David Bunevith is the owner of Top Dog Construction Corp. in Dana Point, Calif., a general-contractor company he has owned and operated since 2000. He discusses some of the most important legal aspects to know and consider for someone who is just starting a business.
What is the first thing someone needs to know about the legal aspects of being a business owner?
You get your company name and file it. The easiest option is a DBA — Doing Business As. If you’re a sole proprietor, it’s pretty simple. You just go to the county clerk’s office, and they look up the name in their online service. Then you have to run an ad in one of their selected newspapers for a month. I printed in The Huntington Beach Press. After they print it so many times, you’re allowed to take the name. Sometimes someone is using the business name and hasn’t filed it. If it’s not in the database and no one claims it, the name is yours. That sets you up as a DBA. What that allows you to do is open a bank account with the business name so someone can write a check to the company. Without that registered name, the bank can’t cash your check.
From there you have to decide how you’re going to set up your business. Legal Zoom can help you set up an LLC, an S Corp, C Corp. One thing about the state of California is that it cost $800 a year. Some people want to lock down all these names as an LLC or incorporated. At $800, that can get a startup in pretty deep. A lot of people start with a sole proprietorship because there are only some nominal fees.
If you’re going to have employees, you should get a payroll service. For a pretty nominal fee, they’re going to take all the payroll taxes out, which keeps your books clean. Using a payroll service allows you to focus on your work.
Also in California, if you’re going to have employees you need to have workman’s compensation. Payroll and workman’s comp is where I see a lot of people fail. The State Compensation Fund is governed by the state. They won’t deny anybody workman’s comp coverage. A lot of insurance companies won’t cover you for workman’s comp. The State Compensation Fund will give coverage even to new companies. After a couple years of loss runs with a clean record, then you can move to a private workman’s comp, which is going to cut your rates down.
So the legal name, the workman’s comp, having the payroll and a good accountant, those are the key elements to keeping the ship afloat.
What advice would you give to a business owner who runs into some legal controversy?
If you can, let them win, especially if it’s something minor. Show the other party that you’re trying to do the right thing and you run a straight business. If you can, try to settle up front. I haven’t had to go through any of this, but I was told by a contractor that I know who was in a suit with somebody that he had to cut a check for $10,000 to an attorney. That’s basically the minimum. If you can settle for less than $10,000, you should probably do it and learn from the experience.
This article was written by Gary Schwind for Small Business Pulse