First, form a legal entity like an LLC or Corporation. Second, maintain a strict separation of finances—never "commingle" personal and business funds. Finally, ensure the business is adequately insured and capitalized to handle its own debts.

At a minimum:

• Operating Agreement or Bylaws (internal rules).
• Federal Tax ID (EIN).
• Nondisclosure Agreements (NDAs) to protect trade secrets.
• Standard Client/Vendor Contracts.

It is the "rulebook" for your LLC. It defines how decisions are made, how profits are split, and what happens if a partner leaves. Without one, California’s "default" laws apply, which may not be what you or your partners intended.

Ownership is usually documented in the Operating Agreement or a Shareholders' Agreement. You should clearly define each partner's capital contribution, their percentage of ownership, and whether their "sweat equity" (labor) counts toward their share.

Without a Buy-Sell Agreement, a partner leaving can freeze the business or lead to a costly legal battle. A pre-negotiated exit strategy determines how the departing partner’s share is valued and who has the first right to buy it.