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Archive for the ‘LLC’ Category

A Few Notes On Incorporating a Sole Proprietorship

Posted on June 8th, 2011 by The BizFilings Team
Category: Incorporate a Business, LLC, S-Corp

Most entrepreneurs start companies as sole proprietorships, which is essentially a default business entity. This filing status is a sensible option for solo professionals such as freelance photographers, graphic designers and contractors.

However, as a business grows and begins to take on more employees, finances, customers and general business responsibilities, owners will need to protect themselves from the threat of legal and financial liabilities.

Proprietors in a general partnership also run the threat of being liable for debts incurred from lawsuits, as such statuses are seen as indistinct from individuals under the law.

Not only can incorporating a businesses with an S corporation or LLC status help protect proprietors’ personal assets, it can also alleviate tax burdens, in certain circumstances.

“Owners of Subchapter S Corporations, a common format for professional service businesses such as accountants, attorneys or physicians, can receive compensation in the form of dividend distributions,” points out Marla Brill for Reuters Wealth. “Such distributions aren’t subject to Social Security tax, which is 10.4 percent of the first $106,800 in wages this year and 12.4 percent in 2012.”

For more on the advantages and disadvantages of incorporating visit the BizFilings Learning Center.

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New Year May Mean Time to Incorporate

Posted on January 4th, 2011 by The BizFilings Team
Category: C-Corporation, Corporation, Grow a Business, Incorporate a Business, Incorporation, LLC, S-Corp, Small Business

As 2011 gets under way, borrowing among the country’s small businesses is up, unemployment is expected to fall slightly for December, consumer spending is increasing and manufacturing activity is accelerating.

Accordingly, small businesses need to ask themselves a few questions: Is it time to start hiring? Should the marketing budget be expanded? If so, when? Should the company begin a more proactive social media presence? Is it time to get incorporated? If so, does the business need a registered agent service? What about corporation vs. LLC?

If small businesses begin to receive greater access to capital and outside investors – as they are expected to, thanks to initiatives such as the recently enacted Small Business Lending Fund – then it is important for owners to protect their personal assets through a business entity such as an S Corp, LLC, C Corp or other classification.

“The end of the year is a great time to think about the administration of your business,” Charley Moore, founder and CEO of Rocket Lawyer, told Inc. magazine. “Think about your corporate structure and consider if incorporating at this time will give you a new year of different tax treatment, or protect your company as it goes into a new phase.”

Determining what entity suits your small business is dependent on a number of factors including growth rate, investment, size of staff and assets – both liquid and illiquid. Owners should consult legal or filing experts to determine if the time is right to form an LLC or corporation.

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Attention Independent Fashion Designers: Strut Your Stuff for a Chance to Win

Posted on November 30th, 2010 by BizFilings Team
Category: Business Inspiration, C-Corporation, Corporation, Grow a Business, Incorporate a Business, LLC, Marketing, Promote My Business, Small Business, Start A Business, Work For Myself

fashionAre you an aspiring designer itching to make your mark? Well, we have just the thing.

Blazetrak and Nolcha, a leading platform for independent fashion designers, have teamed up to launch a contest that will give one designer a once-in-a-lifetime opportunity to participate in Nolcha Fashion Week: New York in February 2011.

Fashion designers are invited to take part in this online competition by submitting up to six photos of your best work through Blazetrak now through Dec. 17, 2010. You will then be officially entered and guaranteed a review by Nolcha’s team of experts. Images can be drawings, models wearing garments and just garments.

According to www.fibre2fashion.com, the winning fashionista will receive: complimentary exhibition space for awesome exposure at the Nolcha Fashion Lounge: New York; a two-hour consultation regarding target, retailers, supply chain, breakeven and scale of the line by Global Purchasing Group; free membership to Afingo.com plus featured spotlight and interview; a complete business formation package by BizFilings.com for you to form an LLC or form a corporation; and a sourcing package that includes premium level membership to Source4Style, including complimentary swatches and sourcing consultation.

The winning fashion designer will debut live on Ustream on Jan. 17, 2011.

So what are you waiting for? Spread the word. Do you know of any other contests like this targeting independent business owners?

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Deciding on a Business Entity Classification

Posted on November 30th, 2010 by The BizFilings Team
Category: C-Corporation, Corporation, Grow a Business, Incorporate a Business, Incorporation, LLC, S-Corp, Small Business, Start A Business, Work For Myself

Forming a company requires an idea, but once the idea is translated into a legitimate business entity of forming an LLC or incorporating a business, challenges arise and decisions need to be made.

According to the World Bank, the U.S. ranks eighth in the world for ease in registering a new business, behind Australia, New Zealand, Singapore and others, averaging a span of six steps and six days to become legitimate. China and Brazil, on the other hand, impose some of the most challenging bureaucratic obstacles to incorporating a business, with an average 37 and 120 day process in China and Brazil, respectively.

The U.S. business registration process is not the most efficient one, but it is certainly above average. Most entrepreneurs are intimidated by the process of choosing a business entity. Limited liability companies (LLC), corporations and S corporations are a few examples of business entities, but they all serve the basic function of protecting an individual proprietor or owner from legal or financial debts.

“The decision is more complicated than it may seem: What the government leaves in one pocket, it takes from another,” writes Inc. magazine. “So sit down with a lawyer and accountant to weigh the options in light of your individual tax situation.”

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Top 5 Things Small Business Owners are Thankful for this Thanksgiving

Posted on November 24th, 2010 by BizFilings Team
Category: Business Inspiration, C-Corporation, Corporation, Form My Business, Grow a Business, Incorporate a Business, Incorporation, LLC, Small Business, Start A Business

Around Thanksgiving time last year, my then 5-year-old nephew, Jack, was asked to write down three things he was most thankful for. Here’s what he put in this order:pizza_opt

  1. God
  2. My family
  3. Pizza

I’m with him on the pizza.

OK, so besides pizza, what are small businesses thankful for?

I would have to agree with the five items that www.network.businessofsoftware.org listed, which include:

  1. Internet. The worldwide Web has certainly sprung open a host of doors and windows of opportunity for small businesses. Not to mention, the Internet has helped support small business growth. “The Internet has given entrepreneurs the freedom and the ability to start new businesses with minimum investment with the help of virtual office/team, online communication, online management of resources and business functions, and a lot more,” according to the Business of Software website.
  2. Social Media. Information can now be transmitted and gathered instantly using tools like LinkedIn, Facebook and Twitter. Social media also lends the opportunity for small businesses to ignite the popularity of an idea within hours – putting a whole new spin on public relations.
  3. Knowledge-Based Economy. As the Business of Software list points out, “The competition has shifted from being size-based to knowledge-based. More and more small businesses are able to compete with larger companies purely based on knowledge that they can easily share. The Internet has leveled the playing field to such an extent that a single person company can run like a 1,000-employee global organization.”
  4. Global Access. Once again the Internet enables small business owners to access worldwide vendors and customers. As an example, companies like BizFilings, have played a big role in helping small businesses to form a corporation or form an LLC no matter where they are located.
  5. Affordable Services and Technologies. Many small businesses are empowered with services and technologies that cater specifically to their needs at affordable prices. Websites such as www.toolkit.com share tools and expertise with small business owners at no charge.

What other services and products are you thankful for? We’d love to hear from you!

Oh, and Happy Thanksgiving!

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When is the Best Time to Incorporate Your Small Business?

Posted on November 17th, 2010 by BizFilings Team
Category: Corporation, Form My Business, Incorporate a Business, Incorporation, LLC, Small Business, Start A Business

stocksealThere are many reasons why you may consider incorporating your business. The primary ones include:

  • Protecting your assets
  • Gaining tax advantages
  • Building credibility

But when is the best time to form an LLC or form a corporation?

This is the million dollar question. If you are a small business owner already up and running, a principal advantage to incorporating immediately rather than waiting until the beginning of the New Year, is to minimize the risk to your personal assets. The longer you remain unincorporated, the longer you are exposing yourself to unwanted losses.

Additionally, it is just as significant to consider that a mid-year incorporation typically results in excessive time and expense to file two tax returns. However, that will most likely be diminished by the self-employment taxes you save by incorporating before the end of the year.

Incorporation experts, like us here at BizFilings, often encourage entrepreneurs who are considering incorporation at the end of the year to delve deeper into exploring the advantages of a delayed effective date.

Some states accommodate business owners to choose a date one to two months in the future for when your business will officially be formed as a corporation or an LLC. This action enables you to manage your paperwork in 2010 and to ask for an effective date in January 2011.

Here are a few ways a delayed effective incorporation date can benefit small business owners:

  • Saving money. By delaying the date of incorporation, business owners can avoid being taxed and avoid filing an annual report in the current calendar year.
  • Saving time. By filing before the end of the year, you can avoid getting your filing stuck in the backlog that may occur at the beginning of the year. So if you were to order with us now, many states will allow us to indicate an effective date of January 1, 2011 on the Articles. If you wait until the beginning of January to order, you may not get filed until mid-January or later.

Learn more about delayed effective date filing through www.BizFilings.com.

When did you incorporate your small business and why?

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Is a Single-Member LLC the Option for You?

Posted on July 6th, 2010 by BizFilings Team
Category: Corporation, Form My Business, Incorporate a Business, Incorporation, LLC, Small Business

stocksealAs a small business owner, you may wonder what the advantages and disadvantages are of forming your business as a single-member limited liability company (SMLLC). 

Essentially, an SMLLC can be defined as operating an LLC with only one owner. Under current IRS obligations, an SMLLC that is not classified as a corporation will be classified as a disregarded entity, which is taxed as a sole proprietor for income taxes. Translated this means, that the SMLLC member simply reports the income and expenses of the LLC on his or her own Form 1040 on Schedule C, under his or her own Social Security number. The SMLLC does not have its own tax return. Small business owners should consult with a lawyer or accountant in case your state has an income tax. This way you’ll be able to determine if a return has to be filed for any state income tax.

Similar to all LLCs, an SMLLC is designed to protect against personal liability. But there is lingering concern as to whether a member of an SMLLC will be granted equal protection from liability as a member of an LLC with multiple members. The biggest risk with an SMLLC is that certain courts have not deemed SMLLCs as separate entities; dismantling their purpose to protect the assets of the LLC from the creditors of the member.

 The LLC may be the newest form of business organization in the United States – coming into existence in the 1980s and 1990s – but it still bears advantages of combining the liability protection of a corporationwith the tax treatment of a partnership. Considering to divvy out even two percent of your company aptly positions you to enjoy the advantages of forming as an LLC.

The bottom line is that you need to go over your options with a lawyer or accountant to discuss possible issues in determining what formation works best for you.

Is your business currently classified under SMLLC status? If so, why did you choose to form your business as an SMLLC?

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LLC Elects S Corp Status — The Best of Both Worlds?

Posted on April 29th, 2010 by BizFilings Team
Category: Incorporate a Business, Incorporation, LLC, S-Corp

So you are ready to start a small business, eh? You have a wonderful vision for a unique new service or special product. Your business plan is a work of art. You are ready to cast off from the safety and security of your cubicle at the office and blaze a new trail of entrepreneurship. Congratulations!

Now, as you start, run and grow your new business, how do you intend to structure it so that it becomes an efficiently operating, thriving enterprise? Two of the most popular organizational forms today are the limited liability company (LLC) and the S corporation. But what if I told you that you could have the best of both worlds, so to speak, by establishing an LLC and then electing to be treated like an S corporation for tax purposes? Well, it can be done.

Business owners–even attorneys and accountants–often get twisted up in the debate over which is best, the LLC or the S corporation. But it’s not necessarily an either/or proposition. Rather, you can set up an LLC and, after setting it up, you can elect to have the LLC treated as an S corporation. If your LLC operates an active trade or business, and payroll taxes (SECA taxes) on the owner or owners are high, you may find that an S corporation election is the best choice.

Both organizational forms share the characteristic of “passing-through” their income to the owner(s). Both also provide their owner(s) limited liability protection. But each has some distinguishing features, too. You, as a new business owner, will want to consider the differences as you choose the form for your enterprise.

  • An LLC beats an S corporation for ease of operation and administration.
  • An LLC beats an S corportation for profit-sharing flexibility.
  • An S corporation beats a typical LLC for flexibility in paying its earnings to owners as either earned income in the form of salaries and wages or passive income in the form of distributions.
  • An S corporation beats an LLC for various tax planning purposes.

To learn more about the features of an LLC and the features of an S Corp, read the rest of this article at Toolkit.

BizFilings would like to thank guest blogger and Toolkit staff writer, Robert Steere, for his contribution. Robert has served as general counsel for a state tax department, as tax policy director for a state chamber of commerce, and as a tax specialist for two major CPA firms during his 30-year professional career. Bob holds a BS degree from Michigan State University and a JD degree from University of Michigan Law School.

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Corporation or LLC?

Posted on April 1st, 2010 by Heather
Category: C-Corporation, Incorporate a Business, LLC, S-Corp

Perhaps the most common advice a new small business owner hears is to incorporate. There are advantages as well as complications. But even if you decide to go ahead with incorporation, that’s only the first of many choices you’ll need to make. The next step is deciding whether to form a corporation or a limited liability company, or LLC.

The two are similar in many ways. Both are legally a bit like individuals. It’s as if you’ve given birth – suddenly there’s this new entity with rights of its own. Like that new baby, the new entity is NOT equivalent to you, and you’ll get yourself in hot water if you pretend otherwise. Even if you are the only employee, writing a check for Billy’s braces out of the company account is just like writing it out of your next door neighbor’s checkbook.

So long as you are in compliance with state law, both types offer full limited liability to all of the owners of the business in every state. But neither a corporation nor an LLC will protect you in the event of your own malpractice or malfeasance. In both cases, you’ll want business insurance to protect yourself.

Neither will take on your own personal debts—nice try—but in most states and industries, both will protect your personal assets in cases such as legal malfeasance by an employee.

So if they’re similar in all those ways, how are they different? Most of it comes down to the way they’re treated at tax time.

An LLC is a pass-through type of business. Profits and losses of the organization go straight through to the owners. Business income equals personal income, so the owner pays the tax on his or her personal return, and it’s taxed at the individual rate.

Corporations are separate businesses entities with profits and losses taxable to themselves, not to the owners. As a result, corporations are taxed at the corporate rate.

LLCs are generally simpler in structure and in reporting requirements, but in some circumstances, proprietors can earn a substantially increased tax bill through the addition of the self-employment tax, currently at a painful 15.3 percent.

In some situations, corporations can bring their own tax headaches. As mentioned above, the corporation is taxed on its profits, but the owner is also taxed on any dividends and salary from the company. It’s a double tax, and it can seriously cut into the real dollars earned in the end.

This is the beginning, not the end, of a branching tree of decisions. Your attorney or tax accountant can help you find the right path to making your entrepreneurial dream a reality.

See additonal info in our Learning center on both:
Starting an LLC
Starting a corporation

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Filing Articles of Organization

Posted on March 18th, 2010 by Heather
Category: Corporation, Incorporate a Business, LLC, Small Business, Start A Business

Every venture has a moment of creation. When forming a limited liability company (LLC) or corporation, every business entity must file articles of organization with the state in which the business is being incorporated. Once the articles are accepted by the state there is a blinding flash of light, and lo, your business exists!

When forming an LLC, this crucial document is called the articles of organization. In the case of the corporation, it’s usually called “articles of incorporation.” Either way, they establish the same general who-what-when-where-why-how of the new business.

Standard forms for the articles of organization (for an LLC) are available from each state. The business owner can fill in the necessary information on the form. Ideally, however, the articles of organization for an LLC will be tailored to the business owner’s specific requirements, since no two situations are identical.

Regardless of the situation, articles of organization include these four main elements at minimum:

  • Name, principal location and purpose of the business
  • Agent for service of process
  • Classes of ownership interests
  • Initial managers and owners

But Wait! There’s More!

Yes, your company will officially exist in the eyes of the state when the articles of organization are filed, but there are a few more documents you might want to consider before your new business is ready to go out into the world.

The small business owner operating an LLC should also have an LLC operating agreement, which includes a buy-sell agreement (In a conventional corporation, bylaws take the place of an operating agreement, and the buy-sell agreement will be a separate document from the bylaws.)

Most states do not require that an LLC adopt an operating agreement. Do it anyway. An LLC operating agreement provides the owners with formal guidance on issues such as voting, management and division of profits. Without this guidance, it is much more likely that disputes among the owners will arise and that piercing of the veil of limited liability will be applied by the courts. And no one wants that.

Have you filed your articles of organization?

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