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Innovative Services Need Adequate Business Planning in California

On behalf of The Law Office of Lynnette Ariathurai, A Professional Corporation posted in Business Formation & Planning on Friday, February 15, 2013.

When starting a business, it is important to consider all of the legal implications of doing business within the specified industry. Rules and regulations tend to differ for each industry and each type of business. Three new ride-sharing businesses found out how important this part of business planning is when the California Public Utilities Commission (CPUC) sent them cease-and-desist orders. The CPUC was concerned that these companies were not adhering to the same standards as similar services such as taxis.

Two of the companies which received cease-and-desist letters were Lyft and Uber. The CPUC claimed that companies such as Lyft and Uber were not adhering to regulations on taxis and similar services, which the CPUC calls ‘charter-party carriers.’ However, the ride-sharing companies argued that their services do not utilize the same business model as taxi companies and other similar businesses. They claim that the rules regulating charter-party carriers do not apply to ride-sharing services.

The dispute caused CPUC to fine several ride-sharing companies a total of $20,000 in citations. However, the CPUC had agreed to suspend the citations until rules and regulations for these types of services could be finalized. While new rules and regulations are being developed, the ride-sharing services have been allowed to operate under an interim agreement with the CPUC.

Ride-sharing services are not the only types of businesses which may be subject to regulations from authorities in California. Many of the more innovative businesses, such as these, may find themselves in a gray area of the law which has yet to be developed. This means that these types of businesses will require even more careful business planning in order to minimize fines and citations.

Source: The Verge, “Ride-sharing startup Lyft reaches agreement with California regulators, readies Los Angeles launch,” Bryan Bishop, Jan. 30, 2013


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