/Incorporating a Business

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

                               

Legal Steps to Start a Business & Special Offer

image002So you have an idea and want to get that business off the ground – congratulations!!

When planning the steps to start your business, there are some legal aspects you don’t want to overlook. These steps may not be the most glamorous parts of starting a business, but you want to make sure the business is set up properly from the start to avoid issues down the road.

Here are my must-do steps to legally start a business followed by a special offer on CorpNet.com services:

1 – Choose a business name

Have an ideal name in mind for your business? That’s a great start, but before you get too attached and order those business cards you’ll want to make sure it’s legally available for use. You can do a corporate name search and/or check with your state’s Secretary of State database to see if the name is registered by someone else. I also recommend running a trademark search to see if someone has already filed for a trademark. If you search both places and the result is clear – great job! You should move forward with that name. If you find that the name is already in use – you may want to go back to the drawing board and brainstorm some other options.

2 – Choose a business structure

If you don’t officially form a business structure your default is to operate as a sole proprietor. A sole proprietorship does not separate your personal and business finances so if down the line your business is sued, your personal assets can be threatened.

Forming an LLC or Corporation will protect your personal assets from any liabilities of the company.

Forming an LLC, otherwise known as the Limited Liability Company, is a great option for businesses that want legal protection without a lot of paperwork.

The C Corporation requires more paperwork and formalities, which can be a headache for small business owners. However, this structure is ideal for businesses that plan to reinvest their profits back into the company, seek venture capital funding or plan to go public.

Another popular structure is the S Corporation. The S Corp does not file its own taxes but is treated as a pass-through entity. It is a great structure for a small business owner who can qualify as the IRS places limited both on the number of owners and who can be an owner.

Not sure what structure is best for you? Try the CorpNet Business Structure Wizard that can help you decide!

3 – Register your business name

If you are forming an LLC or corporation, this step automatically registers your name with the state. However, if you choose to operate as a sole proprietorship or general partnership, then you will need to register your business name by filing a Doing Business As (DBA).

Registering your business name ensures that you are legally able to operate your business under that name in the state and also ensures hat no one else can use the name in your state.

Ready to take these legal steps to start your business? Use CorpNet.com and for a limited time get 10% off any Deluxe or Complete order! Call us at 888.449.2638 for a free business consultation and mention SOCIAL10 for your discount!

                               

Can A Corporation Be A Member Of An LLC?

Concept Member message on wood boards. Macaroons and glass Tea on table. Vintage tone.Starting and running a business as an LLC (Limited Liability Company) offers some advantages to business owners who want liability protection, taxation flexibility, and credibility without complexity. Next to a sole proprietorship, it’s the business legal structure that’s least complicated and void of cumbersome formality. But if you’ve already incorporated a business, can that entity be a member of your LLC? And what could that accomplish for you?

Yes! Your Corporation Can Be A Member of Your LLC.

All states allow for other types of business entities (not only individuals) to serve as members of LLCs. Generally, there are very few restrictions limiting a corporation from being an LLC member. A corporation doesn’t even have to be incorporated in the same state as the one in which the LLC is organized.

In What Situations Does It Make Sense?

By having your corporation as a member of your LLC, you create an additional level of ownership, which may enable you to offer traditional perks such as retirement plans and give you added protection from liability. Like individuals who are members/owners of LLCs, corporate LLC owners can also take advantage of pass-through federal tax treatment.

Probably the most common situation in which a corporation will serve as the member of an LLC is in the scenario of a business owner creating a holding company and an operating company. The holding company owns all of the business assets and then leases them to the operating company, which uses them to run the business. In such a situation, a corporation could be the holding company and be a member of the LLC, which would be the operating company.

What Restrictions And Requirements Apply?

Although most states don’t place many requirements on members of an LLC, some do more closely regulate membership in a professional limited liability company (PLLC). Members of PLLCs (LLCs formed to offer professional services) often must be licensed professionals in their fields, therefore preventing corporations from serving as members of PLLCs.

Depending on which state you operate in, you may or may not need to disclose who your LLC’s members are. While some states don’t mandate an LLC to disclose its members, others demand that the LLC disclose its managers—so if an LLC is member-managed, it needs to disclose its members. Where required to disclose its membership, an LLC with a corporation that is a member will need to provide the corporation’s name, physical address and percentage of ownership in the LLC.

Don’t Go It Alone.

As you’re starting a business or considering changes to your existing company’s legal structure, make sure you get guidance from professionals who have your best interests at heart. And if you want to make sure all your business registration and other compliance tasks are take care of correctly, remember CorpNet.com is here to help make the process as simple and cost-effective as possible. Call for a free business consultation at 888.449.2638

Image: Adobe Stock

How to Move A Business To Another State

Happy team of businesspeople moving office, packing boxes, smiling.

When you move from one house to another, you likely have checklist of things you need to take care of in the process…changing your mailing address, calling your cable TV provider, contacting your internet company. But when moving your LLC or corporation to another state, many business owners don’t know where to begin.

While there’s a lot to pay attention to, I think you’ll find it really isn’t terribly difficult when you understand how to go about it.

To operate legally in any state, corporations and LLCs must first register with the state. So, if you’re planning to move your business to a new state, you’ll need to do that.

Generally, you can handle it in one of two ways:

Which approach is the right one for you? That will depend on whether or not your move is permanent and whether or not you’re planning to operate your business in both the existing and new states.

Dissolve The Corporation In The Old State And Start It In The New State

If you intend to permanently move to a new state with no plans to operate your business in the old state, then the least complicated approach is to close the business in your original state and register a new corporation or LLC in the new state. Specific requirements vary from state-to-state, but the typical steps of how to do it include:

  • To dissolve the corporation or LLC in your previous state, file a “Certificate of Termination” or “Articles of Dissolution” document with Secretary of State there. In order for the dissolution to be approved, your company will need to be in good standing with the state—i.e., up to date on state tax payments and state filings.
  • In the new state, file to form a new LLC or Corporation with the Secretary of State.

File A Foreign Qualification In The Second State

If you expect your move will be temporary or you’ll still want to conduct business in your old state, closing your business in your old state and starting a new one elsewhere wouldn’t make much sense. In either of those scenarios, you should keep your corporation or LLC registered in the original state and then file a “foreign qualification” in your new state. It’s the same approach you would take when no move is involved but you want to expand your company to another state.

Individual state requirements may vary, but typically the steps to foreign qualify involve:

  • File the necessary foreign corporation paperwork with the new state’s Secretary of State. Some states refer to it as the “Statement and Designation” and others call it the “Foreign Qualification” application. Either way, you’ll find it resembles the Articles of Incorporation document you used when originally filing your corporation. Expect to provide details about your company, such as the name of your corporation, list of corporate officers, your domestic state, stock information (e.g., number of shares authorized, etc), the principle location or address you’ll be using in your new state, and your registered agent.
  • You’ll probably also need to provide a Certificate of Good Standing document from your domestic state in order to foreign qualify.

Just as you would when moving from an old home to a new home, you’ll want to cross all your t’s and dot all your i’s when taking your business to a new state. Sure there’s work and some cost involved, but filing properly from the start is far less complicated and more affordable than facing the legal ramifications of operating in a state without meeting all requirements.

As with all legal matters, I recommend talking with a professional who can guide you through the process. And if you don’t want to risk mishandling (or don’t want the headaches of haggling with) the paperwork involved, consider using CorpNet.com’s services to ensure you’ve filed everything correctly. Call for a free business consultation: 888.449.2638

Image: Adobe Stock

Business Name Registration Or Trademark: Which Is Best?

Key to brand cloud shape

One of the most valuable assets your business will ever have is its name. Your business name is more than what your company is called—it represents your brand’s identity and it’s a way for you to distinguish yourself from your competition. With your business name carrying that much weight, it makes sense to protect it.

As you start your business, consider these two approaches to prevent other companies from using your name and confusing your customers:

Business Name Registration 

If you form an LLC or apply to incorporate a business in a state, your business name is automatically protected in that state after the state has approved your application. No other LLC or corporation will have the right to register their company under that name within the state. Just how different a name must be from another business name varies from one state to the next. For instance, one state may deem it perfectly fine to register “Linda’s Spa and Salon, LLC” when there’s an existing business registered as “Lynda’s Spa and Salon, LLC.” Another state might consider the name “Linda’s Spa and Salon” deceptively similar to the other business’s name.

Note that there are some limitations to state protection. Sole proprietorships and partnerships in that state can still use your name if they so desire; they just wouldn’t be able to form a corporation or LLC using your name. Also, just because you register your business name with the state doesn’t mean a business in another state can’t use the same name. In fact, they could even incorporate or form an LLC using your name, provided they do it in a state or states other than those where you’ve registered your name.

To decide if brand protection at the state level will be enough, I suggest you consider your type of business and business model. If you are opening a local retail store or restaurant, for example, it might not matter to you if another business uses the same name in a different state. How likely would customers be to confuse the two? Probably not at all.

On the other hand, if you have ideas of expanding your business nationally, or are planning to sell your products/services across the country, or have concerns that a partnership or sole proprietorship might use your name, then you might consider protecting your name with a federal trademark.

Federal Trademark Protection

The United States Patent and Trademark Office (USPTO) grants trademarks, which identify the source of products or services. A trademark can be a word, phrase, design, or symbol (or a combination of any of them) that distinguishes a company from its competitors. The USPTO can grant trademarks on distinctive names, logos, and slogans. As the owner of a trademark, you have exclusive rights to the mark. No one else may use it at either the state or federal level.

Expect to pay a little more for a trademark than you would for registering your name with the state. The base rate is $325 per class and it will cost more if you hire a professional to prepare the paperwork for you. It may take from six to 12 months for the USPTO to process your request. Although the process is more involved than registering a business name with the state, a trademark provides you with exclusive rights to your name in all 50 states—and trademarks have an unlimited lifespan, provided you comply with renewal requirements.

If you’re thinking about filing for a trademark, I suggest you do some initial homework so you don’t apply for a name that’s already in use. Don’t risk having your application rejected and losing the application fee you submitted.

First step: Conduct a free basic search to see if anyone has a pending application with the USPTO for your proposed trademark or anything similar to it.

Second step: Do a comprehensive name search to see if anyone is using your proposed name at the state or local level.

Isn’t Your Brand Worth Protecting?

Whether your business will have sufficient protection by registering your name with the state or you’ll require exclusive rights in every state, your business name and the brand it represents is worth securing. Consider talking with a legal expert who can help you decide which option is best for your business. And if the paperwork and process of registering your business name or filing for a trademark intimidates you, remember that CorpNet is here to help. Call anytime for a free business consultation at 888.449.2638!

Image: Adobe Stock

Why Customers Love Us – CorpNet Reviews

Screen Shot 2016-05-12 at 2.43.23 PMAnother month, another great set of 5-star CorpNet reviews to showcase our stellar customer service.

Our team has been hard at work helping all kinds of clients with their business startup needs. From assisting someone who accidentally selected the wrong entity to helping an oversees entrepreneur, our team gets the job done so you can focus on what you do best – running your business.

Here is a look at why customers love using CorpNet.com to incorporate, form an LLC, file a DBA and more! Check out all of our reviews on TrustPilot. Are you ready to get your business off the ground? Reach out anytime for a free business consultation.

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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

Why Customers Love Us – CorpNet Reviews

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We get asked a lot how we are different from our competitors. Although we offer similar services, we take great pride in our stellar customer service which sets us apart from the rest!

You call us, use our chat feature or email us – one of stellar tenured business filing experts in our Westlake Village, CA headquarters will answer. We’re a small team who wants the best for you and your business! No outsourced call centers here!

Just to show how much our customers love us we are starting a new series on the CorpNet Blog sharing some CorpNet reviews. These clients took the time to leave us a great review and we appreciate every single one of them.

Here is a look at why customers love using CorpNet.com to incorporate, form an LLC, file a DBA and more! Check out all of our reviews on TrustPilot. Are you ready to get your business off the ground? Reach out anytime for a free business consultation.

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Expecting A Tax Refund? 8 Business-Savvy Ways To Spend It Wisely

US treasury check.

According to the IRS, it expects more than 70 percent of taxpayers will receive tax refunds this year. Last year, the average refund of the 109 million issued was $2,797. That’s no chump change!

If you’re one of the fortunate taxpayers who will get a tax refund this year, how are you planning to spend that “bonus”?

Decisions…decisions.

While you may find it tempting to blow the cash on a Louis Vuitton handbag or put a deposit on a tropical vacation getaway, there’s something more fulfilling you can do with that money:

Invest it into your business

Yes, I know it doesn’t sound very sexy at face value. But by putting that money back into your company, you’ll expand upon its potential and promise.

How might you use your tax refund to boost your business? Here are a few ideas for making good use of it:

  • Use the money for a consultation with your accountant about tax planning for the future. Just because you got a refund this year, doesn’t mean you will next year!
  • Give your website a make-over. If you’ve got a DIY site, consider hiring a professional to create one that will more successfully generate traffic and leads.
  • Register to attend a highly regarded business or marketing conference. Not only will you learn a lot of relevant information to make you a more enlightened business owner, but also you’ll make valuable connections with other professionals.
  • Get yourself or an employee some specialized training to up your game in the competitive market. When you expand upon your skill set and hone your craft, you make your products and services more valuable to customers.
  • Ditch an old, unreliable piece of office equipment (e.g., laptop, printer, etc.) and purchase a new one. Equipment that doesn’t do the job well can kill productivity and add a lot of stress. Your refund money will be well spent by giving yourself the tools you need to work more efficiently.
  • Buy yourself an ergonomic desk chair. Your comfort and physical well-being should always be a priority if you want to work like you mean business.
  • Join a well-respected networking group. Do some research and find a group that has highly motivated, accomplished members who have a genuine interest in supporting and encouraging each other. While no networking group membership guarantees you’ll get business from it, a culture of camaraderie provides a firm foundation for referrals and for the purchase of services or products between members of the group.

As you can see, you have plenty of ways to creatively use your tax refund to better your business. Whether you’re just starting your company or want to grow it, make the designer shoes and fancy cocktails in coconuts wait. Consider putting your refund dollars where they’ll really make a difference—into your business.

Image: Adobe Stock

Delving Into The DBA: Does Your Small Business Need To File For One?

unsure young woman scratching her head

DBA who?

Also called a fictitious business name, trade name, or assumed business name, a Doing Business As (DBA) filing lets the public know you’re the true owner of your business.

Do you need one for your business?

You’ll need a DBA if one of the following scenarios applies to you:

1. You’re a sole proprietor or general partnership and want to conduct business using a name that’s different from your own name. For example, if Jane Doe wants to open a gift boutique called Things That Matter, she would need to file a DBA. In some states, you’re allowed to use your personal name in addition to a description of your product or service without filing a DBA. For instance, Jane Doe may not need to file a DBA if she wants to call her business Jane Doe’s Gift Boutique. You will need to file a DBA if your business name indicates a group (such as, The Doe Group) or if you only use your first name (i.e., Jane’s Gift Boutique).

2. You have incorporated or formed a limited liability company (LLC) and are operating your business under a name that is different from the name of your company or LLC. To illustrate this scenario, suppose Jane Doe has formed an LLC called Jane Doe Gift Boutique, LLC and Jane also wants to operate her business under the name Janesgifts.com; the LLC would need to file for a DBA for Janesgifts.com. Similarly, if Jane wanted to expand into interior design consulting, then Jane Doe Gift Boutique, LLC would need to file a DBA to do business as Jane Doe Interior Design Consultants.

The DBA designation was created to protect consumers by preventing deceitful business owners from operating under a different name to dodge legal trouble. When you file a DBA, you typically need to print an announcement in the local newspaper, so your community knows who owns the business.

What benefits does a DBA deliver?

Above all else, registering a DBA keeps you in compliance with the law. And for sole proprietors who want to avoid complexity and expense, a DBA lets them use a business name without creating a formal a corporation or LLC. Filing a DBA gives the sole proprietor the freedom to use a business name that will help them market their products or services while establishing a separate professional business identity. Realize, however, that while forming an LLC or corporation protects your business name at the state level, a DBA won’t protect your business name from being used by others—that would require trademark protection.

If you’re a sole proprietor, you will need to file a DBA to open a bank account and receive payments in the name of your business from your customers. Most banks will ask for a copy of your filed DBA before they’ll open your account, so you’ll want to file sooner rather than later!

An LLC or corporation may operate multiple businesses without having to create separate legal entities for each business when they have DBAs. For instance, if Jane Doe plans to open several different boutique shops, restaurants, or websites, she might want to set up one corporation with a relatively generic name and then file a DBA for each shop, restaurant, or website.

Essentially, a DBA will help you expand your business while controlling costs and minimizing the amount of paperwork you have to deal with.

How do you file for a DBA?

From state to state and county to county, the requirements for filing a DBA vary. In some states, you register for DBAs at the county level (and individual counties may have different forms and fees). In some states, you register your DBA with the State Secretary of State or another state agency.

Depending on the state you’re located in, you might also need to publish a notice in your local newspaper and then provide proof to the state that you have done so.

To review the different requirement for DBA filings in your state, you can visit the Small Business Administration’s (SBA) website or use a professional legal document filing service to make sure you’re meeting all county and state requirements.

How soon should you register for a DBA?

You should file for a DBA before doing any business under your fictitious business name. Some jurisdictions give you some leeway and will allow you to file shortly after you first use the name. With a DBA a prerequisite to opening a bank account and forming contracts with customers, however, I recommend filing for one upfront. I also encourage you to try our free business name search tool before filing your DBA to see if your preferred business name is available.

Filing a DBA is an affordable way to keep your business in good legal standing from the very start. Ready to begin?

You can start the process quickly and conveniently online at CorpNet.com!

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