Articles Posted in Start-Ups

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Every state wants to attract businesses. Whether it is an existing business, or a brand new startup, politicians are always courting business people to move to their jurisdiction. While there are usually many states (or cities within states) vying for a new business, it used to be uncommon for states to directly attack one another in these quests. However, that is all starting to change, as evidenced by a current battle between Texas and California.

Battle Starts With Texas Poaching California Businesses

The Los Angeles Times recently reported on the ongoing battle between California and Texas over businesses. This battle has been going on, in a one-sided fashion, for more than a decade. It began with recently-indicted Texas Governor Rick Perry publicly pushing California businesses to move to Texas. And, his public statements along with pro-business government programs have been effective. One out of five businesses that relocated to Texas in 2011 and 2012 were previously California Businesses.

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Starting a new business requires a substantial investment of both time and financial resources. While some entrepreneurs have enough financial resources to do this on their own, most new business people need to seek out others who are willing to invest in their business. From purchasing or leasing real estate, hiring a staff, or purchasing raw materials and equipment, the front end costs of a business can be huge and it can take a while before you start to see a profit.

To help business people who are just starting out, Forbes recently created a list of common mistakes small businesses make when seeking out investors. We have included some of Forbes‘ tips below, as well as some tips from the U.S. Small Business Administration (SBA).

SBA Tips for Securing Investors

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In some ways, the internet has made the world a lot easier for new small businesses. Ordering your own supplies, allowing customers to place orders or make reservations, advertising your goods and services, payroll, and taxes all take on a different and sometimes much easier face with the World Wide Web. Even finding the right real estate for your new business or expansion can be done in large part online, at least in the shopping stage. But the online demands of business have created a serious concern that business men and women of earlier generations did not have to confront: online security.

While businesses have always had to consider surveillance equipment and alarm systems to keep local predators at bay, security threats online can come from the other side of the globe. Fortunately there are things you can do to protect your business and your customers. CIO, a media outlet specializing in information for people in the information technology industry, recently reported on this issue. In the report they looked at four real life scenarios faced by specific small businesses, and then provided types small business owners can follow to be more secured.

How Small Businesses Can Increase Online Security

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Starting a new business can be difficult. Deciding exactly what you want your business to do, where you want it to be located, and how you want it to be organized all take a lot of planning. But even once you purchase or lease a location and open up your doors, the hard work is not done. You still need to figure out a way to get the word out about your new business, and convince potential customers that they should give your company a shot. While it used to be as easy as taking out an advertisement in the phone book, things have changed in the internet age.

It’s Time to Turn to the Internet

One way of getting the word out is social media. Whether your business is a food truck that posts its daily location on Twitter, or a retail establishment that offers special deals to your dedicated customers on Facebook, many small businesses are already pretty savvy when it comes to using free social media. But social media has another side to it that small businesses have to consider: the advertising side.

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Starting a new business requires help from a lot of sources. You need excellent employees, the advice of an experienced and licensed Sacramento small business attorney, and investors. Throughout the down economy, that third requirement was sometimes hard to meet for small business people. Fortunately, those times are changing.

Easier to Find Bank Loans

The New York Times reports that small businesses are finding bank loans easier to come by. Its report tells the story of Jake Fitzsimmons, the owner of a burger joint. Mr. Fitzsimmons opened his bar and restaurant in 2010, immediately after the recession. Thinking getting a loan would be impossible in the financial climate, Fitzsimmons wound up borrowing the money he could not save from his father. He did the same again when he opened his second restaurant in 2012. But now that he is opening a third location, things are different. He had banks bid on the opportunity to finance his expansion; and it worked. As banks become more eager to lend to the right borrowers, they are willing to compete with one another, resulting in better terms for the borrower than Fitzsimmons could have imagined back in 2010.

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Starting a business in California can be complicated. You have to figure out a business plan, find investors, find real estate, and depending on the business, maybe even find employees. On top of all of that, you also have to figure out what kind of business entity you want to set up for your business. The decision to go with a corporation, an LLC, or a partnership will affect your business for years to come. Ultimately it’s a decision that should be made with an experienced business attorney at your side.

New Rules Regarding LLCs in California

With that being said, we would like to provide you with a little information about a change in California law regarding LLCs, or limited liability companies. This information is important both for those considering forming LLCs and for those who have already formed them. On January 1, 2014, a new law called the California Revised Uniform Limited Liability Company Act (RULLCA) went into effect. The law it replaces can be found here. The new law will affect any operating agreements that are entered into after its effective date. However, it will also affect any act taken by an LLC or its members after January 1, 2014, even if the LLC was formed before that date. There are five main changes to the law.

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Small business owners have really struggled for a few years, and things are starting to finally turn around. The improved economic climate has allowed existing small business owners to expand, and has allowed new entrepreneurs to fulfill lifelong dreams by bringing their new startups to life. In an effort to continue this economic turnaround, the House approved a tax law aimed at helping small business owners.

The Wall Street Journal reports that the House voted on June 12 to make permanent a tax break that allows small businesses to write off up to $500,000 in new equipment purchases. Dozens of Democrats joined republicans to make this bipartisan effort possible. The stated reason for making what has been a temporary tax break permanent is to provide both business and government budget writers with some level of certainty going forward. The $500,000 break has existed since 2010, but it would drop to $25,000 this year if Congress fails to act.

USA Today explained in an article exactly what this tax break does for small business owners. It helps them in two ways. First, it allows business owners to write off the costs of computers, machinery, and other equipment sooner than they would otherwise be allowed to under the tax code. It also allows business owners to write off the costs of improving retail property in a similar expedited fashion. The tax break expired at the beginning of this year.

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Right now may seem like a tough time to start or own a small business. With concerns about the Affordable Care Act (Obamacare) and talk of raising the minimum wage, some people may wonder if this is the right time to venture out and live a life-long dream of owning their own company. However, so long as you seek out the advice of a knowledgeable and licensed attorney, now can be a great time to take that leap. And new surveys show that those who have done it are more optimistic than they have been in years.

Nationwide Small Business Owners Feel Circumstances Have Improved

The Central Valley Business Times reports that small business owners nationwide have an improved outlook according to the U.S. Bank Annual Small Business Survey. The survey measures the opinions of thousands of small business owners, and has done so for the past five years. Those surveyed are truly small business owners by any standard, as they all report less than $10 million in annual revenue. Half of the businesses have under $200,000 in annual revenue. This is the first time it has shown that the majority of small business owners are optimistic about the economy, saying it is in a state of recovery or expansion. This compares to the 2010 survey where nine out of ten small business owners classified the economy as being in a recession.

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Last year, we featured several articles about California’s ride-sharing startups. Ride-sharing companies, such as UberX, Lyft, and Sidecar, are in the business of providing vehicles-for-hire. Using apps and other online programs, the companies connect those in need of rides with non-professional drivers driving their own cars. Two of the companies are making headlines, and the news is not so good. According to PandoDaily — the site of record for Silicon Valley — last month, a San-Francisco based Uber driver, Daveea Whitmire, allegedly verbally and physically assaulted one of his passengers who recorded some of the incident on his iPhone. Uber refused to investigate the matter, and insisted that Whitmire had passed the company’s standard background checks. Whitmire’s account has since been deactivated by Uber and evidence has emerged that Whitmire was a convicted felon.

Since Uber entered the market, its drivers have been accused of improper conduct at least three other times. The most recent incident involving an Uber driver occurred on New Year’s Eve, when an Uber driver hit and killed a 6-year-old girl who was crossing the street with her mother and brother. Uber instantly denied culpability. According to PandoDaily, “[i]n nearly all of [the] cases, Uber has responded in the same way, saying it’s not responsible for the conduct of its drivers.” In response to its decision not to investigate, Uber states that “we’re a technology platform that connects riders and providers, so it’s not our job to investigate.” Several Lyft drivers also have been accused of improper conduct, but, unlike Uber, the company apologized to its passengers and promised to investigate the situations; however, just like Uber, Lyft contends that it is not liable because it is merely a “technology platform.”

Uber and Lyft contend that they cannot be held liable for the drivers’ actions because their drivers are not employees but independent contractors. Last August, two Uber drivers filed a class-action lawsuit against the company, claiming that it is stiffing driver’s on tips. The suit addresses the very issue of worker misclassification and seeks recognition that Uber drivers are employees rather than independent contractors. Are Uber and Lyft correct when they say that they cannot be held liable for the actions of the drivers? Can they be sued for negligent hiring or vicarious liability? Even though we will not know the answers to these questions until a court rules, the headlines discussed above raise very important issues for startups and small businesses regarding the classification/misclassification of workers as employees or independent contractors and the importance of properly screening individuals before hire.

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From November 27, through December 15, 2013, hackers stole credit card numbers and encrypted debit card PIN data from as many as 40 million credit and debit cards swiped at Target. The security breach was the second-largest data breach in United States retail history. According to Target, it “alerted authorities and financial institutions immediately after it was made aware of the unauthorized access, and is putting all appropriate resources behind these efforts. Among other actions, Target is partnering with a leading third-party forensics firm to conduct a thorough investigation of the incident.” In a letter to customers, Target warned that customer names, credit and/or debit card numbers, expiration dates, and the CVV (security codes) were stolen. Target is facing significant financial ramifications including legal costs as well as owing money to the credit card companies that must reimburse their customers. Target also faces significant damage to its reputation.

Several months ago, Forbes magazine reported on class action lawsuits over the failure of businesses to secure consumers’ personal data, such as what occurred in the Target breach. While the filing of such cases may become the trend, it does not appear that they will be successful as recent cases have been dismissed for failure to prove standing. The judges in those cases have specifically ruled that the possibility of future injury in the form of an increased risk of identity theft, is insufficient to establish a present injury, and thus, plaintiffs do not have standing.

Interestingly, just two months before the Target data breach, California Governor Jerry Brown signed into law an amendment to California’s Security Breach Notification Act. According to Forbes, the new law requires “consumer notification if ‘a user name or email address, in combination with a password or security question and answer that would permit access to an online account’ was compromised. The law applies even if that information is not combined with a name, and applies to all types of online accounts.”

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