/Tag:form llc

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

Will an LLC help lower your business taxes?

 

571_3167321The key reason to form an LLC (Limited Liability Company) is to shield the personal assets of the owners from that of the business. This means that if your company has bad debts or is sued, banks and other lenders cannot seize your personal property. But let’s face it. For many small business owners, questions about forming an LLC typically boil down to a single topic… taxes.

Whether it’s driven by a desire to escape self-employment taxes or looking to avoid that ‘double taxation’ whammy, small business owners ponder which legal structure is right for their business and financial situation.

The LLC is often associated with ‘pass-through taxation’, meaning the LLC itself does not pay taxes. Rather, income from the business is passed to the company’s owners (aka members) who then claim these profits on their personal tax forms.

However, the LLC actually offers flexibility when it comes to federal tax treatment. This is because the LLC is an entity created by state statute. The IRS allows the LLC to be taxed as a corporation, partnership, or sole proprietor, depending on elections made by the LLC and the number of members.

 

Continue reading “Will an LLC help lower your business taxes?” »

Multiple Ventures? How to Best Structure your Multi-Brand Business

775_4297457I’m always in awe of the many talents of today’s entrepreneur…the wedding photographer who also writes children’s books, the copy editor who sells homemade soap, and the stay-at-home mom who doubles as a part-time caterer and jewelry designer. Today’s creative professionals often find themselves making income through a creative patchwork of diverse interests and talents.

Take Sue as an example. She recently called into the office with no fewer than five ventures. She has been selling children’s clothing, handbags, and craft supplies on Etsy. After a few solid years on Etsy, Sue was now ready to take the next step and launch her own websites outside of Etsy, as well as expand into handmade paper goods and home décor. Continue reading “Multiple Ventures? How to Best Structure your Multi-Brand Business” »

By | August 24th, 2012|Choosing A Business Structure|7 Comments

S Corporation Deadline For New and Existing Corporations

436_3101036Recently, I have been bombarded with questions on when can an exisitng corporation elect s corporation status for an existing corporation.

Question: We have a C Corp, started in 2008, which was kept as a C Corp for VC reasons. We never went that route and now realize that we should go to an S Corp….when do we need to file?

Answer: An S Corporation’s fiscal year is strictly based on a calendar year always with a fiscal year end date of December 31.  As such, let’s say a C Corp filed, but never opened a bank account, issued shares, or started doing biz…if any of those events happen, then the clock starts ticking and within 75 days they can elect S Corp status and have the status effective for this year…In this case with the above questions, the above rule does not apply because they have done business and issued shares.  As such, then they can file S Corporation status on January 1, 2012 and thereafter to make the election effective for 2013 , but no later than March 15, 2013…that is the deadline…

So, in a nutshell….If your business is a corporation, you’re already aware that March 15 is the most critical tax deadline of the year. But March 15 is an important date for another reason…it’s the deadline for electing S Corporation status.

What exactly is the S Corporation (or S-Corp) and is it right for your business? Here are the most important things you need to know about this popular business entity:

What is the S Corporation?

All S Corporations actually begin as general, for-profit C Corporations. After the corporation has been formed, it may elect ‘S Corporation Status’ by filing Form 2553 with the IRS is a timely manner (more on the deadline below…). With this S Corporation election, the company is now taxed as a sole proprietor or partnership rather than as a separate entity like the C Corp. This means that corporate profits and losses are “passed-through” and reported on the personal income tax returns of the shareholders. That’s why the S Corp is known as a ‘pass-through entity.’ 

Why should I form an S Corporation?

The main benefit of the S Corporation boils down to three simple words: avoid double taxation. Let’s take a look at an example to illustrate the benefit. Let’s say your business earns $100,000. And to keep things simple, we’ll assume the tax rates for individuals and corporations are 28% each. In a regular C Corporation, the business pays $28,000 in income tax, and $72,000 is distributed to you. You would then owe 28% personal income tax on the $72,000 dividend, which is $20,160. This means that overall you’ve paid $48,160 in taxes for the year.

Now let’s say you created an S Corporation for this same business. As an S Corp, the corporation pays no income tax. The $100,000 is distributed to you, and you pay $28,000 in tax. It’s pretty easy to see the benefit between $28,000 vs. $48,160 tax payments for the year. Bear in mind: this was an over-simplified example; and you should consult with your financial or tax adviser on the specifics of your own situation. 

Who can’t form an S Corporation?

S-Corp election isn’t for everyone. The IRS places certain restrictions on S-Corps, including:

  • An S-Corp cannot have more than 100 shareholders
  • All shareholders in an S-Corp must be individuals (not LLCs or partnerships) and legal residents of the United States.
  • An S-Corp can have only one class of stock, so all owners must share equally in terms of profits and losses based on their percentage of ownership.

How do I become an S Corporation?

If your business meets the above qualifications, it’s relatively easy to form an S Corp and avoid the double taxation burden. Here are the key steps:

  • First, you must incorporate a business.
  • Next, complete and file IRS Form 2553 with the Internal Revenue Service no more than 75 days from the date of incorporation, or no more than 75 days from the start of the current tax year. Instructions from the IRS can be found here.
  • Within 60 days of the 2553 filing, the IRS will notify you if the election is accepted.
  • Also check with your state’s taxing authority to see if you also need to file state specific forms to qualify for S Corporation status in your state.

What is the deadline?

For simplicity’s sake, March 15 is the deadline for filing form 2553 with the IRS. As expected, the full story is a little more complex. If your corporation exists on January 1 (and you’re a calendar-year tax payer), then your form must be filed by March 15 (75 days from Jan 1) to receive S Corp treatment for the current tax year. In other words, if your corporation existed on Jan 1, 2012, you needed to file form 2553 by March 15, 2012 in order to have your S Corp in effect for the 2012 tax year. However, if you formed a corporation on August 1, 2012, then your S Corporation deadline is November 15 (75 days from August 1).

If you miss the deadline, you’ll most likely be taxed as a C Corporation for the current tax year, and then your S Corp election will be effective for the next tax year. The IRS may offer relief for a late election if you can show that your failure to file on time was due to ‘reasonable cause.’ Of course, no one wants to be at the mercy of the whim of the IRS, so play it safe and get your form in on time.

Mark down March 15 as your S Corp deadline and file your 2553 form. It’s one of the easiest ways to save on your income taxes. And use those savings to invest in your business or however you see fit. Good luck!  

Image: PhotoSpin

Asset Protection 101: What is an LLC?

257_2701929In my previous post, I spoke of the potential risks involved in real estate investment – namely, the risk that your personal assets are vulnerable should you be sued by a tenant or property guest. There are measures you can take to prevent such a scenario from playing out. 

The LLC (Limited Liability Company) is a popular asset protection vehicle for real estate investors. It essentially forms a wall that shields individual owners from personal liability. In addition to this personal liability protection, the LLC can also offer tax advantages and other benefits.

So what is an LLC? It’s a hybrid of a partnership and corporation. It’s considered to be a “Separate Legal Entity.” In fact, a properly formed and maintained LLC will have both a state-certified filing date and an IRS-issued Tax ID Number (similar to an individual’s birth date and social security number).

The following example illustrates the LLC’s liability protection. Let’s say you have XYZ LLC that holds title to a vacation rental property. A guest falls from the balcony and the court awards a multi-million dollar judgment to the plaintiff. The defendant in this case is XYZ LLC, not you. And the judgment can be collected only from XYZ LLC’s assets, and not from your own personal assets. You may end up losing your investment in the property owned by XYZ LLC, but your other properties, your savings account, and any other investments are all safe.

Setting up an LLC is a relatively easy task. You can either contact your attorney or use a legal document filing service such as CorpNet.com(R) to file the necessary forms with your state’s Secretary of State. Continue reading “Asset Protection 101: What is an LLC?” »

Now that I’ve Incorporated…What’s Next?

740_3681478The most frequently asked questions AFTER incorporation

Over the course of my career, I’ve helped over hundreds of thousands of small business owners incorporate a business or form and LLC. And certainly there are many questions leading up to the process, such as…what type of business should I form? What’s the difference between a C Corporation and an S Corporation? But I’ve also found there can be just as many questions after incorporating a business or forming an LLC.

I’ve put together some of the more commonly asked questions to help you navigate life after the incorporation or LLC formation process:

I used to be a sole proprietor and I had a Federal Tax ID number. Do I need to get a new Federal Tax ID number now that I’ve incorporated/formed an LLC?

The answer here is yes. An LLC or corporation is its own separate entity (remember an LLC or Corp can sue, be sued, get a loan…) and as such, it needs its own federal tax ID number, also known as an Employer Identification Number (EIN). Think of business formation like the birth of child. Once a child is born, it needs its own social security number. The same holds true for your business. Continue reading “Now that I’ve Incorporated…What’s Next?” »

By | July 28th, 2012|Business Checklists, Startups|0 Comments

CorpNet.com: Helping Entrepreneurs Start New Businesses Online!

Nellie Akalp is a savvy entrepreneur, wife, and mother of four (inlcuding a newborn). As the CEO of CorpNet.com, she runs a small business that helps guide entrepreneurs and small business owners through the process of starting a business, incorporating a business, and filing business-critical legal documentation with an easy and cost-effective online service.

“With the downturn in the job market, more people are starting new businesses to take control of their own destiny and create opportunities for themselves,” says Nellie. “But the process of incorporating a business can be intimidating. A lot of people might not understand the legal requirements, or they might wonder, ‘Am I doing this right?’ CorpNet makes it easy. We take it off the ‘to-do list’ of our clients.”

If you want to start and grow a business in a way that complies with state laws and protects your personal assets, CorpNet gives free consultations to help choose the right business structure and file all the necessary paperwork. “You don’t need to hire an attorney to incorporate a business,” says Nellie. “CorpNet gives you a much less expensive way to start your business and comply with the specific requirements of whatever state you’re in.”

Nellie offers these four big reasons to incorporate your business: Continue reading “CorpNet.com: Helping Entrepreneurs Start New Businesses Online!” »

By | June 30th, 2012|Choosing A Business Structure, Starting a Business|1 Comment

Why I LOVE What I Do as CEO/Founder of CorpNet…

Last September,  I turned 40 and in about 2 months i will be celbrating my 41st birthday…which once seemed like a pretty HUGE milestone…now its just another day for me. When I turned 40 and now that I’m about to turn another year older, i don’t get sad about gorowing older, don’t dread it, and I have no attempts to forget the day. I realized I’m not just at peace with myself and my age, but I’m actually happy. And granted I have my health and a fabulous family (including a 9 month old baby girl!), but another key thing is that I absolutely LOVE what I do. And that’s a good thing, because I’ve now done it twice and wanted to share this message with you today…seemed like a great day to share!!!

Let me explain. Shortly after law school, I launched a business with my husband. We provided online legal filing services to entrepreneurs, startups, and small businesses. Basically that means we helped companies incorporate, form LLCs, and start their businesses the right way without having to pay an arm and a leg in attorney fees.

In 2005, we had the good fortune to sell that company to Intuit. We now had plenty of capital. We had the freedom to travel, spend time with our children, and dream up other business ideas. I had a great time during this interim, don’t get me wrong. But, the other ventures just didn’t carry the same spark for me. So, in 2009, we started all over again with CorpNet.com, our latest (and last?) document filing service. And every day since, I’ve been so grateful we made that decision.

First and foremost, I love helping other entrepreneurs. I love the concept of the small business. And I love giving small business owners access to resources they might not be able to afford otherwise.  Because every business, no matter how small, should have the right legal protection to help them thrive. Over the course of my career, I’ve helped form more than 100,000 corporations and LLCs across the U.S. Continue reading “Why I LOVE What I Do as CEO/Founder of CorpNet…” »

The Small Business Mid-Year Tax Planning Checklist

991_4165310Now that we’re approaching  the the mid-way point of 2012, it’s the perfect time to review the financial and tax picture of your business. Too often small business owners wait until it’s time to file their returns to start thinking about taxes. Have you ever met with a CPA or tax preparer and been told you could have lowered your tax payments if only you had acted earlier?

Tax planning is an ongoing process and taking actions now can help lower your 2011 taxes, and for years to come. Here is a small business mid-year tax planning checklist for you to consider:

1. Meet with your CPA

Why wait until the busy tax season to meet with your CPA or tax advisor? Make a mid-year appointment when you’ll both have more time to discuss your financials. Most importantly, you’ll still have plenty of time to act on his or her suggestions within 2011.

2. Review your estimated tax payments for 2011

Now that we’ve hit the midway point, review what your business has made year to date and your forecast for the rest of the year. Then assess your estimated tax payments to avoid underpayment penalties or overpayments (you could be doing more with that money). Adjust your final two estimated tax payments for 2011 as needed. Continue reading “The Small Business Mid-Year Tax Planning Checklist” »

3 Steps to Creating and Protecting your Business Name

511_3606933This is a reprint of a guest post written by me that originally appeared on Mashable last year that I wanted to share it with you today.

Your business begins with a name.  It’s the cornerstone of your company identity and impacts your branding, company tone, and first impressions. Think about it. The branding of Target would be very different if the retailer still went by its original name, Dayton Dry Goods Company.

Selecting the right business name for your company is important — and it should be followed by taking the right legal steps to make sure the name is yours to use for years, and decades, to come. A prudent approach to naming entails three important steps: brainstorming, investigation and registration. Continue reading “3 Steps to Creating and Protecting your Business Name” »