The Law Office of Lynnette Ariathurai A Professional Corporation

Business startup shut down by California regulators

There is a certain amount of enthusiasm and energy when an new company initiates business. The new business startup may be anxious to hit the marketplace as soon as possible. However, it is also important to make sure that the new company is in full compliance with the law in order to avoid legal problems. One new startup transit company is now facing this type of problem in California.

Leap Transit was recently forced to stop operating its new luxury bus line. The state government claims that the company was operating the bus line without a proper permit. The California Public Utilities Commission served Leap Transit with a cease-and-desist order in mid-May. The company announced it was temporarily suspending its bus line shortly after receiving the order from the state regulators.

Apparently, the company had been going through the process of acquiring the correct permit from the state agency. The PUC had granted the company the "authority to operate," which is a precursor to the official state permit. At first, the commission stated that the new company falls under city jurisdiction while awaiting its approval for an official state permit. However, the commission seems have decided that the company falls under state regulation after all and has ordered Leap Transit to halt operating its bus line.

This case illustrates the importance of understanding the various intricacies of applicable laws when forming a new business startup in California. Leap Transit will now have to stop operating unexpectedly, which could be financially damaging to the company, as it was likely counting on obtaining income from running its bus line in order to cover its various business expenses. Therefore, compliance planning should be an integral part of any business plan for new startup companies, regardless of the industry.

Source: sfgate.com, "Leap Transit shut down by the state for operating illegally", Kristen V. Brown, May 20, 2015

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