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Common Business Structures
- Sub-chapter
S Corporations are popular with small businesses,
especially the startup. Apart from protecting personal assets,
sub-chapter S is sought by many to reduce exposure to Social
Security and Medicare taxes by passing a portion of the owner’s
personal income through the corporation as a dividend
distribution.
- C
corporations provide owners the same protection of
personal assets from liabilities as the S corporation. On the
other hand, angels, venture capitalists and other investors prefer
the perpetual existence of the company and the freedom to buy,
sell, trade or give away stock at their own option.
- Limited
Liability Companies (LLC) offer options to the other three
forms listed above. Proprietors can protect personal assets, and
income is not federally taxed on the LLC, but rather its members,
be they individuals or business entities. Investments intended for
specific timelines, like real estate and joint ventures, allow the
protection from personal liabilities and pass-through income for
the duration of the venture.
Many people understand the necessity of protecting personal
assets and minimizing tax liability by formalizing their business in
one of the aforementioned legal business structures. However,
once the legal business structure is filed and formalized via an
operating
agreement or bylaws,
managing the business entity can be confusing. In fact,
staying in good standing and ensuring that the business entity is
compliant is a requirement when it comes to maintaining the
protections of the corporate entity. It doesn’t make sense to
utilize a corporate entity to protect personal assets only to
neglect basic corporate formalities, potentially allowing for
“piercing of the corporate veil” (i.e., allowing for access to
personal assets by third parties in the event of a law suit or
business debt).
Some of the basic requirements include:
- Initial
& Annual Reports: In most jurisdictions, Corporations
and LLCs are required to pay annual fees and taxes for the
privilege of operating as a corporate entity. In addition to these
annual fees, most states also require that Corporations (and often
LLCs) submit information about corporate activities or corporate
changes that will become public record. In most states, this
information report is referred to as an "Initial/Annual Report" or
"Statement of Information". The term “report” and “statement
of information” are often used interchangeably by the Secretary
of State. Corporations and LLCs are required to file this
Initial/Annual Report/Statement of Information even though they
may not be actively engaged in business at the time this filing is
due. The applicable filing period varies by state and, in most
cases, the fees associated with these "informational filings" are
nominal. However, if you fail to provide the required information
in a timely manner, your Corporation and/or LLC could be subject
to suspension and/or revocation in addition to any penalties or
late fees the state may impose.
MyCorporation can assist
you with both your Initial/Annual
Reports or Statement of Information. You can even
set up an automatic annual service whereby MyCorporation will
automatically provide you with the necessary documentation for the
Annual Reports/Statements of Information based upon the
requirements of the state in which you are
incorporated.
- Articles
of Amendment: Many states require that a corporation or
limited liability company (LLC) file Articles of Amendment (or a
"Certificate of Amendment") when making an addition to, deleting
from, or otherwise altering the existing provisions of the
Articles of Incorporation/Organization. If you have undertaken any
of these actions in your corporation or LLC, make sure that you
file the necessary Articles (or Certificate) of Amendment.
- Foreign
Qualifications for Corporations and LLCs: Where a
Corporation or LLC is formed in one state, yet has an office in
another state, that company may need to qualify as a "Foreign
Corporation" (or Foreign LLC) within the “foreign” state of
operation. This is most often the case where a Corporation or LLC
is formed in Delaware or Nevada, for example, yet operates in
another state – or when a corporation expands its offices beyond
its home state of incorporation. In either of these
instances, it is important to qualify to do business in the
foreign state so that your Corporation or LLC may operate as a
foreign entity within that state.
- Fictitious
Business Name or DBA: A "DBA" ("Doing Business As") is an
official and public registration of a business name. The business
may be a sole proprietorship, partnership, corporation, limited
liability company (LLC), or any other type of business entity.
DBAs are also known as Fictitious Business Names, Assumed Names,
and Trade Names. DBAs are most commonly filed for one of two
purposes: to register a business name for a non-state-level
business entity (such as a sole proprietorship) for purposes of
conducting business, marketing and/or banking; or to register an
alternate name for a state-level entity (such as a corporation or
LLC) that intends to conduct business under names other than or in
addition to its legal name. In many cases DBA registrations are
required by law or by banking institutions. Even when not required
by la w, anytime an individual or company is using a business name
in commerce it is wise to file a DBA. As such, if you are
incorporated under one name (ex. “ABC, Inc.”), but you do business
under a different name (ex. “abc.com”), it is wise to register
your fictitious business name in all relevant
jurisdictions.
- Registered
Agent Services: A registered agent is an individual or
entity designated by a Corporation or LLC to accept official
documents on behalf of the corporation. The registered agent must
be a resident of the state of incorporation or foreign
qualification. In addition, the registered agent must maintain a
physical address within that state and must be available to accept
service of process on behalf of the corporation during standard
business hours. A Corporation or LLC generally must maintain
current and up-to-date Registered Agent information with the
Secretary of State.
- Corporate
Kits: Maintenance of your corporate documents is vital to
ensure that your corporation maintains its good standing and
continues to benefit from the advantages of incorporation (limited
liability, separate existence, etc.). A great way to document and
maintain all of your relevant corporate information is to utilize
MyCorporation’s Elite Corporate Kit. This provides you with
a safe place to store your corporate documents. Each Elite
Corporate Kit comes with your Corporation’s name embossed in Gold
on the matching slipcase.
Maintaining corporate compliance is crucial – both to maintain
good status with the Secretary of State and to ensure that you are
taking advantage of the benefits of being a Corporation or
LLC. MyCorporation
can assist you with any of the above-referenced state filings, and
can provide you with corporate kits for storage and safe-keeping of
these documents. Feel free to contact our experienced filing
specialists with any questions you might have. |
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