that you are in compliance with regulations applicable to your business and industry.
Listed below are some of the main areas of compliance needed by your business, Running your California business however they may be more based on your business type so we always recommend seeking advice from a professional if you have questions pertaining to your specific California business.
File Renewals Meet Your Deadlines For Corporate Updates
Once you have established the permits and or paperwork submittal deadlines you are responsible for, It is important to keep track of what registration certificates and permits your business has obtained.
You will need to check as issuing agencies as running your California business may require that you renew or update records at a certain point of time (annually, biannually, or by a specified date). We recommend creating a calendar of the dates and deadlines, if you are unsure it is best to check in with each regulating entity to determine what their renewal deadlines and processes are.
Permitting information is available online in California
California small businesses can use CalGOLD, California’s online permit assistance tool, to help in identifying local, state and federal regulating agencies that you may have obtained permits from.
You can use this portal to update records and renew your permits. Once you are logged in just enter your city and type of business, if your business is not listed you can select “General Business Information.”
Permitting renewal help desk is available for California Businesses
Do you have specific questions about filing for or what permits are needed or about your renewals, if so you can check the California Business Service Desk FAQs or submit your question to GO-Biz.
Changing of Business Records or Names
Yes it happens you start the business and then something changes. Very often a name or an address, in this case.
Changing your business name and address
If you change the address, name, or ownership of your business you must update registration records with the various federal, state, and local regulatory agencies that you have registered with.
California State uses the Business Navigator to determine what requirements there are and what departments you should check.
Disability Access Regulations Comply With ADA Regulations
Running your business in California means considering everyone. The Americans with Disabilities Act (ADA) is a Federal civil rights law designed to ensure equal access, full inclusion and participation for people with disabilities or impairments.
Federal and State law prohibit discrimination against people with disabilities. Your business must be ADA compliant. Learn more information about Disability Access Regulations.
Proposition 65 Notification California
The California Safe Drinking Water and Toxic Enforcement Agency (Proposition 65) requires businesses to notify Californians about significant amounts of chemicals in the products they purchase, in their homes or workplaces, or that are released into the environment.
The Proposition was intended to protect California citizens and the State’s drinking water sources from chemicals known to cause cancer, birth defects or other reproductive harm, and to inform citizens about exposures to such chemicals.
Proposition 65 also prohibits California businesses from knowingly discharging significant amounts of listed chemicals into sources of drinking water.
Buying Assets and Equipment for your California business
One major part of owning a business is to build assets of value for your business but what is an asset and how do you purchase them?
Business assets fall into three broad categories: tangible, intangible, and intellectual property.
What are the different types and groups of business assets and how do I acquire them?
Depending on the asset type, you’ll have to decide whether you want to buy or lease assets for your business. However the first step is figuring out which assets are which, what is the difference between them and which will help your new business succeed.
California Business Tangible Assets
Tangible assets — like buildings, vehicles, and equipment — are used for regular business activity and lose value over time. Things like printer paper, which get used up, typically don’t get counted as assets. Count tangible assets on your balance sheet as property or equipment.
California Business Intangible Assets
You cannot touch an intangible asset, think of it this way. An intangible asset is like your business reputation, your image & brand, or your business network. These are not items that you can show on a profit and loss sheet. As you cannot assign a cash value or indeed sell the assets.However they can still contribute to the total valuation of your business.
Trademarks and Patents Are Assets
Intellectual property is a type of intangible asset that includes trademarks, patents, logos, websites, domain names, and software. These unique to your company assets can be worth a great deal of money in the right circumstances so protect them well. Intellectual property is often protected by copyright or trademark protection.
Now you can decide is it best to lease or buy?
So now you are zeroed in on the assets you want and need for your new California business you can decide the best way and how financially you’d like to acquire them.
Leasing your company assets
Leasing can be a good option if you need to quickly get a lot of equipment, or if the equipment you need is very expensive. Commercial space can also be leased, so you can rent a place to run your business. In some cases, leasing can actually be less expensive than purchasing with a high-interest loan.
Leasing has benefits:
- Needs less cash or credit upfront
- Short-term leases let you test out the equipment
- Maintenance is sometimes included at no extra cost
- Lease payments for business assets are typically tax deductible
Leasing also has disadvantages:
- The lifetime cost is normally higher than buying
- Replacing it when the lease is up could be expensive
- Depreciation of leased assets typically isn’t tax deductible
- Every lease can be structured differently, so look into the details of your offer to make sure you’re getting something that works for you.
Confirm the details of a lease
There are two general kinds of leases: operating leases and capital leases. Since the accounting treatment is different, the kind of lease you use can have a significant impact on your business taxes.
Operating leases work like a traditional rental. You don’t own the asset, so it doesn’t get added to your balance sheet. Payments are considered operational expenses. You generally don’t take on maintenance, risk, or tax obligations for the asset.
Capital leases work more like a loan. For accounting purposes, you own the asset. It does get added to your balance sheet, and you can claim depreciation and interest expenses. You also take on all maintenance, risk, and tax obligations for the asset.
There are other factors to look at, too. Leases sometimes have buyout options that let you fully purchase the asset at the end of the lease. The length of a lease can vary, and shorter leases typically have higher monthly payments. If you want to leave a lease early, you could face steep early-termination penalties.
You might want to ask an attorney to review a lease with you before signing, especially if any of the terms or conditions are unclear.
Buying new company equipment
This can be a good option if you have enough cash or credit. You’re confident you’ll be using the assets for a long time.
Buying has benefits:
- You can claim depreciation on your taxes
- The lifetime cost to buy is usually less than leasing
- You can count it as an asset on your balance sheet
Buying also has disadvantages:
- Needs more cash or credit upfront
- Less opportunity to “test out” the asset
- You could be fully liable for maintenance and replacement
Buy with cash or credit
If you buy your assets with cash, you’ll own it in full right away. But it also means you’ll have less cash available to cover operating expenses. Make sure you’ve done your accounting homework, and that you can actually afford to pay with cash.
Loans can give you some of the same benefits of leases by distributing the total cost over a longer period. However, you’ll pay more in fees and interest than buying outright with cash.
You might be able to leverage lines of credit with your bank, or look for other sources to get more funding for your business.
Business & marketing plans help you run your business
As with all things in life a plan is needed to achieve anything and business is no exception.A good business & marketing plan guides you through each stage of starting and managing your business. You’ll use your business plan as a roadmap for how to structure, run, and grow your new business.
“A good business & marketing plan is a way to think through the key elements of your business.”Sensible Business Owners
Business plans can help you get funding or bring on new business partners. Investors want to feel confident they’ll see a return on their investment. Your business plan is the tool you’ll use to convince people that working with you — or investing in your company — is a smart choice.
Picking a business plan format that works for you
There’s no right or wrong way to write a business plan. What’s important is that your plan meets your needs. Most business plans fall into one of two common categories: traditional or lean startup.
Traditional Startup Plan
If you are going into business with some backing or an investor then you will be looking at a much more structured approach to your business plan as you have the funds and or means to p;an accordingly.
Traditional business plans are more common, use a standard structure, and encourage you to go into detail in each section. They tend to require more work upfront and can be dozens of pages long.
Lean Start Up Business Plan
This business plan is becoming more popular as a “Lean start” means focusing on getting the costs for your start up as low as possible without crippling your opportunity. These will often include a lot of sweat equity on behalf of the members of the business.
Lean startup business plans are less common but still use a standard structure. They focus on summarizing only the most important points of the key elements of your plan.
They can take as little as one hour to make and are typically only one page.
In conclusion, ensure that you have a plan to market and grow your business as without it things will get very confusing and to be honest will most likely fail.
Ten Steps to Hiring Your First Employee
Guide for New Employers
The good news is that business is booming. The bad news is there is only one of you. It is time to take the plunge and hire some help. There are many good sources of information about finding the right people, writing job descriptions, interviewing candidates, and managing people once they are on board. While those are all important issues, understanding your regulatory requirements as an employer is crucial to the success of your business. This guide lays out ten easy steps for new employers to follow to ensure compliance with key federal and state regulations.
Step 1: Obtain an Employer Identification Number (EIN)
Before hiring employees, you need to get an employment identification number (EIN) form the U.S. Internal Revenue Service. The EIN is often referred to as an Employer Tax ID or as Form SS 4. The EIN is necessary for reporting taxes and other documents to the IRS. In addition, the EIN is necessary when reporting information about your employees to state agencies. To obtain an EIN, you can apply online or contact the IRS directly.
U.S. Internal Revenue Service
Guide to the Employer Identification Number
Apply for an EIN Online
Step 2: Set up Records for Withholding Taxes
The IRS states that you must keep records of employment taxes for at least four years. Also, keep good records for your business to help you monitor the progress of your business, prepare your financial statements, identify source of receipts, keep track of deductible expenses, prepare your tax returns, and support items reported on tax returns.
Federal Income Tax Withholding (Form W-4)
Every employee must provide an employer with a signed withholding exemption certificate (Form W-4) on or before the date of employment. The employer must then submit Form W-4 to the IRS to ensure. For specific information on employer responsibilities regarding withholding of federal taxes, read the IRS’ Employer’s Tax Guide.
Federal Wage and Tax Statement (Form W-2)
On an annual basis, while running your California business employers must report to the federal government wages paid and taxes withheld for each employee. This report is filed using Form W-2, Wage and Tax Statement. Employers must complete a Form W-2 for each employee to whom they pay a salary, wage, or other compensation.
Employers must send Copy A of Forms W-2 (Wage and Tax Statement) to the Social Security Administration (SSA) by the last day of February (or last day of March if you file electronically) to report the wages and taxes of your employees for the previous calendar year. In addition, employers should send copies of Form W-2 to their employees by January 31 of the year following the reporting period.
Visit the Social Security Administration’s Employer W-2 Filing Instructions and Information for further guidance and assistance.
Visit your California state tax agency for further information.
Step 3: Employee Eligibility Verification (Form I-9)
Federal law requires employers to verify an employee’s eligibility to work in the United States. Within three days of hire employers must complete an Employment Eligibility Verification Form, commonly referred to as an I-9 form, and by examining acceptable forms of documentation supplied by the employee, confirm the employee’s citizenship or eligibility to work in the United States. Employers can only request documentation specified on the I-9 form. Asking for other types of documentation not listed on the I-9 form may be subject to discrimination lawsuits.
Employers, do not file the I-9 with the federal government. Rather, an employer is required to keep an I-9 form on file for 3 years after the date of hire or 1 year after the date the employee’s employment is terminated, whichever is later. The U.S. Immigration and Customs Enforcement (ICE) agency conducts routine workplace audits to ensure that employers are properly
completing and retaining I-9 forms, and that employee information on I-9 forms matches government records.
Download Form I-9 (Employment Eligibility Verification)
All U.S. employers are responsible for completion and retention of Form I-9 for each individual they hire for employment in the United States, including citizens and non-citizens.
Instructions for Completing the I-9: Handbook for Employers – A comprehensive guide to completing Form I-9, Employment Eligibility Verification.
Small Business Guide to Immigration Regulations – Provides a summary of immigration laws most important to small business owners, including information about completing the I-9 form.
Employers can use information taken from the Form I-9 to verify electronically the employment eligibility of newly hired employees through E-Verify. To get started register with E-Verify to virtually eliminate Social Security mismatch letters, improve the accuracy of wage and tax reporting, protect jobs for authorized workers, and help maintain a legal workforce.
Step 4: Register with Your States New Hire Reporting Program
Now you are running your California business The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 requires all employers to report newly hired and re-hired employees to a state directory within 20 days of their hire or rehire date.
Visit the New Hires Reporting Requirements page to learn how to register with California’s New Hire Reporting System.
Step 5: Obtain Workers’ Compensation Insurance
Businesses with employees are required to carry Workers’ Compensation Insurance coverage through a commercial carrier, on a self-insured basis, or through the state Workers’ Compensation Insurance program. Visit your state’s Workers’ Compensation Office more information on your state’s program. You will need this before you hire employees. You may also contact your local insurance agent or “commercial” agents such as State Fund 443-9721 for more information. The cost is based on a percentage of your labor and will need to be paid in advance.
Step 6: Unemployment Insurance Tax Registration
Businesses with employees are required to pay unemployment insurance taxes under certain conditions. If your business is required to pay these taxes, you must register your business with your state’s workforce agency. The State Taxes page includes links to your state’s agency.
Step 7: Obtain Disability Insurance (If Required)
Some states require employers to provide partial wage replacement insurance coverage to their eligible employees for non-work related sickness or injury.
California – The Job Market – Employment Development Department
Step 8: Post Required Notices
State and federal law require posters that inform employees of their rights. In addition employer responsibilities under labor laws. These posters available from free from federal and state labor agencies. Visit the Workplace Posters page for specific federal and state posters you will need for your business. California has specific required postings that you can access here. You can also buy an all-in-one poster from the California Chamber of Commerce
Step 9: File Your Taxes When Running your California business
If you are new employer, there are new federal and state tax filing requirements that apply to you.
Employers who pay wages subject to income tax withholding, social security, and Medicare taxes must file IRS Form 941, Employer’s Quarterly Tax Return. SMB with a tax liability of $1,000 or less may file IRS Form 944, Employer’s Annual Federal Tax Return instead of Form 941.
You must also file IRS Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, if you paid wages of $1,500 or more in any calendar quarter or you had one or more employees work for you in any 20 or more different weeks of the year.
New and existing employers should consult IRS’ Employer’s Tax Guide to understand all their federal tax-filing requirements.
Running your California business means there is assistance at your disposal visit California’s agencies for more information:
- California Tax Service Center
- Workers’ Compensation Insurance
- Unemployment Insurance Tax
- Disability Insurance
Step 10: Get Organized and Keep Yourself Informed
Being a good employer does not stop with fulfilling your various tax and reporting obligations. Maintaining a healthy and fair workplace, providing benefits, and keeping employees informed about your company’s policies are key to your business’ success. Here are some additional steps you should take after you have hired your employees:
Set up Recordkeeping
When keeping payroll records for tax purposes, some federal employment laws also require you to keep records about your employees. You may be subject to state recordkeeping requirements as well.
Tax Recordkeeping Guidance – Resources and tools aimed at helping employers maintain their tax records.
Labor Recordkeeping Requirements – Employment laws such as
- Occupational Safety and Health (OSH) Act
- Fair Labor Standards Act (FLSA) and the
- Family and Medical Leave Act (FMLA)
- All the above have certain recordkeeping and/or reporting requirements.
Adopt Workplace Safety Practices
The Occupational Safety and Health Administration’s (OSHA) Quick Start tool provides a clear, step-by-step guide that helps you identify many of the major OSHA requirements and guidance materials that may apply to your workplace, and will be involved with running your California business
Understand Employee Benefit Plans
See the U.S. Department of Labor’s Employment Law Guide chapter on Employee Benefit Plans for more information.
Learn Management Best Practices
The U.S. Small Business Administration’s Guide to Managing Employees provides sound guidance on hiring, motivating, and directing employees.
Apply Standards that Protect Employee Rights
Running your California business and Complying with standards for employee rights in regards to equal opportunity and fair labor standards is a requirement. See the Employment Law Guide’s chapter on Laws, Regulations and Technical Assistance Services for information and First Step Employment Law Advisor for advice on federal requirements.
Recommended Hiring Process For Your California business
Develop a clear idea of the ideal candidate. Create a job description. This should include information on job responsibilities and job related physical requirements. (See a job description template here and samples here).
Decide what you need in an employee, your next step is to identify the best ways to reach them. Where are they likely to see or hear about a job posting? Family and friends, online sites, the newspaper, university bulletin boards?
CalJOBS is the state job listing service. You can browse job-seekers resumes, or post your opening. It is free, and easy to use.
CR and HSU will post job listings for free in their Career Departments:
HSU: (707) 826-5473 (http://www2.humboldt.edu/acac/).
CR: (707) 476-4159
Generally, it is a good practice to interview more than one person for a position.
Screen the applications based on your job description. Use objective, job related criteria to separate those applications you want to explore further with those who do not fit the job description. Some common reasons for not exploring an application further are; lack of availability, inappropriate salary history, lack of qualifications, incomplete application, etc.
Once you have picked the applicants you want to interview, call and set up appointments. Make sure you have 45 minutes to an hour of uninterrupted time with the applicant. Make sure all conversation is job related.
Ask all applicants the same general questions. Maintain a polite professional demeanor. This is an excellent opportunity to manage expectations and make a good impression yourself. Avoid making an immediate decision (see more information on interviewing, sample questions, and reference checks.)
Conduct reference checks on the applicant you are considering hiring. Call previous employers as opposed to personal references. Even these folks generally can verify dates of employment and tell you if the applicant is eligible for rehire. (See sample reference checks in previous link).
Once you have a candidate you want to hire, you can make a job offer. Call them and check that they can physically do the job. If they are physically able to do the work, offer them the job. Ask them to bring their ID (as outlined on the second page of the I-9 form below) for their first shift as they will need it for the I-9 form.
- A training plan that breaks the training process into manageable chunks with time for questions. • An employee manual. Download a sample template. There are numerous others on the web.
Running Your California Business Small Business Taxes
One thing is for sure you are going to have to pay taxes. However you may be asking what taxes I pay and am I needing to pay.
Depending upon your business model is going to directly impact your tax liability and who you need to pay those taxes to.
Your liability may extend to Federal, state and local taxes. Local applicable sales tax as well as employment taxes if you are planning on employing staff.
The California Tax Service Center is a partnership of tax agencies, including the California Department of Tax and Fee Administration(Formerly the Board of Equalization), Employment Development Department, Franchise Tax Board, and Internal Revenue Service.