/Tag:home-based

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

Home Office Rules for Smarties!

728_4610511Recently, I was chatting with a friend who was lamenting, wishing, and hoping that she worked from home rather than an office.  I assured her that she should be VERY careful for what she wished for….Home offices are not always what they are cracked up to be!

Home offices are sort of like out-of-town visitors who never seem to leave, an over-bearing mother-in-law with never-ending opinions, or that nagging zit that just will not seem to go away.

While it is very convenient when my kids are home sick or off school for conference day, when it is pouring rain, or I am having a bad hair day, a home office has its very own downfalls.  It can be like a black hole.

A place where you get sucked into and cannot seem to find your way out EVER.

First and foremost, it is extremely hard to set boundaries with a home office similar to an overbearing mother-in-law.  When you decide to venture into another part of the house, you may feel your home office pulling at you to come in its confines.

Second, you have to make and get your own coffee.  Now, I know most of you do that anyway in your ‘offices,’ but who doesn’t want someone to bring them coffee?  Forget the corner office with the view, I just want a hot, steaming cup of joe brought to my desk on request.  One can dream. Continue reading “Home Office Rules for Smarties!” »

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?” »

Starting a Business to Suit Your Personality

 

158_3615911There are certain personality traits that are universal for every entrepreneur. Regardless of the business you’re planning to pursue, you have to be motivated and focused, able to go the distance to achieve your goals.

But aside from the standard qualities that we all need to make our businesses work, how else can your personality impact how you earn a living?

Your Personality in Your Business

It turns out that it can be pretty important. Certain personality types are better suited to certain types of businesses. Maybe more importantly, certain personality types are not suited to certain types of businesses. Continue reading “Starting a Business to Suit Your Personality” »

Taming Your Home Office During Summer

As a mom in business, getting and staying organized is an ongoing theme.  From planning my week on Sunday night to scheduling in fitness to making sure everyone gets home from school to planning for an upcoming conference, my daily life runs like an airplane flight plan.  During the summer, hyper-planning and knowing where everything is located IS even more critical otherwise life begins to looks like one big circus.

When summer hits, our lives as mom (dad) – preneurs  and professional women (and men) get turned upside down, and we adjust our routines to allow for different pickup and drop off times along with wanting to enjoy some summer fun with our kids.  Unfortunately, somewhere in between basketball camp, swimming, and a myriad of important conference calls, my home office took a turn for the worse. 

The first sign was my desk.  I could not find what I needed when I needed it and wasted a good bit of time looking and searching.  The second sign was lost sleep over trying to remember which pile of papers was which.  The third and final sign was when I went into my closet to grab something off my normally tidy shelves and my CorpNet.com Binder (also know as a corporation or an LLC kit)fell on my toe.  OUCH.  If you have received a binder from CorpNet, you know what I mean.  Those suckers are big, heavy, and full of great info and ways to keep your paperwork together, but do not feel so great when they land on your foot. Continue reading “Taming Your Home Office During Summer” »

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…” »

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” »

Avoid the Top Five Incorporation Mistakes

 

1019_4245625Forming an LLC or incorporating a business can be a relatively quick and easy process. And it’s an undeniably critical step to protecting one’s personal assets from any liability of the company. However, while incorporating may be straightforward, small business owners often make a few common mistakes that can have a significant impact on their business. Are you guilty as well?Mistake 1: Choosing the wrong business entity

The three most common types of business structures in the U.S. are the LLC (Limited Liability Company), S Corporation, and C Corporation. Choosing the right business structure can affect the amount of taxes you pay and how much paperwork you need to deal with.

The LLC is great for small businesses that want liability protection, but prefer minimal formality and paperwork. The S Corporation is a pass-through entity for federal taxes (like the LLC) and is great for small businesses that can qualify. Lastly, the C Corporation files its own tax report and should be selected by those companies that plan to reinvest profits back into the company or seek funding from a VC. So what are some of the mistakes made when selecting a business structure?

Continue reading “Avoid the Top Five Incorporation Mistakes” »

By | June 11th, 2012|Business Checklists, Incorporating a Business|0 Comments

HOW TO: Legally Structure your Startup

775_4589486Whether you’re the next big thing in social gaming or organic knitwear, each startup eventually faces the same gnawing questions: How should I legally structure my business? Should I form an LLC or an S Corp? What about an S Corp vs. a C Corp  These questions are only natural. After all, the legal and financial ramifications are significant. And your passion might be designing iPhone apps or analyzing Twitter data, but I’m pretty confident it’s not tax law. While circumstances vary among individuals and individual businesses, here are some general guidelines to help you jump-start your decision on business structures. There are other possible business types, but I’ll focus on three: the LLC, the S Corporation, and the C Corporation. Continue reading “HOW TO: Legally Structure your Startup” »