When entrepreneurs and new business owners are just starting out, they often have many questions, such as:
- What legal form should my business take?
- How and when do I register my business with the local government?
- How do I set up my books and accounting correctly?
Easy Ordering takes less than 5 minutes to complete.
Available in All 50 States
Our Complete Service Includes:
- Company Records Binder
- Company Name Imprinting
- Slip Cover
- Company Embossing Seal
- 20 Imprinted Stock or Membership Certificates
- Stock or Certificate Ledger
- Operating Agreement on Disk (LLC kit only)
- Employer Identification Number (EIN) Filing Service.
After you form your new company, it is absolutely essential for you to keep accurate and up to date records. The IRS requires it! With our Corporate or LLC service this is easy. Giving you more time to run your business.
- Advantages of Incorporating
All legal and tax professionals agree, if your business is not incorporated you may be throwing away thousands of dollars in tax savings and deductions.
In addition, all of your personal assets such as your home, cars, boats, savings and investments are at risk and could be used to satisfy any law suits, debt or liability incurred by the business. Forming a Corporation can provide the protection and tax savings needed to give you peace of mind and make your business even more successful and profitable.
Some Benefits Include:
Liability Protection: Properly forming and maintaining a corporation will provide personal liability protection to the owners or shareholders of the corporation for any debt or liability incurred by the business. Personal liability of the shareholders is normally limited to the amount of money invested in the corporation.
Tax Advantages: Another important benefit is that a corporation can be structured many ways to provide substantial tax savings. You can minimize self-employment taxes and increase the number of allowable deductions lowering the taxes you pay on the income of the business. Many corporations structure retirement and tax deferred savings plans for their owners and employees which can provide even greater tax savings.
Raising Capital: Sale of stock for the purposes of raising capital is often more attractive to investors than other forms of equity sales. A corporation can also issue Corporate Bonds to raise capital for expenditures without compromising the ownership of the business.
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- Incorporating Frequently Asked Questions
What is a corporation?
A corporation is a legal entity that exists separately from its owners. Creation of a corporation occurs when properly completed articles of incorporation are filed with the correct state authority, and all fees are paid.
What is the difference between an "S" corporation and a "C" corporation?
All corporations start as "C" corporations and are required to pay income tax on taxable income generated by the corporation. A C-corporation becomes an S-corporation by completing and filing federal form 2553 with the IRS. An S-corporation's net income or loss is "passed-through" to the shareholders and are included in their personal tax returns. Because income is NOT taxed at the corporate level, there is no double taxation as with C-corporations. Subchapter S-corporations, as they are also called, are restricted to having no more than 100 shareholders.
Do I need an attorney to incorporate?
An attorney is not a legal requirement for incorporating a business in any state except South Carolina, where a signature by a South Carolina attorney licensed to practice in the state is required on articles of incorporation. In every other state, you can prepare and file the articles of incorporation yourself. However, if you are unsure of what steps your business should take and you don't have the time to research the matter yourself, a consultation with a good corporate attorney is often well worth the money you spend.
How do I know if my name is available?
We will request your two top name choices. We will check these as part of your order. If neither of these is available, we will contact you for other name choices.
How do I name my corporation?
First, we recommend that you spend some time coming up with a name for your corporation. Although each state has different rules concerning the naming of your corporation, the most common rule is that it must not be deceptively similar to another already formed company. The corporate name must include a suffix. Some examples are "Incorporated", "Inc.", "Company", and "Corp." However, your state may have different suffix requirements.
What are the benefits of incorporating?
The primary advantage of incorporating is to limit your liability to the assets of the corporation only. Usually, shareholders are not liable for the debts or obligations of the corporation. So if your corporation defaults on a loan, unless you haven't personally signed for it, your personal assets won't be in jeopardy. This is not the case with a sole proprietorship or partnership. Corporations also offer many tax advantages that are not available to sole proprietors.
Some other advantages include:
- A corporation's life is unlimited and is not dependent upon its members. If an owner dies or wishes to sell their interest, the corporation will continue to exist and do business.
- Retirement funds and qualified retirement plans (like 401k) may be set up more easily with a corporation.
- Ownership of a corporation is easily transferable
- Capital can be raised more easily through the sale of stock.
- A corporation possesses centralized management.
What is a Registered Agent?
Most every state requires that a corporation has a registered agent. That agent must have a physical location in the formation state. The registered agent can typically be any person (usually a resident of the state) or any properly registered company who is available during normal business hours to receive official state documents or service of process (lawsuit).
How many Directors/Shareholders do I need?
Most states allow for one person to act as shareholder, director, and all officer roles.
How many shares of stock should I choose, and at what par value?
We provide a default of 200 shares, although you can choose any amount you want on all orders. Your par value is not requested on all orders, and is usually expressed as "No Par Value" or some dollar amount per share such as "$1.00" or "$0.10." Some states require that you do not issue your stock for less than the par value. Some states also base their fees on the number of shares authorized, multiplied by the par value.
What is a Federal Tax Identification Number or EIN?
Your corporation is required to have an Employer Identification Number (EIN) also known as your Federal Tax Identification Number so that the IRS can track payroll and income taxes paid by the corporation. But, like a social security number, an EIN is used for most everything the business does. Your bank will require an EIN to open your corporate bank account.
We provide two EIN services:
- Basic EIN Service - We prepare and email your SS4 (EIN application) & easy one-page instructions for obtaining your EIN. You need only review, sign and fax or call in the information to the IRS to get your EIN.
- Full EIN Service - We actually obtain your company's EIN for you.
What do I need to do AFTER I incorporate?
You must have your initial shareholder(s) meeting to elect your director(s), if your director(s) haven't been designated in the articles. Then, you must have your initial organizational meeting of your directors. At this meeting, you will need to elect your officers, adopt your company's bylaws, and issue your stock (among other actions).
How do I get started?
Once you have decided on a name, order your corporation online. Once we receive your paid order, we verify the availability of your name choices, draft your articles, file them with the state and send you all appropriate documents after they have been filed.
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- Advantages of Limited Liability Companies (LLC)
Combining the Best Aspects of Partnerships and Corporations
A Limited Liability Company, or LLC, is not a corporation, although it offers many of the same advantages. An LLC is best described as a combination of a corporation and a partnership. LLCs offer the limited liability of a corporation while allowing more flexibility in managing the business and organization.
An LLC does not pay any income tax itself. It's a "flow through" entity that allows profits and losses to flow through to the tax returns of the individual members, avoiding the double taxation of C corporations.
While setting up an LLC can be more difficult than creating a partnership (or sole proprietorship), running one is significantly easier than running a corporation. Here are the main features of an LLC:
Limited Personal Liability
Like shareholders of a corporation, all LLC owners are protected from personal liability for business debts and claims. This means that if the business itself can't pay a creditor -- such as a supplier, a lender, or a landlord -- the creditor cannot legally come after any LLC member's house, car, or other personal possessions. Because only LLC assets are used to pay off business debts, LLC owners stand to lose only the money that they've invested in the LLC. This feature is often called "limited liability."
While LLC owners enjoy limited personal liability for many of their business transactions, it is important to realize that this protection is not absolute. (See Exceptions to Limited Liability at LLC Frequently Asked Questions)
Unlike a corporation, an LLC is not considered separate from its owners for tax purposes. Instead, it is what the IRS calls a "pass-through entity," like a partnership or sole proprietorship. This means that business income passes through the business to the LLC members, who report their share of profits -- or losses -- on their individual income tax returns. Each LLC member must make quarterly estimated tax payments to the IRS.
While an LLC itself doesn't pay taxes, co-owned LLCs must file Form 1065, an informational return, with the IRS each year. This form, the same one that a partnership files, sets out each LLC member's share of the LLC's profits (or losses), which the IRS reviews to make sure the LLC members are correctly reporting their income.
The owners of most small LLCs participate equally in the management of their business. This arrangement is called "member management."
The alternative management structure -- somewhat awkwardly called "manager management" -- means that you designate one or more owners (or even an outsider) to take responsibility for managing the LLC. The non-managing owners (sometimes family members who have invested in the company) simply sit back and share in LLC profits. In a manager-managed LLC, only the named managers get to vote on management decisions and act as agents of the LLC.
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- LLC Frequently Asked Questions
Who should form an LLC?
You should consider forming an LLC (limited liability company) if you are concerned about personal exposure to lawsuits arising from your business. For example, if you decide to open a store-front business that deals directly with the public, you may worry that your commercial liability insurance won't fully protect your personal assets from potential slip-and-fall lawsuits or claims by your suppliers for unpaid bills. Running your business as an LLC may help you sleep better because it instantly gives you personal protection against these and other potential claims against your business.
Not all businesses can operate as LLCs, however. Businesses in the banking, trust, and insurance industry, for example, are typically prohibited from forming LLCs.
Should I choose an LLC or an S-corporation?
While the S-corporation's special tax status eliminates double taxation, it lacks the flexibility of an LLC in allocating income to the owners
An LLC may offer several classes of membership interests while an S-corporation may only have one class of stock.
Any number of individuals or entities may own interests in an LLC. However, ownership interest in an S-corporation is limited to no more than 100 shareholders. Also, S-corporations cannot be owned by C-corporations, other S-corporations, many trusts, LLCs, partnerships, or nonresident aliens. Also, LLCs are allowed to have subsidiaries without restriction.
What is an LLC Operating Agreement?
An LLC operating agreement allows you to structure your financial and working relationships with your co-owners in a way that suits your business. In your operating agreement, you and your co-owners establish each owner's percentage of ownership in the LLC, his or her share of profits (or losses), his or her rights and responsibilities, and what will happen to the business if one of you leaves.
Do I need to have an Operating Agreement?
Although most states' LLC laws don't require a written operating agreement, you shouldn't consider starting business without one. Here's why an operating agreement is necessary:
- It helps to ensure that courts will respect your personal liability protection by showing that you have been conscientious about organizing your LLC.
- It sets out rules that govern how profits will be split up, how major business decisions will be made, and the procedures for handling the departure and addition of members.
- It helps to avert misunderstandings between the owners over finances and management.
It keeps your LLC from being governed by the default rules in your state's LLC laws, which might not be to your benefit.
Must I hold LLC meetings?
Although a corporation's failure to hold shareholder or director meetings may subject the corporation to alter ego liability, this is not the case for LLCs in many states. In California for example, an LLC's failure to hold meetings of members or managers is not usually considered grounds for imposing the alter ego doctrine where the LLC's Articles of Organization or Operating Agreement do not expressly require such meetings.
Exceptions to Limited Liability
While LLC owners enjoy limited personal liability for many of their business transactions, it is important to realize that this protection is not absolute. This drawback is not unique to LLCs, however -- the same exceptions apply to corporations. An LLC owner can be held personally liable if he or she:
- personally and directly injures someone
- personally guarantees a bank loan or a business debt on which the LLC defaults
- fails to deposit taxes withheld from employees' wages
- intentionally does something fraudulent, illegal, or clearly wrong-headed that causes harm to the company or to someone else, or
- treats the LLC as an extension of his or her personal affairs, rather than as a separate legal entity.
This last exception is the most important. In some circumstances, a court might say that the LLC doesn't really exist and find that its owners are really doing business as individuals, who are personally liable for their acts. To keep this from happening, make sure you and your co-owners:
- Act fairly and legally. Do not conceal or misrepresent material facts or the state of your finances to vendors, creditors, or other outsiders.
- Fund your LLC adequately. Invest enough cash into the business so that your LLC can meet foreseeable expenses and liabilities.
- Keep LLC and personal business separate. Get a federal employer identification number, open up a business-only checking account, and keep your personal finances out of your LLC accounting books.
- Create an operating agreement. Having a formal written operating agreement lends credibility to your LLC's separate existence
A good liability insurance policy can shield your personal assets when limited liability protection does not. For instance, if you are a massage therapist and you accidentally injure a client's back; your liability insurance policy should cover you. Insurance can also protect your personal assets in the event that your limited liability status is ignored by a court.
In addition to protecting your personal assets in such situations, insurance can protect your corporate assets from lawsuits and claims. Be aware, however, that commercial insurance usually does not protect personal or corporate assets from unpaid business debts, whether or not they're personally guaranteed.
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