/Tag:incorporate

So You Want To Start An Accounting Firm? Here’s What You Need To Know.

If you’re a CPA, making the transition from working for someone else to being your own boss has probably crossed your mind. Self-employment offers an opportunity to have more control over your own schedule, allowing you to better balance your professional endeavors and personal life. It also enables you to manage your firm the way you want to manage it. Indeed, there are some attractive perks to starting your own accounting firm. There are also a lot of things to consider and accomplish in the process.

Think It Through

Before you move forward with launching your own business, make sure self-employment is the right choice for you. It doesn’t suit everyone, and it’s best to discover that before you devote time and money to the cause. Ask yourself:

  • What is motivating you to be a business owner? 

Think carefully about what’s driving your decision. If your motivation comes from the inability to deal with your boss or your coworkers, you might want to reconsider. When you have your own business, you’ll need to find ways to work harmoniously with many different people. Not all of them will be easy to get along with. Realize that starting a business won’t enable you to avoid interpersonal challenges.

  • Are you OK with assuming some risk? 

Starting a business comes with initially forfeiting a steady paycheck and paid vacation time. And with no employer-paid health insurance, you need to seek and pay for that necessity on your own. If your business doesn’t succeed or doesn’t grow as quickly as you anticipate, you might face some financial hardships. Are you willing and able to accept that?

  • Do you have enough capital to get started?

Many new businesses fail in their first few years of operation because they don’t have enough initial capital. Be realistic about your financing. Generally, it’s best to have enough money available to support yourself for at least six months to a year as your business becomes established.

  • Are you self-disciplined and driven? 

One of the biggest changes you’ll experience in going from employee to self-employed is holding yourself accountable for your work. With no boss to give you assignments and check in about their status, you need to keep yourself on track. You’ll need to be self-motivated and organized—your business success will depend on that.

  • Are you prepared to handle all the aspects of running a business? 

As a business owner, you’ll do more than just accounting work for your clients. You’ll wear many hats as you manage your business. Marketing your company, qualifying leads, negotiating contracts, dealing with IT issues…it all falls on you—at least in the beginning stages of your business.

If after that exercise you decide you want to pursue starting your own accounting firm, I expect you’re wondering, “Where do I go from here?”

To legitimately launch your business, here’s an overview of the seven legal steps to get there:

1. Select a business name

Think about whether you want to market your business using your own name (e.g., “Jane Smith, Accountant”) or create a business name (e.g., “Accounting You Can Count On”). As a solopreneur accountant, you might opt to use your own name because you and your brand are one in the same. On the other hand, choosing a business name might help you be perceived as well-established and experienced.

If you go with a business name, make sure it is available to use before you start printing it on business cards and other marketing materials. Check to see if the name is available in the state where you’re planning to operate your business by checking with your state’s secretary of state office. We have a free business name search tool here at CorpNet that can help, as well.

Also check to see if the domain name for your business is available (e.g., accountingyoucancounton.com). Sites like GoDaddy.com will let you instantly find out if there’s a suitable domain, and they will offer suggestions for alternate names if the one you want is already taken.

No one in your state is using the name you want? Excellent! Next, you’ll want to search the U.S. Patent and Trademark Office to see if anyone has a pending request for or has successfully registered a trademark for the name. Don’t skip this step because you’ll land in legal hot water if you infringe on another company’s trademark.

2. Choose a legal structure and register your business.

The business structure you choose will affect your business from both legal and tax standpoints. Solo accountants and small firms often choose to register as an LLC (Limited Liability Company), PLLC (Professional Limited Liability Company), or PC (Professional Corporation). As state constructs, these business entities are subject to different rules in different states. You can find the specific rules for accountants in your state via the CorpNet website or you can call the Secretary of State’s office in your state to get the details you need.

3. Obtain the licenses and permits you’ll need.

Regardless of which state you’re operating your business in, you’ll need some form of licensing to provide public accounting services. You will need to hold a CPA license and your firm may need a public accountancy license. To determine the requirements in your state, check with your State Board of Accountancy.

Besides CPA accreditation you may also need other state and local municipality permits, as well. They might include a general business operation license, a signage permit, and possibly a home occupation permit (if you’re operating your business from home. CorpNet can help you determine the license and permit requirements applicable to you, or you can check with your local government office.

4. Apply for a Tax ID Number

Also called a Federal EIN (Employer Identification Number), this allows the IRS to track your business’s transactions. LLCs and corporations are required to have an EIN and many banks will require that you have one before they’ll allow you to open a business bank account.

5. Open a bank account exclusively for your business.

It’s important to keep your personal and business finances separate—for both legal and tax purposes. In fact, that separation is mandatory for LLCs and corporations. After you’ve registered your business with the state and have your Tax ID number, you will have the information you need to open a business bank account.

6. Get insurance to protect your business.

Even though officially forming an LLC or incorporating your business will help to lower your personal liability related to business debt and lawsuits against associates, it will not protect your personal assets if action is brought against you due to your own actions. That’s why it’s a good idea to consider getting an insurance policy for peace of mind. Talk with a knowledgeable and trustworthy insurance agent who understands the needs of accountants and other businesses in the financial services industry. A reliable agent can guide you to the type of coverage that will best protect you, such as a Business Owner’s Policy (BOP), Professional Liability, Insurance, Data Breach Coverage, or others.

7. Know your business compliance responsibilities.

Registering your business is just the beginning. LLCs and corporations have ongoing requirements to keep their businesses in good standing. For example, most states require LLCs and PLLCs to file an annual report each year and show proof of a valid certification. Corporations have more corporate compliance responsibilities. Besides annual reports, they must conduct annual meetings, prepare meeting minutes, and meet other compliance requirements.

I know it can be tough to keep up with everything that’s required and when it’s due, so I recommend using the CorpNet B.I.Z. (Business Information Zone) compliance tool. It’s a free monitoring tool that can help you stay on top of your state filings and fees due throughout the year.

The steps to starting an accounting business aren’t overly complex. To make sure you launch your business on solid legal ground, you’ll want to make sure you do it right. Consider talking with a legal professional who can guide you and look to CorpNet to ensure your business forms and filings are done accurately and on time.

If you want more detail about launching your accounting business, join me on Thursday, May 4, 2017 at 11 a.m. Pacific Time for CPAacademy.org’s upcoming webinar, “Steps to Start Your Accounting Firm.” Registration is required, so sign up today!

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!

To-Dos When Starting a Part-Time Business

So you’re not ready to quit your “day job,” but you want to start a business? Many entrepreneurs dip their toes to test the waters by launching their businesses part-time. In some ways, it’s the best of both worlds; you pursue your dream of business ownership while still bringing home a steady paycheck.

Although there are some considerations unique to starting a business part-time, you’ll find other aspects are the same as when starting a company full-time.

For example, you have to take the necessary steps to operate your business legally.

 

  1. Make sure you can legally use your business name.

Either check your state’s Secretary of State database or do a corporate name search to see if anyone else has registered the name you want. I also advise using CorpNet’s free trademark search tool to see if someone has already filed for a trademark on the name.

  1. Select a business structure.

By default, your business will be considered a sole proprietor unless you file for a different legal structure. Operating as a sole proprietorship offers simplicity, but it does not separate your personal and business finances and liabilities. That means if your business is sued, your personal assets might be in jeopardy.

I recommend considering formally registering your business by either forming an LLC (Limited Liability Company) or incorporating (C Corporation or S Corporation) to protect yourself. Doing so shields your personal assets from the liabilities of your company.

Before talking with an attorney for guidance, you can start learning about the advantages of different business structures by using CorpNet’s Business Structure Wizard.

Note that the different structures offer different taxation pros and cons, so I suggest also talking with an accounting or tax professional to explore which structure will work best for you in that respect.

  1. Register your business name.

When you form an LLC or incorporate your business in your state, registration of your name automatically happens. However, if you choose to operate as a sole proprietor and want to use a fictitious name for your company, you must register your business name by filing a Doing Business As (DBA). Don’t skip this step! It will allow you to operate your business under that name in your state and it will prevent other sole proprietors in your state from using that name.

  1. Get the licenses and permits you need.

Depending on the type of business you’re operating and where you’re located, you may have to secure licenses and permits to legally run your business. Federal, state, county, and/or local licenses and permits might apply to you. To avoid costly penalties and fines, research which permits and licenses you need to have to legally run your business.

 

Part-time Doesn’t Mean You Should Approach It Half-Heartedly.

Aside from the legal considerations in starting your part-time business, keep these things in mind, as well:

  • Know your limits.

There are only so many hours in each day, so carefully assess your capacity to work in and on your business before jumping in.

  • Make sure there’s no conflict of interest or legal restrictions.

Check with your employer about any rules that would prevent you from starting and operating your type of business while still on that company’s payroll.

  • Take it seriously.

Although you may still be working for someone else in your other job, you’ll need to give your part-time business serious time and energy if you ever want to make it a full-time endeavor.

 

Need Help Getting Your Part-time Startup Off The Ground?

If you’re planning to give part-time entrepreneurship a go, CorpNet is here to help you take care of all the business filings required to legally launch and run your business. Contact us today to make sure your part-time business has all of its registration paperwork submitted accurately and on time.

By | January 11th, 2017|Running A Small Business, Starting a Business|2 Comments

Nellie in the News: November 2016

Thanksgiving and November have come and gone and the holidays and 2017 are creeping up on us fast and we are here help prepare your business for the new year! CorpNet can help you incorporate a business or form an LLC right now or as a delayed filing in any state.

This month, our CEO Nellie Akalp has been busy writing a ton of articles to help small business owners start a business, stay in compliance and prepare for the new year. Below are some highlights from the month of November!

Want Nellie to speak at your next event or share her tips on your podcast? Contact her today!

Interviews & press Mentions

Marvelous Moms Club – Mompreneur Monday with Nellie Akalp http://bit.ly/2fXEpF9

Thoughtful Growth – Tips for Motivation: Unmissable Advice from 192 Experts http://bit.ly/2eb6k2D

AIS Insurance – Nellie Akalp of CorpNet.com on Small Business http://bit.ly/2fvItiR

Small Business Trends – 10 Tips for Being Prepared as an Entrepreneur http://bit.ly/2fwnJG3

 

Expert Contributed Posts

Small Business Trends – Is it Time to Modify Your LLC Operating Agreement? http://bit.ly/2eR6a4G

GoDaddy – 5 Tips for Motivating Employees to Perform at Work http://bit.ly/2ejN2M9

Mashable – Your Brain Needs a Break – These Apps Are Here to Help http://on.mash.to/2eSc9mR

Freshbooks – Your Business Structure Affects your Taxes: Here’s How http://bit.ly/2eWgupg

Huffington Post – Should You Change Your S Corporation to A C Corporation? http://huff.to/2fQ7py3

Entrepreneur – How to Create a Meaningful Morning Routine http://bit.ly/2fSTnNQ

UPS Small Business Solutions Blog – Setting the Stage for a Successful Small Business Saturday http://bit.ly/2fS3a6A

By | November 29th, 2016|Nellie in the News|0 Comments

Back to Basics: LLC or Corporation? Which Is The Better Choice For Your Business?

Both forming an LLC and incorporating your business safeguard you by protecting your personal assets if legal action is taken against your business. They also give your business a boost of credibility by having either “LLC” or “Inc.” behind your company name. But there are differences that could make one or the other the better choice for you.

I can’t emphasize enough the importance of knowing the pros and cons of the legal structures available to you before you decide which will serve your business most effectively.

 
The Low-down On LLCs

Many owner-managed businesses opt to form as LLCs.

LLC owners are referred to as “members,” who each own a certain percentage of the business. Single-member LLCs are uncomplicated from a compliance and management standpoint. When you have multiple members, however, you should have an operating agreement that documents who can make decisions and how transferring membership interests should happen if a member leaves, dies, or files bankruptcy. Some states require that the remaining members dissolve the LLC under the circumstance of a member’s leaving, death, or bankruptcy.

From a tax standpoint, you can choose to have your LLC treated in one of two ways.

  • As a pass-through entity, with the profits and losses of your business passed to your LLC members’ personal tax returns. If your business isn’t profitable, that will lower your personal tax obl
  • As an S Corporation, whereby only salaries and wages are subject to self-employment taxes (FICA and Medicare), not company profits taken as distributions to members.

Because there are notably less formation paperwork and compliance requirements with an LLC than there are with a corporation, business owners who want legal protection and tax flexibility without a lot of complexity find the LLC structure an attractive option.

One potential disadvantage of forming an LLC, however, is that you cannot sell stock to raise capital for your business. And if you seek funding from venture capitalists, you may get turned down because many will only invest in corporations.

 
Insight About Incorporating

Whether S Corporation or C Corporation, the owners of corporations are called shareholders. Their percentage of ownership corresponds to their percentage of shares in the business. Unlike with an LLC, it’s typically simple to transfer shares (ownership) from one person to another. That means the business can continue onward when shareholders leave, die, or sell their shares.

S Corporation

With an S Corporation, a business’s income, losses, and deductions pass through to its shareholders. Typically, the shareholders report corporate income on their personal income tax returns.

Unlike LLCs and C Corporations, S Corporations are limited to 100 members/shareholders. So while they can sell stock, their potential to raise capital in that way is somewhat limited.

While S Corporations require more paperwork and ongoing compliance than LLCs, they don’t come with as much formality as C Corporations.

C Corporation

Tax treatment of C Corporations involves what is often called “double taxation.” A C Corp pays corporate income tax on its profits, and then its shareholders pay personal income tax on the profits they receive as dividends.

C Corporations don’t have a limit on the number of shareholders that can invest in them, and they may be more attractive to outside investors.

Because C Corporations operate as separate legal entities from their owners, they provide more personal liability protection than other business structures.

Note that potential drawbacks to incorporating as a C Corporation are the higher formation costs, extra compliance requirements, and additional oversight they are subject to.

 
Do Your Due Diligence, Then Decide.

With both legal and financial aspects of your business affected by your choice of legal structure, make sure you carefully evaluate your options. I encourage you to seek professional expertise and guidance, so you fully understand the advantages and disadvantages of each structure.

In the meantime, you can get off to a great start by using the CorpNet Business Structure Wizard for gaining a better idea of the structure that might work best for you.

                               

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

                               

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

 

 

                               

Why Customers Love Us – CorpNet Reviews

Screen Shot 2016-05-12 at 2.43.23 PMWe’re back with another month of fantastic 5-star reviews of CorpNet.com services! The summer days are getting hotter, but we have the AC cranked up and we’re working hard ensuring happy customers across the board.

Here’s a look back at some fantastic 5-star reviews of our services these past few weeks. Do you need to incorporateform an LLC or file a DBA? Check out all of our reviews on TrustPilot and reach out anytime for a free business consultation at 888.449.2638.

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By | July 14th, 2016|CorpNet Reviews|0 Comments

Why Customers Love Us – CorpNet Reviews

Screen Shot 2016-04-08 at 12.42.22 PMOne thing we strive for here at CorpNet.com is stellar customer service. We go above and beyond with every order to ensure our customers are happy, and if they are not, we make it right!

Summer is in full swing and many people are planning their annual vacation to relax, unplug and unwind. But there are still many individuals hard at work making their business dreams a reality and we’re thrilled we can help them along the way while exceeding their expectations for a document filing service. Some customers even left amazing CorpNet.com reviews!

Here’s a look back at some of these amazing 5-star reviews of our services these past few weeks. Do you need to incorporateform an LLC or file a DBA? Check out all of our reviews on TrustPilot and reach out anytime for a free business consultation at 888.449.2638.

 

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By | June 21st, 2016|CorpNet Reviews|0 Comments

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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