Loading...

Filing an LLC – FAQ

We are excited to bring you another post in our monthly FAQ series! This month, our CEO Nellie Akalp is answering questions about one of the hottest entity types for small businesses – the LLC. What are the requirements of filing an LLC? What are the benefits? Read on to find out!

Q: What are the benefits of forming an LLC?

A: In an LLC, the owner’s personal assets are shielded from business liabilities just as they would be in a corporation. In addition, the IRS views the LLC as a “disregarded entity.” Thus, an LLC does not file separate taxes; company profits and losses flow through to the owners and are subject to each owner’s individual tax rates. The LLC is great for a business that wants liability protection, but seeks minimal formality. It’s also the perfect structure for a business with foreign owners since anyone (C Corp, S Corp, another LLC, a trust, or an estate) can be an owner of an LLC.

Q: Do I need to prepare an Operating Agreement to form an LLC?

A: You’re not required to create an operating agreement in order to form an LLC, but in many states you will be required to keep an operating agreement at your place of business to maintain your corporate compliance. And even if your state does not require a formal operating agreement, it can be an important document to help clarify verbal agreements between owners and prevent misunderstandings.

Q: What is an Operating Agreement?

A: The Operating Agreement is an official contract that spells out the management and ownership of the LLC. It can outline details like how much of the company each member owns, everyone’s voting rights; how profits and losses should be distributed among the members; and what happens when someone wants to leave the business.

Q: Do I need to submit my LLC’s Operating Agreement?

A: You’re not required to submit a formal operating agreement to the state or any other entity. But, most states do require that an LLC has an operating agreement in place and kept at their place of business.

Q: Are there any differences between how an LLC and S Corporation are taxed?

A: Both the LLC and S Corporation can be taxed on a pass-through basis; taxes aren’t paid on the entity level, but at the individual owner level. Profits and losses are passed through and reported on the individual’s tax return. While both LLCs and S Corporations are pass-through entities, there are a few differences.

One difference is that the income of an LLC flows to the members involved with the business and is subject to self-employment tax. With an S Corporation, only salaries are subject to self-employment tax; any distributions that are paid out to members are not subject to self-employment tax.

Another key difference is that the LLC offers a lot more flexibility in terms of how owners can be taxed. With the S Corporation, owners must be taxed based on their pro rata ownership interests; if you own 50% of the business, then you’re taxed on 50% of the company’s profits. With an LLC, owners can determine their allocations for the year and be taxed accordingly.

Q: Can one person form an LLC?

A: Yes, all states allow one member LLCs.

Q: Does an LLC have stockholders?

A: No. LLCs are not permitted to issue stock in any state. Only corporations (C- or S-Corporations) can issue stock.

Q: How is an LLC structured?

A: LLCs have members – these are the owners of the LLC and are similar to stockholders in a corporation. Members typically receive an ownership stake in the LLC commensurate with their investment (either financial investment or ‘sweat equity’). In addition, members choose a manager to manage the LLC – this position is similar to a director of a corporation. A manager can be a member or could be someone from outside the LLC.

Q: Does an LLC need to hold an annual meeting?

A: No state requires an LLC to hold an annual meeting. This is one of the benefits of the LLC – it has fewer formalities than a corporation. However, if your LLC’s operating agreement requires an annual meeting (or other meetings), then you’ll need to hold such meetings in order to stay compliant. Many owners choose to make meetings optional in the operating agreement.

Q: What’s the difference between an LLC and PLLC?

A: In many states, licensed professionals, such as lawyers, doctors, architects, and accountants, aren’t allowed to form LLCs. Instead, these professionals can form a PLLC (Professional Limited Liability Company). One of the key differences between an LLC and PLLC is that members of the PLLC must be licensed professionals, and you’ll need to show proof of a valid license to register the PLLC. In most cases, members of a PLLC are personally liable for their own malpractice claims, but aren’t personally liable for another professional’s malpractice claims.

Do you need help registering an LLC or have a questions regarding the process? Call the CorpNet.com team today for a free business consultation at: 888.449.2638

Image: Adobe Stock


[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

Will Your Business Need Financing in the New Year?

As you plan and set goals for your small business in 2017, one area to look at is financing. Will you need additional funding at some point in the New Year? If the answer is yes, how will you raise the money? Take a closer look at the two primary means of raising capital — equity financing and debt financing — and what you need to know about each.

Equity Financing

In equity financing, you give up a piece of your business (equity) in return for an investment of capital. Equity investors may be private investors, venture capital companies or even your friends and family.

Angel investors are the most realistic source of investment capital for most small business owners. Angels are private investors; some invest individually, while others form angel groups to pool their money. Generally, angels are experienced business people, former business owners or professionals. In addition to the capital they can provide, they can also offer much needed business guidance and expertise.

If your small business has strong growth potential in an industry such as technology or healthcare, you may be able to get venture capital. Venture capital firms tend to focus on businesses with a track record of success and potential for rapid growth with a high return on investment. They make large investments, but in return, will want to have a strong say in your business and possibly even take over management.

If you plan to seek capital from investors, it’s important to make sure the business structure you chose will allow what you want to do. For example, if you operate as a sole proprietor, you won’t be able to take on equity investors, since there is no separate “company” to invest in.

A general partnership, C corporation or limited liability company (LLC) form of business all enable you to sell shares in your business. However, if you have an S corporation, the number of shareholders you can have is limited to 100, which could be a problem. In addition, the S corporation form limits what type of person or entity can be a shareholder or owner, which could cause problems either in raising capital or transferring ownership of shares down the line.

While taking on investors may seem like an easy solution to getting the money you need, you should think carefully before giving away equity in your business. Depending on the amount of equity they control, investors can make it more difficult for you to make decisions about your business without their input. Your relationships with investors, even those you are currently close to, may change in the future, leading to unforeseen difficulties. If you give up too large a stake in your business, you may eventually lose control of it altogether.

Debt Financing

As the name implies, debt financing means taking on debt that you need to repay at some point. Typically, this means a bank loan. However, debt financing can also take the form of loans from friends and family, credit unions, or alternative financing sources or even taking credit cards advances.

Business loans can be secured or unsecured. Secured loans require you to put up some collateral, such as business equipment or your house, to obtain the loan. Unsecured loans don’t require collateral, but are often more difficult to get and have higher interest rates and fees.

If you’re seeking a bank loan, the best place to start is with a bank that makes Small Business Administration (SBA) loans. SBA loans are partly guaranteed by the SBA, which makes banks more willing to lend to small businesses they otherwise might consider risky borrowers.

Other sources of debt financing include:

  • Equipment financing: If you are purchasing business equipment, the company that makes the equipment may have financing options available.
  • Invoice financing: Invoice financing companies advance you money based on the amount of your outstanding invoices.
  • Factoring companies: Similar to invoice financing, factors purchase your outstanding invoices for a percentage of their value, and then take over collecting on the unpaid invoices for you.
  • Merchant cash advances: If your business makes most of its sales via credit cards, such as an e-commerce business or retail business, you may be able to get a merchant advance based on the amount of your average credit sales.

The Right Choice

To make sure you’ve selected the right form of business for your financing needs, it’s best to discuss it with your attorney and accountant before making any decisions. If you need to make changes to your business structure before seeking financing, start now so you’ll be ready to go after the capital you want in 2017.

Image: Adobe Stock

[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

Nellie in the News: November 2016

Thanksgiving and November have come and gone and the holidays and 2017 are creeping up on us fast and we are here help prepare your business for the new year! CorpNet can help you incorporate a business or form an LLC right now or as a delayed filing in any state.

This month, our CEO Nellie Akalp has been busy writing a ton of articles to help small business owners start a business, stay in compliance and prepare for the new year. Below are some highlights from the month of November!

Want Nellie to speak at your next event or share her tips on your podcast? Contact her today!

Interviews & press Mentions

Marvelous Moms Club – Mompreneur Monday with Nellie Akalp http://bit.ly/2fXEpF9

Thoughtful Growth – Tips for Motivation: Unmissable Advice from 192 Experts http://bit.ly/2eb6k2D

AIS Insurance – Nellie Akalp of CorpNet.com on Small Business http://bit.ly/2fvItiR

Small Business Trends – 10 Tips for Being Prepared as an Entrepreneur http://bit.ly/2fwnJG3

 

Expert Contributed Posts

Small Business Trends – Is it Time to Modify Your LLC Operating Agreement? http://bit.ly/2eR6a4G

GoDaddy – 5 Tips for Motivating Employees to Perform at Work http://bit.ly/2ejN2M9

Mashable – Your Brain Needs a Break – These Apps Are Here to Help http://on.mash.to/2eSc9mR

Freshbooks – Your Business Structure Affects your Taxes: Here’s How http://bit.ly/2eWgupg

Huffington Post – Should You Change Your S Corporation to A C Corporation? http://huff.to/2fQ7py3

Entrepreneur – How to Create a Meaningful Morning Routine http://bit.ly/2fSTnNQ

UPS Small Business Solutions Blog – Setting the Stage for a Successful Small Business Saturday http://bit.ly/2fS3a6A

[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

By | November 29th, 2016|Nellie in the News|0 Comments

Should I Incorporate Now or At The Beginning Of The Year?

So you want to change your business structure from a sole proprietorship to an LLC or a corporation? Great! But you might be wondering if you should make it effective now, or wait to file your paperwork until the New Year.

If you’re one of those hyper-organized people, like me, you probably love the idea of having a neat and tidy January 1 effective date. After all, who wants to deal with filing two sets of tax forms—one for the period of time in this year when you operated as a sole proprietor and another for the part of the year the new structure was in place? But at the same time, I’ll bet you want to have all your ducks in a row right now, so you don’t risk filing too late and facing the same situation next year.

Sigh. What’s an entrepreneur to do?

Delayed Filing To The Rescue
Guess what? Most states offer a Delayed Filing option. It provides you a way to perfectly time the effective date of when your business officially changes to your new structure of choice.

Delayed Filing enables you to submit your application for whichever business structure you’ve chosen, but delay the actual incorporation date until a specific date in the future. In short, it lets you control your effective date of incorporation or LLC formation.

Whether you want to make a clean break with a January 1 start date or you have reason to schedule your new structure to take effect on some other date next year, you can get the paperwork out of the way now. That leaves you with one less task to take care when you need to be focused on marketing strategy, customer service, and all else.

Nice, right?

When To Submit Your Delayed Filing
You can use the Delayed Filing option at any time of the year. Check with your state to find out how far in advance you need to file. The requirements vary from state to state. Typically, you would need to file between 30 to 90 days before your requested effective date.
What To Do
When filling out the online forms to form an LLC or incorporate, indicate the number of days after filing that you want your business structure to be effective. When registering your business structure for a delayed start date, your Articles of Incorporation (or Articles of Organization) will need to reflect that effective date, as well.

Final Words of Insight
Even though the end of the year is near, you still have time to submit a delayed filing for January 1, 2017. You will, however, need to use the fast track service to expedite review and approval by your Secretary of State department in time for your intended start date.

Worried you won’t be able to handle the filing details with the busy holiday season upon you? Contact us! We’ll be happy to help you file your paperwork now, so you can get right down to business in the New Year.

Image: Adobe Stock

 

How to Handle Payroll for Your First Employee

Business is booming, and it’s time to hire your first employee. Finding great talent, hiring someone, and making sure that all of your new hire paperwork is in order is often a steep learning curve for entrepreneurs. Fortunately, once you go through the on-boarding process with one employee, you’ll be ready to handle many more as your company grows.

Do You Really Need to Hire an Employee?

First, you’ll need to determine whether or not you truly need to hire a full-time or part-time employee or whether contract labor or a freelancer can do the job.

Understanding the difference between the two main categories of employees versus independent contractors is critical, since mistakes can lead to hefty IRS penalties for not paying the appropriate employment taxes. An independent contractor has more autonomy in how they work, where they work, and how they complete each task, while an employee works directly under your supervision on set tasks, at the time and place of your choosing.

You cannot keep someone as an independent contractor status and treat them like an employee. The IRS takes a dim view of this approach since some companies use it to avoid paying unemployment taxes and other benefits. You must also be quite clear about job hours, since there are different insurance and tax requirements for part-time versus full-time employees.

Consider how you’ll track employee hours. If it’s just one employee, it may be easy to note when they arrive at work and when they leave. If you plan to expand your workforce, a computerized tracking system may needed to accurately track hours for benefits and payroll.

Once you’ve settled upon hiring an employee, create a job description for the position. Include roles, responsibilities, requirements for the job, and a list of tasks associated with the job itself. This will guide your hiring process and help wanted ad, too, so it’s an important task.

Finding Great Help

You can hire locally through newspaper or online classified ads. You can also place ads on job boards such as Indeed, Monster, and other sites. Base your job posting on the description. Receive resumes, review them, and interview the three most promising candidates.

Congratulations! You’ve found your candidate and extended a job offer. If they accept, it’s time to begin the hiring process, step by step.

The Hiring Process, from Start to Finish

There are certain legal and tax rules you must follow when you hire a new employee.

  1. Obtain an EIN: An EIN, or employer identification number, is a number used on many legal and tax documents. You apply for an EIN on the IRS website
  2. Register with your state’s labor department: You must register with your state’s labor department to pay the appropriate unemployment compensation taxes.
  3. Purchase Worker’s Compensation insurance: States require employers to carry Worker’s Compensation insurance to cover their employees in the event of an accident or injury on the job. Each state sets its own policies regarding Worker’s Compensation insurance, so check with your state’s labor department for the rules for your state.
  4. Set up your payroll system: You can set up your own payroll system or work with online payroll software to handle weekly payroll filing needs.
  5. Complete forms: Each employee should fill out a W-4 form, the withholding allowance form, and an I-9 form with verification of eligibility for employment. Photocopy proof of eligibility, such as driver’s licenses, etc., and return the originals to your employee.
  6. Report the employee: You must report employees to the state’s hiring agency. The state then checks against records of people who owe for child support.
  7. File IRS Form 940: You’ll need to complete IRS form 940 each year to report federal unemployment tax.
  8. Set up personnel files: Setup files for your new employees that includes copies of their resume or job application, employment verification, IRS forms, and emergency contact information.
  9. Sign up for benefits: If your company offers benefits, review them with your employee and ask them to enroll.
  10. Finish the process: Create an employee manual and hang up required “Employee’s Rights” posters. Follow all OSHA workplace safety regulations. Get your new employee the tools they need to do their job – a desk, computer, cash register, car or whatever else you need. Then welcome them aboard!

Other Considerations

Depending on your business needs, you may need to include in your hiring process an NDA. NDA stands for “Non Disclosure Agreement”. It is a legally binding contract that prevents employees from sharing trade secrets with anyone else. This protects your business if you have any important information that you don’t want getting out into the public.
Image: Adobe Stock

9 Ways to Show Your Employees You’re Thankful for Them

With Thanksgiving just around the corner, our thoughts naturally turn to what we’re grateful for in life. As a small business owner, I know you’re thankful for your employees. After all, how would you run your business without them? In honor of Thanksgiving, here are 9 ways to say “thank you” to your employees.

  1. Give out bonuses. Let’s face it: Most people are highly motivated by money. There are a couple of ways to handle bonuses. You can set performance goals and give employees bonuses for meeting them—for example, giving a bonus to salespeople who surpass their quotas for the quarter. Or you can give out smaller, “surprise” bonuses, like handing a $25 gift card to a customer service person who goes above and beyond to make a customer happy.
  2. Show some PDA. (That’s “public display of appreciation.”) A thank-you means more when it’s shared in front of the whole team. Whenever you praise employees, take a moment to call everyone’s attention to what you’re doing. It not only makes the employee you’re praising feel great, but also shows the rest of the staff what type of behavior you want to see at work.
  3. Spread the word. Go beyond spotlighting your employees’ achievements in the workplace: Highlight your high-performing staffers on social media, on your website or in your marketing materials. Choose an “Employee of the Month” and profile him or her on your website or in your email marketing newsletter.
  4. Have a food fest. In my experience, one of the best ways to show employees appreciation is through their stomachs. Offer bagels or doughnuts every Friday morning or order pizza every Friday for lunch. Have a potluck where employees bring in their all-time favorite family recipes or dishes from their ethnic heritage. Holiday season? Hold a bake-off with different departments competing for a prize.
  5. Make it personal. Who wants to get an engraved plaque with their name on it? Yawn. Make employee rewards more meaningful by tailoring them to the recipient’s hobbies and interests. Get passes to a big game for a sports fan, or a gift card to a spa for a busy mom.
  6. Write a note. It’s easy to say “Thank you” in passing or send a nice email, but a thank-you note is something a recipient can save and savor. Take time to make your notes concrete and specific; this shows you’re really paying attention to what your employees are doing.
  7. Upgrade them. Having the latest equipment helps employees be more productive and do their jobs better—but, it also shows them how much you value their hard work. Update computers, provide mobile devices for work, spring for better-quality headsets or buy ergonomic office chairs.
  8. It’s about time. Comp time off is always a great way to thank employees for a job well done. Flexible work hours can also show employees how much you value them. Try offering different shifts, such as 8 AM to 4 PM or 10 AM to 6 PM, instead of the standard 9-to-5.
  9. Offer employee benefits. Beyond health insurance, there are tons of other benefits you can provide for your staff. For example, even the smallest business can set up a 401(k) plan to help workers plan for retirement. Life insurance, disability insurance, financial services and even pet insurance are other benefits that can show your employees you care.

Image: Adobe Stock

 

[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

How to Attract and Retain Skilled Workers Through Culture

If you want your startup business to succeed, it is vital to cater to millennials, now the largest generation in the American workforce, according to Pew Research Center. Professionals born between 1980 and 1996 crave engagement at their jobs, and if they aren’t satisfied, they’ll leave, 2016 Gallup research shows. Fortune Magazine reports that leaders of the top 100 best companies to work for in the United States cite culture as their most important tool to achieving success. By showing employees you value their work-life balance, giving them opportunities to learn and grow in their careers and recognizing their good work and rewarding it with fun activities at the office, a company culture thrives and motivates employees to produce better work and stay at your business.

Happier employees are 12 percent more productive, too, according to 2014 research by the University of Warwick. Decreased stress leads to less time off due to illness or accidents, as the Harvard Business Review reports that 60 to 80 percent of workplace accidents are caused by stress. Moreover, high-pressure companies spend more than two times the amount on healthcare costs than other businesses.

Taking all these factors into consideration, here is how to make your business culture stand out to those searching for jobs and how to sustain it for those who work for you.

Show off on Your Careers Page and Social Networks

Give potential candidates a glimpse of what they can expect from your company culture through the descriptions and imagery throughout your website, especially your careers page, and social networks. Write in a voice that conveys the personality of your company. Display your mission statement on your website. Create a video that gives a tour of the office. A great example of this is Toms shoes. Its homepage features the slogan “one for one” prominently, showing off its goal of donating a pair of shoes for every pair that is bought.

Include testimonials from staff about why they are passionate about working for your company. Photos of smiling faces provide evidence your business is an attractive place to work for. You can share content about your culture on everything from your Facebook profile to your LinkedIn page. If you’re looking for a good example of what to include, Amway posts updates about the company on its LinkedIn page. Posts cover everything from pictures of new employees to information about new products to trips its team leaders take.

Provide Training and Development at Work

Jobs are no longer only ways to make money for today’s employees. To stay engaged, employees require learning opportunities that help them add to their skill repertoire. This benefits your business as training enhances your employees’ competence and creativity. The Gallup poll found that 87 percent of millennials say on-the-job development is crucial to increasing their loyalty and stimulation at work.

Ways to implement development range widely and include:

  • Department-wide enrollment in online courses related to the profession
  • Cross-department training to improve how employees understand and work with each other
  • Company-wide training on skills that benefit the whole workplace, such as interpersonal communication or conflict management

Your business could employ a training professional to conduct lessons or send out a casting call for employees to lead training sessions for each other, which might make the learning more meaningful.

Respect Employees as Humans, not Just Workers

A company culture that chains employees to desks and doesn’t recognize personal needs is draining and restrictive. Employees who feel like they are able to fulfill their familial duties or personal passions while still working full-time for you will be more engaged when they’re at work. Ways to improve a work-life balance at your business include:

  • Provide childcare benefits and maternity and paternity leave
  • Offer incentives for prioritizing health, such as a paid gym membership
  • Partner with local businesses to get discounts for your employees on services such as auto repair or massages

One of the best things you can do to improve the work-life balance of your staff is to offer flexibility in hours worked, whether that means allowing them to set up their own schedule throughout the week or work remotely part of the time or when needed. A 2014 study by telecommuting job site FlexJobs found that 74 percent of people say work-life balance is affected by the flexibility of their work hours. The ability to work remotely at least part of the time decreases stress related to commutes and family or personal obligations. Working from a home office may also increase productivity for some employees.

Company culture can constantly be improved upon, so it’s a good idea to periodically survey your current employees about what is working and what is needed. When you involve your employees in creating the culture themselves, they’ll be more likely to support it and be invested in it.

Image: Adobe Stock

 

[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

By | November 15th, 2016|Managing People, Running A Small Business|2 Comments

9 Customer Appreciation Tactics

Ah, it’s Thanksgiving season—time to stuff yourself with turkey, watch football, start your holiday shopping and argue with your crazy uncle at the dinner table. For small business owners, it’s also the perfect time to show your customers and clients how much you appreciate their business all year long. Here are nine customer appreciation ideas that will help build customer loyalty.

  1. Throw a party. Host a thank-you dinner or lunch event for your top customers. November is a great time to get festive, before all the holiday parties start and people’s calendars fill up. Make it special with a creative Evite or even a fancy printed invitation. Hold an awards ceremony to spotlight customers with awards like Customer of the Year.
  2. Make your customer a star. Put your top customers in the spotlight—literally. Film a video interviewing them about their area of expertise. Post it on your site and share it on social media. You’ll make them look good, and that makes you look good.
  3. Give a shout-out. Highlight top customers with posts on social media. Thank them for their business and explain why they’re such great customers. For example, you could feature a “Customer of the Week” every Wednesday. Be sure to include a link to their website to drive customers there.
  4. Tap some VIPs. Look at your data to find out which customers spend the most in your store, salon, restaurant, etc. Make them VIPs and invite them to special events such as invitation-only sales, after-hours shopping events, or tasting menu dinners. You can even create a VIP version of your website with limited-edition products or special VIP swag.
  5. Remember their special days. Use a customer relationship management (CRM) app to track data about your customers. Then set up reminders to send a thank-you card or email on special dates. The anniversary of their first purchase, their birthday, their wedding anniversary, the day they started their business—all are possibilities. Include an offer good for a free gift or significant discount to spark a new purchase.
  6. Give a gift. For top customers, go beyond standard promotional products like imprinted T-shirts or coffee mugs. Take some time to think of gifts that are tailored to each recipient’s interests, industry or personality. For example, you could send a copy of a business book you know a customer’s curious about, but hasn’t read yet. How about tickets to a favorite sports team’s upcoming game? Be sure to enclose a handwritten note along with the gift thanking the customer for his or her business.
  7. Refer people to clients’ businesses. There’s no better way to thank a good customer than to refer others you know to their business. Be sure to get an OK from your referral, and then send both parties an email introducing the two.
  8. Listen. Ask some of your best customers if they’d like to be on an “advisory board.” You can pick their brains for feedback about new products you’re considering or ways to improve your customer service. Who wouldn’t feel flattered to be asked for their opinion—especially if it’s because they’re such important customers?
  9. Practice random acts of kindness. Not all thank-yous have to be thought out in advance. Once a week, pick a random client to reward with a freebie, discount, call, lunch invitation or thank-you note—just because.

 

Image: Adobe Stock


[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

By | November 10th, 2016|Running A Small Business|2 Comments

5 Qualities That Give Veterans An Entrepreneurial Edge

Veterans Day gives us pause to reflect on the sacrifice and service of our women and men in the military. We enjoy many freedoms because of their bravery and selflessness. Indeed, we owe them a debt of gratitude.

I admire and respect veterans for many reasons. Among them are the fine qualities that make them not only outstanding individuals but also seriously effective entrepreneurs.

What characteristics and skills do veterans bring to the table that can help them succeed in business?

  • Courage – Many veterans have faced adversity, danger, and fear most of us will never fathom. Their courage when confronted with risk gives them a competitive edge because they have learned to stay calm, cool, and collected when the pressure’s on and things seem uncertain.
  • Determination – “When the going gets tough, the tough get going.” Veterans embrace this and live by it, which can help them immensely as entrepreneurs. Although there’s no sure thing in business, the one thing you can bet on is that times will get tough now and then. Business owners need a heightened degree of determination to weather the storms and stay the course.
  • Commitment – With their strong sense of commitment to the cause, veterans put their all into achieving their goals. That’s a tremendous asset in the business world where not only is strategy important, but also is the drive to put forth the effort and energy to get results.
  • Resilience – Sometimes the rigors of entrepreneurship will knock down even the best of us. Because veterans have the strength of character to rise above challenges, they are well equipped to bounce back when facing tough circumstances.
  • Versatility – Along with resilience, veterans’ ability to roll with the punches and adjust strategy when needed can fuel their success in business. Their adaptability can help them pivot gracefully when market changes, competitive pressures, or the regulatory environment dish out unexpected challenges.

Veterans have traits we should all have and hone as entrepreneurs. So while we celebrate their contributions to our country on Veterans Day, let us also remind ourselves of what we can learn from them so we become more effective business owners.

Are you—or someone you know—a veteran who is thinking about starting a business? Check out CorpNet.com’s business filing services that simplify starting and running a business. Our Business Structures Wizard is a great place to begin as you decide on which business legal structure might be best for you.

 

Image: Adobe Stock


[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]

By | November 8th, 2016|Events & Announcements, Running A Small Business|0 Comments

Setting Up a Corporation – FAQ

Happy November! We are excited to bring you another post in our monthly FAQ series!

When starting a business, one of the first questions an entrepreneur must ask themselves is, “What entity type should I register?” Here at CorpNet, we are often asked to explain the differences between a C Corporation and an S Corporation, how to file a corporation, and even, “What is a corporation?” In this month’s FAQ post, our CEO Nellie Akalp answers all your burning questions about corporations!

Q: What is a C Corporation

A: A C Corporation is a standard corporation. It is considered a separate entity from its owners. This means that the corporation is responsible for any of its debts and liabilities. This is often called the “corporate shield” as it protects the owner’s personal assets from debts and liabilities of the business.

A corporation has a formal structure consisting of shareholders, directors, officers and employees. Every corporation must select at least one person to serve on its board of directors and officers are required to manage the day-to-day activities of the company.

As a separate business entity, a corporation files its own tax returns. As a C corporation owner, you’ll need to file both a personal tax return and a business tax return. In some cases, this can result in a “double taxation” burden for small business owners (see the question on double taxation below for more details).

Q: How do I create a C Corporation? 

A: To create a C Corporation, you’ll need to file the proper formation documents, typically called the Articles of Incorporation or Certificate of Incorporation, with your state’s secretary of state agency. You will also need to pay the necessary state filing fees. If you incorporate with CorpNet, you simply need to complete the online order form (or give us a call!). We’ll prepare the necessary paperwork and file it with the state.

Q: Who can form a C Corporation? 

A: There really aren’t any restrictions on who can form a C Corporation. Some states do require that the directors of a corporation are 18 and older, but there aren’t any age, residency, or other legal requirements for who can form a C Corporation. Keep in mind that the IRS places several restrictions on who can elect S Corporation status.

Q: What organizational roles are required in a C Corporation?

A: C Corporations have three groups: shareholders, directors, and officers. Shareholders own the C Corporation (via their shares of stock), yet the shareholders typically don’t manage the company. Shareholders do elect and remove directors, and can vote on major corporate issues.

The board of directors manages the affairs of the C Corporation, and can appoint and oversee officers. It’s the officers who are responsible for the day to day management of the corporation.

It’s possible to be a shareholder, director, and officer. In fact, in most states, you can be the sole shareholder, director, and officer for your C Corporation.

Q: What’s the minimum number of directors required for my C Corporation?

A: Most states allow just one director for a C Corporation, but you can have more. In some states, the minimum number of directors depends on the number of shareholders.

Q: What is double taxation?

A: Income earned by a C corporation is typically taxed at corporate income tax rates. Then, after the corporate income tax is paid, any distributions made to stockholders are taxed again as dividends on the stockholders’ personal tax returns. This is often called “double taxation” since corporate profits are first taxed on the corporation and then dividends are reported on the individual stockholder’s return.

Q: What is the difference between a C Corporation and S Corporation?

A: C Corporations are subject to double taxation as described above. A C Corporation entity is required to pay tax at the corporate level. An S Corporation is considered a pass-through entity for tax purposes. This means that the company’s profits and loss are passed through to the individual shareholder’s tax return (and each shareholder is typically taxed on the company’s profits based on their share of stock ownership).

Q: What are the benefits to forming a C Corporation compared with an S Corporation?

A: A C Corporation can offer greater tax flexibility. In addition, if you’ll be keeping the profits within company (as opposed to distributing dividends to shareholders), then the C Corporation can shield shareholders from direct tax liability.

Q: Can I form a Corporation with just one person?

A: Yes. A Corporation can have just one shareholder. Keep in mind that even if you’re the sole shareholder, you will still need to comply with corporate formalities such as director and shareholder meetings, and keeping meeting minutes.

Q: If I have multiple businesses, what’s the best way to legally structure them?

A: There are three different ways to structure multiple businesses. There are advantages and disadvantages for each approach – and the best structure will depend on your personal situation.

  • You can file an LLC or corporation for each of your businesses. This approach isolates the risk to each individual business, but involves maintenance fees and paperwork for each of the LLCs/corporations.
  • You can file one LLC or corporation, and then set up multiple DBAs (Doing Business As) for each of the other businesses. With this approach, you just need to pay your annual LLC/corporation maintenance fees for the LLC/corporation (and not each individual DBA). However, each DBA isn’t protected from the other DBAs. So if one DBA is sued, all the other DBAs under the main LLC/corporation are liable.
  • In the third approach, you can create individual Corporations/LLCs for each of your businesses and put them under one main holding Corporation/LLC.

Q: What is your Express Filing Service?

A: It’s a way to reduce your formation filing timeframe and get your corporation set up faster – sometimes as fast as 24 hours or even the same day! To understand the express filing timeline, it’s important to understand there are two different processing times: CorpNet and the state.

With the Express Filing Service, we’ll process your documents the same day (if submitted, Monday through Friday, before 4 pm PST). Depending on your state, we’ll hand deliver, fax, or send your documents via courier – whatever your particular state/county allows as the fastest option.

Then, the state office is instructed to process your filing as an expedited filing. State processing time estimates vary by state, and not all states support expedited filings. When you fill out your incorporation package online, you will see if the expedited service is available in your state and what the state’s estimated processing times are.

Do you need help registering a corporation or have a questions regarding the process? Call the CorpNet.com team today for a free business consultation at: 888.449.2638

Image: Adobe Stock


[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]