/Legal Tips For Small Businesses

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!

Registering Your Business Name: Three Ways To Get It Done

What’s in a name? More than you might realize when it comes to choosing one for your business!

Aside from the obvious must haves of grabbing customers’ attention and being memorable, a business name must also be available to use—and protected.

Selecting a name for your company is only the first step in the process. You also have to determine that no one else is already using the name by performing a name search.  Then register your business name, so you can legally use it and so other businesses don’t try to claim it as their own.

Imagine if you’re operating under the business name of “Sylvia’s Salon” and someone a few blocks away opens its doors as “Sylvia’s Salon.” That would confuse customers. It could also end up hurting your reputation if someone were to write a bad review of your company when they were actually referring to an experience they had at the other Sylvia’s Salon.

Three Options For Registering Your Business Name

How you register your business name will largely depend on your business’s legal structure.

1. Securing Your Business Name By Forming an LLC, S-Corporation, or C-Corporation

When creating a formal business structure for your company, you take care of your business name registration in the process. And by forming an LLC or registering as an S-Corporation or C-Corporation, you also gain certain liability protection and potential tax benefits.

Submitting articles of incorporation or articles of organization (sometimes called “certificate of organization”) to your state automatically registers your business name within that state. Prior to approving your name, a search is done to ensure it’s not already being used by another business in the state.

2. File A Fictitious Business Name

If you’re a sole proprietor, you can very simply claim and protect your name by registering a fictitious business name with your state or the city/county clerk. This is known as filing a DBA (Doing Business As).

The fee for filing a DBA is typically nominal. So you’re sure no one else has rights to the name, you’ll want to do a name search before filing. Many banks require a DBA before they’ll open a business bank account for an entrepreneur. Depending on the state you’re registering in, you might also be required to publish a notice in a local newspaper and/or a local legal publication to inform the community that you’ve filed your business name.

If you’re using a business name that includes both your first and last name (such as Sylvia Benton’s Salon), you can use the name without filing a DBA. Other names need to be filed as DBAs.

3. Trademark Your Name

Registering your business name as a trademark (or service mark if you sell services) provides the most protection against the threat of others using your name to sell similar products and services. Federal trademark registration will safeguard your name nationally rather than only within your state.

To register for a federal trademark, you must submit an application to the United States Patent and Trademark Office and pay the applicable fee. As with the other options for registering your business name, make sure you do a trademark search before filing to verify your name isn’t already in use.

Your business name is far more than “just a name.” It lays the foundation for your company’s identity and professional reputation. As with any registration or filing that has legal ramifications, you’ll want to cross all your t’s and dot all your i’s when registering your business name.

Not sure of the process or don’t have the time to take care of it on your own? Save yourself the hassle! Contact CorpNet today for a free business consultation and we can help you register your business name!

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CorpNet FAQs – Business Licenses

 

As an online legal document filing service that helps entrepreneurs with an array of startup needs, we get asked a ton of questions from our clients about various topics. We decided to start sourcing these questions and create a new blog post series for our readers, as some of you may be wondering the same thing but haven’t found the answer elsewhere.

Today we are launching our new FAQ series starting on the topic of business licenses. Here are some of our most frequently asked questions on the popular topic followed by answers from our CEO Nellie Akalp. Still have Questions? Feel free to post in the comments below and Nellie will be happy to provide additional insight!

Business Licenses

Q: What’s the difference between a business license and registering a business? If I already registered my LLC or corporation, do I still need a business license? 

A: Registering your business and getting your business license are two different things – and you most likely will need to do both. Registering a new business with the state (either by forming an LLC, corporation, or filing a DBA) provides a legal foundation for your business. Then, the business license(s) gives you the right to operate your business…similar to how a driver’s license lets you drive a car.

Q: How do I know what kind of business licenses I need? 

A: The specific license and permit requirements vary based on your type of business and your location. As expected, a home contractor or restaurant will have more permit requirements than a web designer. Find your business type on our Business Licenses page to check the specific requirements for your business. If you don’t see your specific business listed, give us a call at 1.888.449.2638 and we’ll help you out.

Q: What are the penalties if I don’t have the right licenses for my business? 

A: You can face fines, and even have your business shut down if you are caught operating without the right licenses/permit paperwork in place.

Q: How much does it cost to get a business license or permit? 

A: Exact costs depend on the license type and your location. Find your business type on our Business Licenses page to view the pricing for your particular business license and location.

Q: What if my business is involved in more than one type of activity or has multiple locations?

A:  Each business location and each business type is subject to licensing requirements, so you most likely will need to get the proper permits/licenses for each location and business activity.

Q: How long does a business license last? 

A: Typically speaking, a business license will last one year (although some locales give you the opportunity to apply for a three-year license). If you sign up for our free B.I.Z. service, we’ll automatically notify you when any licenses are coming up for renewal.

Q. If I change my legal structure, can I keep my old business license? 

A. No. Any change of legal entity (e.g. if you change from a sole proprietorship to an LLC or corporation) requires a new business license. If you change your legal structure, you will need to apply for a new business license for the new entity.

Q. Can I transfer my business license to a new owner? 

A. Typically speaking, you cannot transfer a business license from one owner to another. The new owner of the business will need to apply for their own business and specialty licenses.

Do you need help setting up a business license or have a question about another aspect of starting a business? Call the CorpNet.com team today for a free business consultation at: 888.449.2638

Image: Adobe Stock

 

 

                               

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

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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

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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!

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Your Franchise Business Structure Questions Answered

FRANCHISE Thoughtful male person looking to the digital tablet screen, laptop screen,Silhouette and filter sun

Thinking of starting a franchise? A lot of new franchisees expect that absolutely everything will be taken care of by the franchisor. While yes, a lot of processes, supplier relationships, et cetera, will be handed down to you by your franchisor, there are some decisions you’ll have to make, such as what business structure your franchise will use.

Now that you know you’ve got a big decision, you likely have questions. Here, I’ll answer some of the more common questions from franchisees about business structures.

Which Business Structure is Right for Me? 

While there’s no one-size-fits-all answer to this question, generally the answer falls into one of two camps:

Both of these business structures provide protection of your franchise, as well as your personal assets. If you choose no business structure, you’ll operate as a sole proprietor, and you’ll put yourself at risk. If your franchise is ever sued, your personal assets can be taken to cover costs.

On the other hand, with both the S Corporation and the LLC, your personal assets can’t be touched, because you’re considered separate from your business entity.

What are the Differences Between the S Corp vs the LLC?

While there are a lot of similarities between these two business structures, including pass-through tax treatment, protection of personal assets, and unlimited duration, there are a few key differences.

The S Corporation tends to require more rigid paperwork and processes. You’ll need to assign a Board and meet with them annually, as well as file an Annual Report. The LLC requires less formality.

Also when it comes to owners, the S Corp only allows US citizens or residents to be owners, and limits shareholders to 100.  An LLC may be owned by other LLCs or corporations, and the owners do not have to be US citizens or residents. You can have an unlimited number of owners in an LLC.

Where is the Best Place to Incorporate or File as an LLC?

You may hear that certain states are better to form a business structure in, even if you don’t do business there. Yes, some states have low or zero state tax, but that doesn’t make them the best place to form a business entity.

My advice is to form your corporation or LLC in the state you plan on running your franchise. Otherwise you may have to file additional forms and pay extra fees to register in a state other than where you do business, and in my mind, it’s not worth the hassle.

How Hard is it to Incorporate or File an LLC?

You’ve got several options here. If you’re all about DIY and don’t mind a little paperwork, you can download the appropriate form for your business structure from your state’s Secretary of State website. Some site even let you file online. You’ll need to provide basic information about your business including contact information, officers’ names, and the nature of your business. You’ll pay your incorporation or filing fee, which is usually between $100 and $300.

If you’d rather let someone else handle the work, you can employ a business filing services company that will take care of the paperwork on your behalf.

Depending on how busy your Secretary of State’s office is, you can expect to get your business structure approved in a month or two. If you work with a filing service, you can expedite the process to get it approved within a matter of days.

Want help moving forward with incorporating or forming an LLC for your franchise? Give us a call for a free business consultation and we would love to help! 888.449.2638

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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

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