/Corporate & Business Law

Registered Agents – FAQs

Happy May! This month, we will be going over the requirements for being or maintaining a registered agent and what the registered agent does for your business.

 

Q: What is the purpose of the registered agent?

A: The registered agent is the person named to receive important legal and tax documents on behalf of a business in a given state. This includes important mail sent by the state (annual reports or statements), state tax documents, as well as any Notices of Litigation. Virtually all states require corporations, LLCs, LLPs, LPs and nonprofits to appoint a registered agent in the state where the company is formed. And, if a company registers to transact business in another state (via a foreign qualification), it will typically need a registered agent in that state too.

 

Q: What are the requirements for a registered agent?

A: The registered agent can either be an individual or a company approved by the state to be a registered agent. The registered agent must be located at a street address – P.O. boxes are not acceptable. In most cases, the registered agent also needs to be located in the state where the company is incorporated or qualified to conduct business. Keep in mind that a P.O. box is usually allowed as the mailing address for the business.

 

Q: Can I serve as my company’s registered agent?

A: Yes, absolutely! However, states require that the registered agent must be available at all times during normal business hours to receive and sign for any important documents. That’s because the state needs to make sure a summons, lawsuit, or other official state documents are actually received by the company and not “lost in the mail.” If you’re confident that you’ll always be on hand during normal business hours at the designated address, you can be your registered agent. But most small business owners prefer to have a third party serve as the registered agent for the state.

 

Q: Will my business fall out of good standing without a registered agent?

A: Here’s one scenario of what can happen. Let’s say you fail to maintain a registered agent service, or you choose to serve as your own registered agent and either move or aren’t around to receive an official communication. If an official document from the state can’t be delivered to/accepted by your registered agent, then the state may put your business in bad standing until you update the state records with an active registered agent.

 

Q: What is Service of Process?

A: This refers to the delivery of legal documents such as a lawsuit, summons, subpoena for records, wage garnishment or any other official correspondence from the state. Your business is required to have a registered agent in the state who can receive service of process during normal business hours.

 

Do you have a questions regarding a Registered Agent? Call the CorpNet.com team today for a free business consultation at: 888.449.2638

 

                               

What Every Small Business Should Know About 1099s

Every year when tax time rolls around, I field questions from business owners about whether or not they need to send 1099s to their vendors. As common as 1099 forms are, they remain one of the most misunderstood Internal Revenue Service (IRS) requirements.

To make sure you understand the circumstances under which the IRS requires issuing 1099-MISC forms to vendors, I’m going to provide some basic “must-know” information here.

What Is A Form 1099-MISC?

You must issue an IRS Form 1099-MISC to each person you’ve paid $600 or more in services (including parts and materials), prizes and awards, rents or other income payments. The 1099-MISC only applies to payments you made in doing business; it does not apply to payments made for personal purposes.

To Whom Do You Need To Send A Form 1099-MISC?

If your business paid more than $600 to a vendor or sub-contractor [individual, partnership, Limited Liability Company (LLC), Limited Partnership (LP), or estate], you are required to send a Form 1099-MISC to document what you paid them throughout the year. In general, anyone who worked for you—other than your employees—will need a 1099 from you.

Also, unless an exception applies to them, you need to issue a 1099 to your landlord if you are paying rent for business purposes. You must also issue a 1099-MISC to your attorney if you paid for legal services that amounted to more than $600 during the year.

Are There Any Exceptions?

There are. The list is rather long, but most commonly these types of vendors do not get 1099-MISC forms:

Also, you don’t have to send 1099-MISC forms to vendors to whom you made your payments via a credit card, debit card, gift card, or a payment network like PayPal. The onus to report vendor compensation is on those payment companies.

How Do You Figure Out If A Vendor Needs A 1099 From You?

I recommend before you request vendors to do any work for you, ask them for a completed W-9 form. The W-9 will give you all the information you need for filing taxes. It supplies a vendor’s mailing information, Tax ID numbers, and business structure (so you’ll know if the vendor is incorporated or not and does or does not need a 1099).

When Is the Deadline To Send 1099s?

By January 31, 2017, you must do two things to comply with your 2016 tax year 1099 obligations:

  • Submit Form 1099 to each vendor (reflecting what you paid that vendor in 2016).
  • Submit a copy of the Forms 1099 you sent to each vendor, along with a Form 1096 that discloses in total what you paid to all vendors who received 1099s from you.

Make sure you check on your state’s rules, too. Some states require they also receive your 1099s.

What Happens If You Miss The Deadline? 

Sending the required 1099-MISC forms late (or not at all) could cost you. The penalties vary depending on how far past the deadline you wait to issue the forms. If your business had gross receipts of $5 million or less, the amount you’re smacked with could range anywhere $50 to $260 per form (for tax years 2016 and 2017). If you’re caught intentionally not providing a payee with a correct statement for tax year 2016, you could face a fine of $520 for each form not submitted (that amount will increase to $530 for tax year 2017).

Where Can You Get 1099 Forms?

Unfortunately, you cannot download 1099 Forms from the IRS website. You can, however, order them from the IRS site and have them mailed to you, or you can pick them up at an IRS service center, post office, or another location that supplies them.

Eliminate Headaches—Do It Right From The Start!

Whether you’re in the early stages of launching a startup or already running a small business, I recommend you talk with a tax professional who can share more details about 1099s and the other aspects of filing your tax returns.

Starting a business or ready to change your current business structure? Contact us about making the registration process hassle-free and as fast as possible. We’re here to handle all of your legal document filing needs!

Dos And Don’ts When Transferring Leadership Responsibilities: Lessons To Learn From Obama and Trump

Changes in leadership don’t always happen seamlessly—or amicably. As is evident with the imminent transfer of leadership from President Obama to President-Elect Donald Trump, many factors influence how smoothly (or not) a change in authority will happen.

Whether you’re taking over running a business or handing over the reins to your responsibilities to someone else, expect some bumps in the road. But be careful not to become a source of agitation and dissent through the process. This recent presidential election, which has been simultaneously entertaining and frustrating at times, can teach us some valuable lessons about what to do and what not to do during a leadership transition.

 

Lessons Learned From Obama and Trump: The Dos And Don’ts Of Changing Leaders

  • Don’t undermine the capabilities of either the incoming or outgoing leader.

If you’re the new boss in town, bad-mouthing the outgoing person in charge won’t sit well with those loyal to their incumbent leader. And if you’re the one passing the baton, lack of confidence in the new leader will create distrust and distract employees from performing to their potential. To minimize the stress your team may already be feeling over the change, resist the impulse to undercut the qualities and strengths of one another

  • Don’t expect everyone to be enamored with the change.

While some of your staff members might be excited about the new era ahead, you can bet others will be anxious, annoyed, or angry—possibly all three. Prepare to bear the brunt of their harsh criticism whether you’re the new leader or the one leaving your post.

  • Don’t underestimate the power of words.

I saw a quote online that really resonates with me, “Words are free. It’s how you use them that may cost you.” Keep this in mind as you navigate the challenges of handing over or accepting leadership responsibilities. Through this recent presidential election, we’ve seen how choosing and using words reactively can create animosity and negativity. Before speaking and before writing, pause to think about your words and choose them carefully before you share them with business colleagues, employees, vendors, customers, and the public at large.

  • Do show enthusiasm for continued progress toward common goals.

Find points of agreement where you and the other leader can demonstrate unity. Sure, you may not see eye to eye about plenty of things related to how the business should be run, but now isn’t the time to dwell on that. Your employees need to have some sense of consistency and common ground.

  • Do provide/accept information and insight to make the transition fluid.

As the outgoing leader, be cooperative by openly sharing essential information with the new leader so she can more adeptly step into your shoes. As the new leader, be open and receptive to the insight the outgoing leader has to share. Put ego aside and realize your predecessor has knowledge and experience that can help you lead more effectively.

 

Your Top Priority As A Leader

Both outgoing and incoming leaders have one thing in common: a job to do! Pointing fingers, making snarky remarks, and stirring up drama will only distract you from doing right by those who work in your business and those who do business with your company. If you keep that in mind through every step of the process, the transfer of leadership will go much more smoothly.

 

Remember, Corpnet.com is here to help leaders of businesses in all industries take care of the business filings needed to legally run their companies. Check out our FREE Corporate Compliance Tool, and contact us today about how we can save you time and money.

 

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By | January 13th, 2017|Corporate & Business Law, Entrepreneuring|0 Comments

Why You Need to Incorporate Your Business

When you think about incorporating your business, do you scoff, “Not me. I’m just a one-person/home-based/part-time business—incorporation is for the big guys”? If so, it’s time to rethink your attitude. You see, every small business—no matter how small or informal—needs to be incorporated.

That’s because no matter how small or informal your business is, you could be sued. Suppose your business isn’t doing well, you can’t pay a business debt and the creditor takes you to court to get their money back. Perhaps you are a children’s party planner, a child is injured during a birthday party you organize at a local park, and the parents decide to sue you. Or maybe you own a one-person accounting firm and, after you make a mistake on a client’s taxes that costs them a lot of money, they sue you for the damages.

In any of these cases, unless your business is incorporated, all of your personal assets could be at risk—including your savings, possessions and even your family home. And even if the lawsuit is baseless, you still have the legal costs involved in defending yourself in court.

If you haven’t done anything to determine a legal form for your business, and you are the only person in your business, by default you’re considered a sole proprietor. Even if you have a partner and the two of you have formed a general partnership, your personal assets still are not protected.

Why does incorporating provide so much protection? When you incorporate your business, you are creating a new legal entity that’s separate from its owners. If your corporation owes a debt or if it is sued, the business—not you personally—is liable.

Incorporating has several other advantages:
• It makes it easier to separate your business and personal finances, which has tax advantages.
• It helps you establish a credit score for your business so you don’t have to rely on your personal credit score.
• If you think you might ever need to get a business loan or look for investors to help finance your business, being incorporated will help there, too.
• Being able to put “Inc.” or “LLC” after your business name just looks more professional, which can make customers and clients feel more confident doing business with you.

There are several different forms your business can take when incorporating: a C corporation, an S corporation, or an LLC (limited liability company). Here’s a quick overview of the differences:
• C corporation: A C corporation pays federal income taxes. However, any dividends paid to the owner (or other shareholders) are also taxed. This is sometimes called “double taxation,” and the S corporation form was created to help avoid it.
• S corporation: An S corporation doesn’t pay federal income taxes. Any income or financial losses pass through to the owner and get reported on his or her personal tax returns.
• LLC: Limited Liability Companies have a more flexible management structure than C or S corporations, while still protecting your personal assets. Any profits or losses from the business will be reported on your personal tax return.

There are some costs associated with incorporation, as well as some paperwork you’ll need to complete every year. However, when you consider the risk to your personal finances that could arise from not incorporating, the cost is well worth it.

Find out more about corporation business structures.

To take advantage of all these perks, incorporate your business with CorpNet today! Call us for a

                               

Got Hit Hard By Taxes This Year? It’s Time To Change Your Legal Structure For Tax Year 2016

BizStructure_changeEven though the agony of filing your income taxes is done for 2015, you might still be feeling the pain if your tax liability put a hurting on your bank account.

And you might be wondering how to avoid a hit like that in the future.

Maybe It’s Time To Change Your Business Legal Structure

If you’re self-employed and operating as a sole proprietor, I suggest exploring if a change in legal structure might provide some tax relief for your business.

Sole proprietors can rack up an exceptionally hefty tax bill because they’re required to pay self-employment (Social Security/Medicare) taxes in addition to their federal, state, and local income taxes. By transitioning to an S Corporation status, you might reduce your self-employment taxes. When operating as an S Corporation, you’re allowed to split your profits into two distinct payment types:

  • Your salary
  • S Corp distributions.

You pay the 15.3 percent Social Security/Medicare tax only on the salary portion of your revenue.

So, if your company made $100,000 in profit and you paid yourself $50,000 in salary and the other $50,000 in distributions, the 15.3 percent self-employment tax would apply to only the first $50,000.

Pretty sweet, right?

But don’t get carried away and think you can pay yourself something ridiculous like $5,000 in salary and $95,000 in distribution. The IRS pays attention and will take notice if any shareholder who is employed by the business isn’t receiving a “reasonable compensation” as their salary. Be sure you’re paying yourself the market rate for services you provide to your S Corporation—it’s far better to do it right from the start than to have to explain yourself and risk repercussions later.

When’s The Best Time To Make The Change?

The tax benefits you might receive by changing your business structure will begin upon the date you incorporated. They are not applied retroactively, so the earlier in the year you change your structure the more of your business income will be subject to the advantages. For instance, if your corporation receives a filing date of May 1, 2016, you’ll still need to file your taxes as a sole proprietor from January 1 up until that date. From May 1 through December 31, 2016, you’ll file your taxes as a corporation for the remainder of the year.

Beyond The Tax Benefits

Besides the potential tax benefits, changing from a sole proprietorship to an S Corp (or LLC or C Corp) also helps protect your personal assets because your business becomes a separate legal entity. This means your company (and not you personally) is responsible for all of its liabilities and debts.

Is A Change In Legal Structure Right For You?

Every business has its own unique financial situation, so there’s no definitive answer whether a change in legal structure will benefit you. To make sure you’re making an informed, educated decision, I recommend consulting with a tax advisor or CPA to discuss your specific circumstances.

Have you already made the decision to change your business legal structure? Give us call call today for a free business consultation and we can help get the process started for you! 888.449.2638

Image: Adobe Stock

How to Legally Protect Your Small Business


Scott Drake of the Legal Broadcast Network recently interviewed CorpNet.com Founder and  CEO, Nellie Akalp about how small businesses can protect themselves legally.

Scott asked Nellie why small businesses should incorporate. Her answer? The number 1 reason to incorporate is for liability protection. Nellie goes on to say most small businesses think they’re too small to bother incorporating, but even if you’re selling cupcakes out of your home or a freelance social media consultant, incorporating can protect you. Other benefits include tax savings and having the ability to raise capital.

Other Business Structure Options

The most common structures that businesses use are:

Sole proprietorship: You do business under your personal name or a fictitious name (you’d need a Fictitious Business Name form). But your personal assets are exposed to liability.

LLC: Limited Liability Company. Best of both worlds: protection of your assets but minimum hoops to jump through. Perfect for businesses with foreign owners.

C Corporation: Not recommended for small business owners; better for companies that plan to issue stock or raise funds.

S Corporation: Ideal for small businesses. IRS requirements cover number of owners allowed and shareholder qualifications. Provides self-employment benefits and considers business owners employees.

Where to Incorporate

Nellie explained to Scott that incorporating where your business is physically located is best, especially if there are five or fewer shareholders.

She went on to explain that CorpNet.com is a self-help legal filing service, and one option for filing paperwork. Typically you don’t need a lawyer to file a business structure, she said. It’s better to save the money you’d spend on a lawyer for legal issues that might come up down the road.

Not sure which business structure suits your company’s needs? We’re happy to help. Check out our free Starting a Business Checklist  or our Business Comparison Chart, then call us to file your LLC or corporation.

Do You Do Business in California? What You Must Know

900_4247347Even if you’re a company registered in another state, if you do any business in California, you are subject to California tax and filing requirements. You may assume that since you’re based in another state, you’re immune to California regulations, but not so! Read on to get the scoop.

If you regularly conduct business in California, you’re required to qualify or register with the California Secretary of State (SOS) in order to have legal standing in California. In the event that you are sued by a California customers, you won’t be able to defend yourself without qualifying or registering in the state. If you don’t go through these procedures, any contracts you create can be voided, since your business won’t be fully recognized as an “entity” in California.

Doing Business in California

Not sure if you do enough business in California to need to qualify or register? If you meet any of these criteria, you do.

  • Your business actively engages in any transaction in California for the purpose of financial gain or profit.
  • Your business is organized or commercially based in California. A business is commercially based in California if it is the primary place from which the business is directed.
  • Your business’ California sales exceed either $500,000 (annually adjusted for inflation) or 25% of your total sales. Sales include sales made by an agent or independent contractor of the entity.
  • Your business’ California real property and tangible personal property exceeds either $50,000 (annually adjusted for inflation) or 25% of your total real property and tangible personal property.
  • Your business’ California compensation paid exceeds either $50,000 (annually adjusted for inflation) or 25% of the total compensation.
  • Any of your business’ members, managers, or other agents conducts business in California on behalf of the company, regardless of where your business primarily conducts business. Continue reading “Do You Do Business in California? What You Must Know” »

Illinois Affiliate Tax Law Struck Down: Is Now the Right time to Form an LLC in IL?

il The state of Illinois recently had a state sales tax law struck down that could provide some exciting opportunities for entrepreneurs who are looking to form an LLC in Illinois.

In an effort to collect more sales tax revenue, the state of Illinois had created an “affiliate nexus sales tax law” that required many businesses that sold products via online affiliates to collect Illinois sales tax, whether or not those businesses had an actual physical presence in Illinois. On April 25, 2012, Illinois Circuit Judge Robert Lopez Cepero struck down the law, saying that it violated the Commerce Clause of the U.S. Constitution by interfering with interstate commerce.

According to the court’s ruling, simply selling products or services via in-state online affiliates is not enough to create a legally defined “nexus” that would require a company to pay state sales tax in Illinois. Apparently some businesses had been leaving Illinois or incorporating outside of Illinois because the affiliate nexus tax law was forcing them to collect Illinois sales tax just because they had a “nexus” of online affiliates selling in that state, thus creating a regulatory burden that many Illinois affiliate businesses didn’t want to put up with.

CorpNet has an online affiliate program, and I can personally say that it would be a big hassle for our small business if we had to collect state sales tax for every single purchase made through one of our online affiliates. Governments need to do what they can to raise revenue to pay for schools, roads and other services, but they have to strike the right balance between raising revenue and avoiding discouraging companies from doing business in that state.

In this case, it seems that many Illinois affiliate businesses were missing out on opportunities and even incorporating outside of Illinois because the companies whose products and services they sold didn’t want to be burdened with the details of collecting Illinois sales tax.

Continue reading “Illinois Affiliate Tax Law Struck Down: Is Now the Right time to Form an LLC in IL?” »

How does the Euro Crisis affect your small business?

285_2873295The Euro Crisis has been going on for over a year, and it’s one of those terribly complicated, possibly catastrophic, but not-very-exciting stories that often cause stock markets to plunge.

I’m not an economist, but basically, here’s how it works: Europe used to have lots of different currencies – the German Mark, the French Franc, the Spanish Peso, the Italian Lira, etc. Starting in January 1999, the European Union introduced the “Euro” as the EU’s single shared currency, with the idea that a shared currency would improve trade and develop deeper economic ties and efficiencies between European countries. And yet today, 13 years later, the Euro is threatened with collapse.

A few countries like Greece, Portugal, Italy and Ireland are facing a national debt crisis that they cannot afford to pay off by themselves, so they are turning to the other, wealthier, nations of the EU for bailouts. But these other countries (mainly Germany, which has Europe’s largest economy) are reluctant to foot the bill for what they feel are the excesses and poor decisions of the debtor countries. It’s as if Texas and Florida couldn’t afford to pay their bills, so they asked California for a bailout – and California’s taxpayers refused to pay. Continue reading “How does the Euro Crisis affect your small business?” »