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Archive for January, 2012

Tax-Exempt Companies and IRS Form 990-N

Posted on January 31st, 2012 by Joey Donovan Guido

Category: How To Information, Nonprofit, Small Business, Small Business News

Have you heard of the IRS Form 990-N?

If you haven’t, you are not alone. But that doesn’t mean it’s not an important form. In fact, if it’s not filled out for three consecutive years a company will automatically lose its tax-exempt status.

In an effort to help your nonprofit organization remain compliant, we’ve put together this brief article to give you a quick overview of the form and whether or not you’ll need to actually file one.

The first thing you’ll need to determine is whether you’re a tax exempt organization with annual gross receipts that are usually $50,000 or less. If you are, filing IRS Form 990-N (e-Postcard) is typically required. Companies can also file a complete Form 990 or Form 990-EZ, instead of the e-Postcard.

Due Date of the e-Postcard

According to the IRS, “the e-Postcard is due every year by the 15th day of the 5th month after the close of your tax year. For example, if your tax year ended on December 31, the e-Postcard is due May 15 of the following year. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. You cannot file the e-Postcard until after your tax year ends.

Filing IRS Form 990-N

Click here to file your form. The IRS has partnered with the Urban Institute to make this form available for completion online. This form must be completed and filed electronically. There is no paper version.

What You Need to Complete the e-Postcard(according to the IRS):

Employer Identification Number (EIN), also known as a Taxpayer Identification Number (TIN)
Tax year. Are you following a calendar tax year, or a fiscal tax year?
Legal name and mailing address
Any other names the organization uses
Name and address of a principal officer
Web site address if the organization has one
Confirmation that the organization’s annual gross receipts are normally $25,000 or less ($50,000 for tax years ending on or after December 31, 2010)
If applicable, a statement that the organization has terminated or is terminating (going out of business)

For more information, please visit the IRS Form 990-N page.

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Choosing a Tax-exempt Status for Nonprofit Companies

Posted on January 27th, 2012 by Joey Donovan Guido

Category: How To Information, Incorporate a Business, Nonprofit, Small Business, Start A Business

Tax-Exempt

Nearly everyone’s heard of the infamous 501(c)(3) tax-exempt formation. But did you know that there are other no less than 32 tax-exempt options for nonprofits?

To follow is a listing of four of the most popular ones — including 501(c)(3) — along with a brief description of what makes each of them unique …

501(c)(3)

These are typically public charities or private foundations established for a variety of purposes including: religious, educational, charitable, scientific, literary, testing for public safety, fostering of national or international amateur sports, or prevention of cruelty to animals and children.

Application form number: 1023
Annual return required to be filed: 990 or 990EZ, or 990-PF
Charitable contributions allowable: Typically, yes

501(c)(4)

Geared toward civic leagues, social welfare organizations, and local associations of employees. This type of nonprofit generally promotes community welfare, as well as charitable, educational and recreational endeavors.

Application form number: 1024
Annual return required to be filed: 990 or 990EZ
Charitable contributions allowable: No, generally

501(c)(6)

This type of nonprofit is often a business league, chamber of commerce, or real estate boards. The general nature of activities involves improvement of business conditions of one or more lines of business.

Application form number: 1024
Annual return required to be filed: 990 or 990EZ
Charitable contributions allowable: No

501(c)(7)

Consisting predominantly of social and recreation clubs, this type of nonprofit organization focuses on pleasure, recreation and social activities.

Application form number: 1024
Annual return required to be filed: 990 or 990EZ
Charitable contributions allowable: No

A Note on Defining Your Business Purpose
Your business purpose is an explanation of what your nonprofit corporation is formed to do or provide. Having a very detailed description is essential. If you plan to apply for tax-exempt status, the IRS will require a copy of your Articles of Incorporation and will pay particular attention to your business purpose and use it to classify your business.

For a complete list of nonprofit, tax-exempt formation choices, visit our IRS Organization Reference Chart.

We’re Here to Help
If you have questions, or would like assistance with forming a nonprofit company, feel free to give our customer service team a call between 8am and 7pm CST, at 800-981-7183. Or, send us an e-mail anytime. We’re always happy to help.

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Top Benefits of Forming a Nonprofit Company

Posted on January 26th, 2012 by Joey Donovan Guido

Category: How To Information, Incorporate a Business, Small Business, Start A Business

Thinking about forming a nonprofit company?

You probably already know that they’re specifically formed for purposes other than operating a profit-seeking business. But you might not be aware of all the benefits associated with being a nonprofit organization.

To follow are the top advantages of forming a nonprofit company. We hope they help you gain a clearer picture of what these types of business formations have to offer …

Top Seven Benefits of Forming a Nonprofit Company

Limited liability protection. Protects directors, officers and members against being held personally responsible for their company’s debts and liabilities. With limited liability protection, creditors cannot pursue the personal assets of the business owner to pay off business debts.
Tax-exempt status. Nonprofits can apply for both federal and state tax-exempt status.
Access to grants. Some nonprofits are eligible to receive public and private grants, making it easier to get operating capital. For instance, certain grants and other public allocations are only available to 501(c)(3) organizations.
Tax-deductible donations. With 501(c)(3) nonprofits, donations made by individuals to the nonprofit corporation are tax-deductible.
Possible state sales and property taxes exemption. This benefit varies by state.
US Postal Service discounts. Tax-exempt nonprofits generally can receive discounts on bulk mail rates.
Credibility. There is established credibility for an organization that is recognized by the IRS as a tax-exempt nonprofit.

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The Basics of Forming a Nonprofit Company

Posted on January 24th, 2012 by Joey Donovan Guido

Category: Entrepreneur, Form My Business, Start A Business

The-Basics-of-Forming-a-Nonprofit-Company Forming a nonprofit company can be confusing. There are steps that must be taken on both the state and federal level — some of which require an expert’s understanding of incorporation forms. This is especially true when it comes to 501(c)(3) registration.

But before we get ahead of ourselves, let’s take a look at the basics of forming a nonprofit company, so we can glean a better understanding of the process …

What is a Nonprofit Company?

The name “nonprofit” is a tricky one. It often lends itself to visions of hard working philanthropists who get paid small salaries. And although this is sometimes the case, many nonprofits are huge, very profitable companies. The difference between for-profit and nonprofit companies comes down to one thing: how profits are distributed. In the for-profit world, profits can be legally redistributed to shareholders. Not so for nonprofit entities, which need to apply profits back into the organization.

How to Form a Nonprofit Company on the State Level
Although nonprofit companies adhere to state laws that are different than those of standard corporations (LLCs, S corps and C corps), the business formation process is very similar. Three things you’ll need to do are:

File nonprofit Articles of Incorporation with the state, along with applicable state filing fees.
Provide a detailed business purpose: In your Articles of Incorporation, you need to provide a detailed explanation of what the nonprofit is being created to do/provide. The IRS will consider this information as it reviews your application for tax-exempt status.
Include specific tax-exempt language in your articles of incorporation. Typically, the IRS looks for this if you file for tax-exempt status.

How to Form a Nonprofit Company on the Federal Level
Speaking of tax-exempt status, there’s a misconception that creating a nonprofit corporation means the nonprofit is automatically tax-exempt. Not true. Once you’ve formed your nonprofit on a state level, you’ll need to file for tax-exempt status (if it’s something you’re seeking) with the IRS. This means filling out and submitting form 1023 with the IRS, who must approve your request. If your 1023 form is approved by the IRS, you will then have what is called 501(c)(3) status, making your company tax exempt.

Other things to keep in mind:

The IRS requires filing fees. The standard filing fee is $750. A reduced filing fee of $350 is available to nonprofits who expect to have, or have had, gross revenue under $40,000 for the first four years combined
Some states that also require a state-level tax-exempt status filing
There are many additional IRS nonprofit classifications other than 501(c)(3). It’s important to make sure that you’re filing for a classification that suits the needs of your company.
The IRS requires a plethora of financial information, which you may not have at the inception of your nonprofit corporation.

The Difficulties with Form 1023
When filing for tax-exempt status, we highly recommend utilizing an expert to complete form 1023. This form has the reputation of being the most difficult form created by the IRS, and if it’s not filled out correctly your tax-exempt status may never come to be. Form 1023 is approximately 30 pages long — without the schedules and attachments. The IRS estimates preparation time of over 100 hours for completion, and IRS approval can take anywhere from a couple months to around a year, depending on the number of written follow-up questions the IRS has and how quickly you provide answers.

It’s critical that you use a reputable company to complete this form, one that’s experienced with filing 1023s. We typically refer our customers to The Foundation Group.

What does tax-exempt status mean?
Being tax-exempt means that the net profits of the nonprofit organization are exempt from federal income taxes. Certain states allow state-level tax-exempt status, and in such cases, the net profit is also exempt from payment of state income taxes.

Tax-deductible Donations
Many companies that are approved for 501(c)(3) status, can accept donations and contributions from individuals and businesses. In turn, the persons or businesses that are contributing to the nonprofit corporation may claim their donation as tax-deductible* — which of course is a big selling point when seeking contributions. (*The IRS determines which types of 501(c)(3) entities are permitted to do this.)

Have Questions?
If you have questions, or would like assistance with forming a nonprofit company, feel free to give our customer service team a call between 8am and 7pm CST, at 800-981-7183. Or, send us an e-mail anytime. We’re always happy to help.

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Incorporating a Business? What You Need to Know to Ensure Your Limited Liability Protection

Posted on January 20th, 2012 by Joey Donovan Guido

Category: How To Information, Incorporate a Business, LLC, S-Corp, Small Business

Limited-Liability-Protection

When you’re incorporating your business, whether it’s a Limited Liability Company (LLC), S corporation (S corp), or another business formation, there are at least two things you’ll need to do to properly set up your company.

Filing incorporation documents within the state you’re doing business in is critical. Even if you choose to incorporate in Delaware because of the many business advantages it offers, you’ll still need to incorporate in the actual state you’re physically doing business — often referred to as your home state. If you have multiple states where you have a physical presence, you’ll need to incorporate in each of them. Incorporating in any state other than your home state is called Foreign Qualification.

Once incorporation documents are filed, many small business owners think they’re done. This is not the case. It’s true that your company is officially formed, but if you want to ensure that your limited liability protection remains intact, you’ll have to conduct business in a certain way.

Obtaining an Employer Identification Number (EIN)
The key next step is setting up a bank account, but in order to do this you have to file a form with the IRS to attain an Employer Identification Number (EIN). This Federal Tax ID number is what will enable you to open up a bank account in the name of your company (or its DBA name). It’s very important that your business transactions are kept separate from your personal bank account.

Clients and customers will need to make payments to the business, or DBA name, and all funds should be deposited in the business account. If there’s a hazy middle ground where checks are being made out to you and deposited into your personal checking account, this may compromise your limited liability protection.

What is Limited Liability Protection?
One of the major benefits of incorporating, limited liability protection protects a business owner against being held personally responsible for their company’s debts and liabilities. With limited liability protection, creditors cannot pursue the personal assets (home, savings, etc.) of the business owner to pay off business debts.

We’re Here to Help
If you have questions, or would like assistance with incorporating your company, feel free to give our customer service team a call between 8am and 7pm CST, at 800-981-7183. Or, send us an e-mail anytime. We’re always happy to help.

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Turning Your New Year's Resolutions into Reality

Posted on January 19th, 2012 by Joey Donovan Guido

Category: Goals, Grow a Business, How To Information, Leadership, Small Business

Did you make any business or personal
New Year’s resolutions this year?

If so, bear with me while I ask a redundant question:

Do you want your resolutions to become reality?

Of course you do.

But in order to do so, you’ve got to transform your resolutions into actual goals.

To follow are four major steps that will help you create detailed, attainable goals — upping the odds for manifesting your New Year’s resolutions into reality.

1. Discover your goals. If you’ve already determined your New Year’s resolutions, you’ve already accomplished this first step. If not, take out a piece of paper (or open a Word doc) and click here for details on discovering goals.

2. Clearly define your goals. I like to say that vagueness will leave us directionless, but a goal that is brimming with details gives us a “high-definition” view of what our future looks like. Take a moment to think of your small business as a trip you’re planning. A clearly-defined goal is like the address (destination) you enter into your GPS. Without the destination, your GPS can not plan a step-by-step route to get you where you want to go. More on defining goals.

3. Setting your goals. Speaking of step-by-step, the next part of the process is creating a step-by-step plan of action. It’s imperative that each step is manageable, or what I like to refer to as “bite-sized.” Here’s how Zig Ziglar and Napoleon Hill, two of my mentors, describe the process of developing your step-by-step plan of action:

Identify EXACTLY what you desire
Spell out exactly why you’d like to reach these goals
List the obstacles you need to overcome in order to get there
Identify the people, groups and organizations you need to work with to get there
Identify what you need to know (learn) in order to reach these goals
Develop a plan of action
Set a date on it. When do you expect to get there?
Write it all down!
More on setting your goals

4. Overcoming obstacles. Let’s face it, we’re not working in a controlled environment here. It’s very likely that obstacles will present themselves as we strive to attain our goals. Here are some practical ways to manage obstacles when they arise:

Learn to respond instead of reacting
Seek our positive input from people, books, seminars …
Have a flexible plan that has room for revisions as needed
Develop your long-term vision so that you don’t lose sight of your goals when obstacles arise.
Avoid them all together by being aware of potential problems before they arise
More on overcoming obstacles

As you can see, there’s a considerable amount of work involved in the process. But this is your business and your life we’re talking about. At years end, I’m sure you’ll want to look back and see success, not frustration because your resolutions never manifested into anything but a big idea.

Take the time to turn your New Year’s Resolutions into attainable goals. You’ll be glad you did.

Good luck!

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Don't Judge Your Small Business Based on the State of the Economy

Posted on January 13th, 2012 by Joey Donovan Guido

Category: Entrepreneur, Grow a Business, Leadership, Marketing, Small Business, Small Business News

Small-Business-State-of-the-Economy If you’re an entrepreneur, or a small business owner, it might be tempting to run your business based on the state of the economy.

When the economy is bad, there can be a tendency to want to play it safe in the decisions a small business owner makes. This is true across the board — from products, to marketing, to the types of people that are hired.

Playing it safe, especially in a poor economic climate, may seem like the best way to help your small business survive. The problem is that safe thinking leads to products and services that are merely acceptable. But when customers are being more careful than ever with how they spend their money — they’re looking for something that’s exceptional, not acceptable.

Survival mode rarely leads to innovation or growth. Instead it leads to mediocrity, because fear of making a mistake leads to ultra-conservative decisions.

I’m not saying to throw caution to the wind, but settling for acceptable when you’re capable of exceptional is never a good idea. Nor is it the most fun, profitable or fulfilling choice.

There’s no doubt that there’s a higher volume of work and effort involved with reaching exceptional. But the results are worth it — for your customers, your employees, your bottom line and the future of your company.

It’s time to move your small business out of survival, and into exceptional.

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Delaware's Annual Report Filing Deadline is Approaching

Posted on January 12th, 2012 by Joey Donovan Guido

Category: Entrepreneur, Home Business, Internet Business, Small Business, Small Business News

Delaware-Annual-Report-Filing If you’ve formed a business in Delaware, either as your home state or Foreign Qualification, you’ll need to file an Annual Report.

The due dates for Delaware’s Annual Report are as follows:

Domestic Corporations and Not for Profits
March 1, 2012

LLCs
No annual report is required, but LLCs must pay an annual tax of $250.00 by June 1, 2012

Foreign Corporations
June 30, 2012

Please keep in mind that there are state fees associated with all of these filings, except for exempt domestic corporations.

What Happens if the Report is Filed Late?
The penalty for not filing a completed Annual Report on time varies depending on which type of formation you have.

Domestic Corporations and Not for Profits: the penalty for failing to file a completed Annual Report on or before the deadline is $125. In addition, interest on any unpaid tax balance is charged at 1.5% per month.
LLCs: the penalty for payments made after the due date is $200.00. Interest accrues on the tax and penalty at the rate of 1.5% per month.
Foreign Corporations: if the Annual Report is not made by the due date, Foreign corporations are assessed a penalty of $125.

We’re Here to Help
If you have questions, or would like our assistance with the your Delaware Annual Report Filing, feel free to give our customer service team a call between 8am and 7pm CST, at 800-981-7183. Or, send us an e-mail anytime.

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Dissolution: How to Properly Close a Company

Posted on January 9th, 2012 by Joey Donovan Guido

Category: How To Information, Small Business

Dissolution-How-to-Properly-Close-a-Company Small business owners don’t typically open up their business with the intention of closing it down. In reality, it happens.

Anyone who’s closed a business knows the emotional baggage that goes along with it — including feeling like a failure. But it’s important to remember that more often than not successful endeavors — and successful businesses — are the result of one or more failures.

From Thomas Edison, to Steve Jobs, failure played an integral role in their ultimate success. Learning what went wrong, as well as taking note on what worked well, is a recipe for success.

But before you move on to your next endeavor, you’ve got to get your current company closed properly. Walking away without taking the right steps to dissolve your company could cost you money — and it could hurt your reputation in the business world (some states make this type of information public).

Although it may be overwhelming now, correctly dissolving your company is something you’ll be glad you did down the road.

To follow is an overview of the steps a business needs to take to dissolve their company. For more details, visit our dissolution article at BizFilings.com.

Step 1: Corporation or LLC action
Company owners must approve the dissolution of the business. With corporations, the shareholders must approve the action; with limited liability companies (LLCs), members grant approval.

Step 2: Filing the Certificate of Dissolution with the state
After shareholders or members have voted for the dissolution, paperwork must be filed with the state in which the business was incorporated. If the company qualified to transact business in other states, paperwork must be filed in those states, too.

Step 3: Filing federal, state, and local tax forms
Although you’re ending operations, your tax obligations do not immediately cease. You must formalize the business closing with the IRS as well as your state and local taxing agencies.

Step 4: Notifying creditors your business is ending
You must notify all of your company’s creditors by mail, and explain:

That your corporation or LLC has been dissolved or has filed the statement of intent to dissolve
The mailing address to which creditors must send their claim(s)
A list of the information that should be included in the claim
The deadline for submitting claims (often 120 days from the date of the notice)
A statement that claims will be barred if not received by the deadline

Step 5: Settling creditors’ claims
Creditor claims can be accepted or rejected by your company. Accepted claims must be paid or satisfactory arrangements made with creditors for repayment.

Step 6: Distribution of remaining assets
After paying claims, remaining assets may be distributed to company owners in proportion to the share of ownership.

Just like Thomas Edison, who failed at creating a working light bulb over 10,000 times, we have to keep trying and learning until we get it right. Until then, don’t give up.

Archive for January, 2012