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Archive for the ‘LLC/Incorporation’ Category

What is a DBA?

Sunday, September 21st, 2008

The initials DBA, which is the term for an assumed business name, simply stand for “doing business as.” A DBA, sometimes called a fictitious business name or trade name, is used by individuals who wish to open bank accounts or to receive income under a name other than their legal name. The term “legal name” is used here to mean one’s personal name, such as “John Smith.” Filing a DBA is much less expensive than incorporating, and may be all that is necessary for the small business owner. For instance, if John Smith wishes to own and operate a pizza restaurant, instead of creating a corporation for the entity “John’s Pizza,” he can simply file “John Smith DBA John’s Pizza,” and he is in business.

While the main advantage of a DBA is the cost savings for a small business, the main disadvantage is personal liability for business debt. If your business fails, you do not have a corporate umbrella to protect your personal assets. This means that you can be made liable personally for the debt of your business and could lose any personal assets that are not otherwise protected. Another disadvantage is that you do not have any legal protection for the name you have chosen and some other entity can open a business under the same name.

However, while filing a DBA does not necessarily protect your chosen name from the use of others, it is still a good idea to check through other corporate and DBA names before choosing a name for your business so that you do not choose a name that has been used by several other businesses in your area. Remember when choosing a name that your business name is an important asset in branding your product or service and you should be sure to choose wisely. Obviously, the best names will be easy to pronounce and easy to spell, but not necessarily very common. Be sure to pick a name for the long haul, because you don’t want to have to rename your business once you’ve got everything in place.

Once you have a DBA, should your business grow, you may want to incorporate at some point. Also, if you intend to open up several business ventures or franchises, you could set up a parent corporation and then file a DBA for each of the smaller businesses. Obviously, this would be much less expensive than incorporating each franchise separately. While it is not always necessary to seek the advice of an attorney to file a DBA, if your plans include an eventual incorporation, you may want to consult an attorney prior to initially setting up your DBA.

Obtaining a DBA is handled differently in each state and is sometimes accomplished at the county level. Therefore, the necessary forms and fees are different depending upon where you live, so you will need to contact the Secretary of State or other state agency to determine exactly what to do to register your DBA. There could even be a requirement to publish your new DBA in a local paper and file proof of the publication.

What is Incorporation?

Sunday, September 21st, 2008

Incorporation is the creation of a legal entity, or corporation, for the purpose of doing business in a particular state. Companies and/or individuals may chose to incorporate their business as a means of protecting personal assets, such in the case of bankruptcy or other bad debt created by a business. There are various forms of incorporation, each with different rules and benefits, and the laws governing each type can vary from state to state. Prior to incorporating, the individuals or company involved should discuss all the ramifications of each type of incorporation with an attorney and/or an accountant to determine which type of incorporation will best suit their particular needs.

While it is not absolutely necessary to hire an attorney in order to incorporate, it is in the best interest of the individuals involved if they do seek the advice of both an attorney and an accountant, prior to incorporating. The various forms of incorporation can all require different types of annual reporting, which could have an affect on the corporation, and it is wise to be fully aware of both the advantages and disadvantages of the type of incorporation that is best for your business.

There are various legal benefits to incorporating, which include protecting personal assets, establishing retirement funds, lowering tax rates, raising funds through stock sales, and establishing credit or building a separate a credit rating. Furthermore, ownership is easily transferable to others and the existence of a corporation is not in any way affected if a director, officer or shareholder dies or resigns.

Various entities may incorporate, that is individuals, businesses, non-for-profits, and different types of clubs or even government bodies, such as a cities or towns. These corporations may take different forms, such as standard corporation, partnership, limited liability company, or limited liability partnership, and be publicly traded or privately owned.

The first step in becoming incorporated is to determine that the name you have chosen is available for incorporation in your state. This is done by contacting the corporate filing office, such as the Secretary of State or Corporations Commissioner, as well as federal and state trademark registers. This is another reason why incorporating through an attorney is a good idea, as they will handle that for you.

Next, the corporation must file Articles of Incorporation. The rules for filing can vary by state, but the basic outline of the Articles of Incorporation would include the purpose of the corporation, the name, the address of the corporation’s principal place of business, contact information for the agent of the corporation, and the number and types of shares of stock. The fees for such filing also vary depending upon the state in which the corporation is formed.

A corporation must also prepare and file Corporate Bylaws, which will outline important details, to include dates for annual shareholder and/or officer meetings, notification instructions, information on who can vote, and other facts necessary for shareholders and officers of the corporation. At the annual meetings, or any special meetings, held by the corporation, the corporate Secretary is obligated to take and have transcribed minutes of the meeting, which are to be filed and maintained in the corporation’s corporate book.

What is an LLC?

Sunday, September 21st, 2008

A Limited Liability Company (LLC) is a form of corporation or corporate entity that allows the various individuals involved, as well as the corporation as a whole, to limit their liability as against each other. Simply put, this means that if the LLC accrues debts that it cannot pay, each member of the company is not individually responsible to cover those debts. Similarly, if the company or an individual in the company commits a crime, such as fraud or theft, the other members are more protected from those actions than they would be under a traditional corporate structure. In a conventional corporation, each member, as well as the corporation, can be made liable for the actions and/or debts of the individual members and/or the corporation.

An LLC is a relatively new way to incorporate and the flexibility allowed makes it more desirable for smaller or single-owner businesses, which may not have deep pockets. The LLC is the most flexible form of incorporation, other forms being the more traditional Corporation, S-Corporation, Limited Liability Partnership (LLP), Limited Partnership (LP), and Limited Liability Limited Partnership (LLLP). There is also the Series LLC, where a separate LLC is formed for different company assets, and the PLLC, which is a Professional Limited Liability Company, generally a group of licensed professionals (doctors, attorneys, etc.) who practice the same profession. The Series LLC is a very new form of corporation, and has been created as a way to protect each asset or business transaction, such as the purchase of real property, separately.

The members or owners of an LLC are not restricted in most states, meaning they can be individuals or corporations. Even other LLCs and foreign entities can be members of the LLC. There is also no limit on the number of owners or members of the LLC. It can have as few as one member, or as many as one hundred members, or more.

LLCs must file Articles of Organization with the secretary of state in the state they choose. Since state laws vary, some of the information required, as well as the filing fees for the Articles of Organization, will be different from state to state, however, the information generally must include company name, the name and address of a statutory agent, and a valid purpose for their business.

An LLC must also draft an Operating Agreement, which will outline the various rights of the members and the company. This document is incredibly important to the smooth operation of the LLC, and should be carefully considered and worded so as to appropriately protect the LLC and its members. The Operating Agreement should also outline the way in which the LLC will be managed, either by the members themselves, or by another person or entity.

Clearly, one reason for incorporation as an LLC is for the tax benefit. The LLC can choose to be taxed in several different ways, as a Sole Proprietor, as a Partnership, as an S-Corporation or as C-Corporation. This flexibility is just another way in which the members of the LLC are able to achieve their desired benefit.

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This web site also offers an Education Center where you can learn more about the issues you need to understand to make good business decisions for your life, your family, and your business. has been featured prominently on many news programs and in such newspapers as The Wall Street Journal. offers expert advice and help with legal documentation, after you answer questions online about the specific needs in your situation. It lets you create official legal documents from home, from your computer, and the paperwork will be prepared for you and shipped to you within just a matter of a couple of days, as a general rule.

Many people need help with legal issues who never get the assistance they need because they don’t know how to go about it, or “seeing a lawyer” sounds too expensive. Within the option of, everything is made easier and simpler for you. Everyone can have access to the legal advice they need through this web site. It’s a positive opportunity and you should take advantage of all that it offers the next time you need a legal document prepared. was started by attorneys who recognized the need for simple answers to simple questions through an inexpensive forum. They have a team of legal experts, retired judges, and law school professors who work with you and answer your questions. You can rely on the fact that their legal forms are accurate and dependable. They want to offer you customer service and satisfaction that is second to none and they work to provide you with quality efforts. Customer service representatives are available by telephone 24/7 to answer your questions and direct you to the proper sources of information.

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Every company needs structure, but what kind? LLC or Corporation?

Saturday, January 12th, 2008

In order to determine if an LLC is the right company structure for you, it’s important to learn what precisely an LLC is. While it is easy to get an LLC, or limited liability company, mixed up with a corporation, it would be a mistake to do so. The terms aren’t interchangeable and unless you realize why this is, you might as well pick a company structure out of a hat!

Basically, an LLC features the best of two worlds: it’s part partnership and part corporation. The owners deal with profits, losses, and taxes directly, yet the company isn’t rendered a separate entity – except in the sense that liability is taken off the shoulders of its members. The LLC structure avoids some of the bureaucratic and tax problems that corporations face, but because it is so new to the United States, it still has a few hiccups and isn’t always best for large-scale companies.

Benefits of an LLC structure:

· No double taxation! Because of the partnership setup, wherein the members are focused on more directly by the government, there is pass-through taxation. An LLC can be taxed as a corporation, however, if its owners so choose.

· Less paperwork and less meetings! This is probably one of the brightest aspects about an LLC. Because it is unincorporated, there are a great deal less “requirements” of it. Those operating an LLC have significantly more control over how they choose to manage the company.

· An LLC has the same basic perk of a corporation – limited liability. Limited liability is where its at, and as implied in the name – “limited liability” company, you get this too.

Why an LLC structure may not be ideal:

· Some LLC’s simply can’t escape a heavy tax burden because of the state they’re in. Many states, including New York, Texas, and California, greet LLC’s with a frustrating franchise tax.

· LLC’s are often strange and foreign sounding to people. Shareholders, members, and even local legislatures aren’t quite used to LLC’s yet. While LLC’s have been popular in other countries for years, they’re relatively new to America. This means that investors are not always attracted to LLC’s, members don’t always know what to do with themselves and are often confused about what their roles are, and because there aren’t as many rules, LLC’s are more vulnerable to falling apart.

· In some states, the laws are such that an LLC is pointless and the end goals of avoiding double taxation and protecting its members are impossible.

So is an LLC the right structure for you? For small companies with leaders who are good at making up their own rules, an LLC is recommendable. However, if your company is unfortunate enough to be in a state that is slow to reward LLC’s, it could be the kiss of death to your business success. For bigger companies that may benefit from the simple organization of a corporation or for companies trying to succeed in states that aren’t friendly to LLC’s, the conventional corporate structure is a better fit.

The bottom line is: LLC’s are right for some and totally wrong for others

LLC’s: They don’t have to be so confusing!

Saturday, January 12th, 2008

The limited liability company, or LLC, is a new concept for businesspeople in the United States. Internationally, LLC’s are fairly common. However, investors, employees, and lawmakers aren’t always quick to warm up to such a structure in America. Let’s clear up some of the misunderstandings and confusion about LLC’s and hopefully we can figure out what an LLC is all about in the process! Here are frequently asked questions about the topic; chances are you’ve stumbled upon the same ones in your own thought process.

How does an LLC differ from a corporation?

LLC’s resemble partnerships or sole proprietorships in that they feature advantageous pass-through taxation. Economically, they make a lot more sense! But they also have the benefit of limited liability for their members, just like a corporation. Basically: the LLC is not a separate entity from its owners but its owners are still protected from personal liability. No double taxation and no liability – LLC’s are hybrids of a partnership and a corporation.

If LLC’s are so great, why would you not structure your business in such a way?

Simply put – LLC’s are like the new neighbors; a lot of people don’t trust them. Shareholders aren’t as eager to invest in them. Members get confused about what LLC means for them (they aren’t forced by the state to be organized in any standard way). More importantly, in many states, an LLC becomes almost a corporation by default. Franchise taxes and other restrictions haunt many LLC’s because lawmakers aren’t as willing to give them more freedom and tax benefits than typical corporations.

Do you need more than one owner to form an LLC?

Nope – you only need one member!

Is it hard to form an LLC?

It’s quite easy to form an LLC. In most states, you simply have to fill out an “articles of organization” form and pay a fee. If you already own a partnership or sole proprietorship, it’s easy to switch over to an LLC. Some states have further requirements, however, and you’ll want to research this on your own.

Can an LLC be taxed like a corporation?

If you so choose, the LLC can be taxed as if it were a corporation. This benefits LLC owners who want to keep more of their profits.

Is an LLC in Texas the same as an LLC in Maryland?

Not at all. LLC’s in some states will thrive, while in other states, they might die. Local laws regarding LLC’s, especially when it comes to the issues of taxes, are highly variable.

As the years pass, LLC’s might become more and more appealing. The reverse situation could occur, however, if legislatures only become more and more restrictive and consequently make the LLC structure meaningless, as all its advantages will be offset by fees and regulations. However, if shareholders and businesspeople can wise up to the benefits of LLC’s, they’ll probably just grow in popularity.

You’ve taken a step in the right direction by reading this article. Your next step will be toward a corporation or an LLC; it’s a very personal decision that depends entirely on the unique character of or your company and your state’s laws.

LLC’s: Where do the profits go?

Saturday, January 12th, 2008

A limited liability company, or LLC, has a very unique personality, one that may take some getting used to for Americans. There is the partnership/sole proprietorship and the corporation. And then there is the LLC, which combines the benefits of both of these structures and in effect, is has its own identity. One of the key aspects of an LLC that is so different than in any other business structure is that the terms “shareholders” and “partners” can be tossed out and replaced with “members.”

What this means is a certain amount of great equality or inequality is possible. There can be one member or hundreds – it doesn’t matter, there’s no cap. In fact, a member can be a breathing human being or it can be a corporation. This basic makeup of an LLC is why profit sharing is sometimes hard to understand from the outside.

The owner of an LLC really can go about profit sharing however he or she likes. In partnerships, the profits are split right down the line. But in an LLC, they can be split in any which way. Moreover, an LLC can even be taxed as a corporation, meaning the owner(s) retain more profits. As the owner of an LLC, you basically get to choose how you want it to be taxed and who and where the profits go to.

There are a few pitfalls that come with this structure. First off, while the people up top have more power, this can mean bad news for more minor members. In corporations and partnerships, there is a required organization and while it can complicate and bore a company (who wants to keep meeting minutes?), it can also assure a smoother and fairer operation. Secondly, an LLC can’t live forever. Whenever a member dies or goes bankrupt, the LLC dissolves! That certainly can throw a wrench into an ideal profit sharing plan.

Still, another obstacle exists for LLC members when it comes to profit sharing. If they want to go public, it’s difficult to share profits. Same goes for sharing profits with employees – it’s not a practical move to make with an LLC. If you seek large-scale profit sharing, you probably should set up a corporation, not an LLC.

One important thing to note, however, is that there might be more profits to share in an LLC as double taxation is avoided, without the loss of protection of personal liability! This is of course one of the main reasons to form an LLC as opposed to a normal corporation.

It’d difficult to grasp any single concept with regard to LLC profit sharing, as it will vary from company to company. As it should. A large appeal of an LLC is that it can be managed in any way. This is great news for small companies who function well on their own and are all the more effective and profitable when they are given the reigns and can call the shots.

The Price Tag of Incorporation: Fees

Saturday, January 12th, 2008

A lot of benefits await a company that’s about to incorporate, but there’s a price to it all. A hefty price in fact. Incorporation is a long and sometimes grueling process. It also happens to be an expensive one. In particular, a company will face fees for incorporating – all this means is a company can’t really incorporate on its own; it often needs the help of an outside service to efficiently incorporate. There are steps you must take both before and after incorporation that require a lot of paperwork and changes to your business structure.

Basically, there are three ways you can incorporate. Are you a staunch do-it-yourselfer? If you know what you’re doing, you can save yourself a lot of money by incorporating yourself. But that’s not an easy task and most prefer to turn to an incorporation service or an attorney to guide them through the process. Some companies offer more complete incorporation services than others and typically, the upfront fees you are quoted won’t be all you end up paying out – there are many hidden costs. There’s another added factor that will affect your incorporation fees: your state. What state are you incorporating in? Each state has different filing fees.

Just as you would shop around for a car, or any relatively pricey product for that matter, you need to do the same for an incorporation service. There are unfortunately many bad deals out there and you don’t want to fall victim to a scheme. Read the fine print, ask about hidden costs, and make sure the services offered will lead to full, and not just partial, incorporation.

Also, consider the friendliness of the staff as a point of major importance. Incorporation is a complicated and serious step for a company to take and it must not be done casually. It’s best if you have a team of people skilled in incorporation on your side, ready and willing to answer every question and address every concern you have. Incorporation poses different problems for different companies and that’s why your incorporation service (or attorneys) must be in tune with your company’s individual struggles.

In fact, you may very well be advised not to incorporate as you comparison shop for an incorporation service! It’s not beneficial for every company to incorporate and if you can avoid the fees, why not?

But you’re probably wondering… what do these incorporation fees cover? What goes into incorporation exactly and why is it so expensive? Here are a set of tasks a good incorporation service will handle:

· State filing fees

· State recording fees

· Search for a name for the soon-to-be corporation

· Certificate of Incorporation preparation

· Filing the many important documents for incorporation

Furthermore, incorporation fees include that of forming the corporation and also a limited liability company. So keep that in mind as you think about the price of incorporation.

Do you feel even more confused now? The uncomfortable fact is incorporation is far from an easy thing to do, but there are a lot of services out there dedicated to making it a convenient option for your company. But it does have a cost! Even after you incorporate, you’ll still have more paperwork and jobs to do to keep your corporation in good standing. Chances are these pesky incorporation fees will be worth it in the long run, but only if you choose a good service.

Self-filing for Incorporation

Saturday, January 12th, 2008

Incorporation can be an equally important and intimidating task for the owner of a company, and because it’s also so expensive, many people prefer to file for incorporation without the help of an outsider. This will certainly save a soon-to-be corporation a lot of money. But unless a company’s owner knows what he or she is doing, it can be a great waste of time and effort and it can also hinder the incorporation process and render the company vulnerable to all kinds of problems.

So if you’re interested in self-filing for incorporation, it’s a good idea to get well-versed in all the jargon and learn about each and every step you’ll have to take. You may want to get an attorney on your side, regardless, if only to address concerns as they come up. And they most certainly will come up!

Here is a simple introduction to incorporating your business. The first question you must ask is: “what kind of corporation do I want to form?” There is a lot of literature, on and off line, that can help you find an answer – ultimately, it will depend on the size and function of your wannabe corporation. As you continue on with incorporation, keep in mind that the laws vary from state to state and county to county. You must constantly research the legality of every aspect of incorporation before you make any official decision.

Now, another important decision you will make is what state to file for incorporation in. For many, this decision will be an easy one, as you’ll file for incorporation in whatever state your company is located in. But what if you have more than one company spread out across states? Again, research the laws in the multiple states and pick the state that will be most auspicious for your corporation. Some state laws are more favorable toward businesses than others.

Here’s the fun part. What are you going to call your corporation? While you want to encourage the creative juices to flow, you won’t have total freedom in choosing a name. Some names are taken. With the help of the Internet and the United States Patent and Trade Office, you should discover what options are off the table pretty soon.

Now for the monotonous part. You must elect someone to register the company and also do all he filling for incorporation. That person could very well be you. This is indeed cost effective. Just make sure you know what you’re doing first, or you might find yourself in over your head.

Once you’re through with this process, you can start the real and more exciting work: determining the structure of your corporation, its Board of Directors, bylaws, etc.

So, do you think you’re ready to self-file for incorporation? The more informed you are, the better prepared you will be to get your corporation up on its feet without the help of an attorney or incorporation service. But the money saved won’t be worth it if you are ignorant about incorporation, because your mistakes will likely be costly ones.

Is it less taxing to incorporate?

Saturday, January 12th, 2008

Some companies may seem to escape death, but they will ever be able to escape taxes. That doesn’t mean there aren’t some tax benefits out there, though, that only the corporations are getting. Companies are tempted to incorporate for a number of reasons, but more and more often, taxes are the main motivator. But why?

Well, it’s important to note right away that incorporation only means tax benefits for some companies. For others, taxes might actually become a bigger problem than they were before. However, potentially, you have a lot to gain – in what you won’t be paying in taxes to the government – by incorporating. There are a few basic tax benefits that corporations often rely upon.

The first one is tax deferral. All this means, really, is that a company can keep more of its earnings. How can this be? When a company becomes a corporation, it becomes a separate entity of its owner and thus adheres to different rules than it did before. Typically, an owner must pay taxes directly to the government on his or her net income. But if that same owner has a corporation on his or her hands, it’s an entirely new ballgame. The corporation has different tax rates than its owner! Depending on the state, a corporation will have to pay little to no income tax. You can expect that the income tax of a corporation will be significantly lower than a personal income tax.

This may all sound very quaint and appealing, but there’s more to the story. The grass isn’t necessarily greener on the other side because of a nuisance called double taxation. Double taxation happens when both the shareholder and the corporation are taxed for various profits and gains. Especially when a corporation liquidates, this is a problem. (As new dividends make themselves known.) There are ways to resolve the double taxation dilemma, but it does take quite a bit of thought and planning.

Whether you’re running a company or a corporation, you must think about taxes in the long term. Don’t just plan for this year and next – think far into the future and foresee problems like double taxation. As you consider the tax benefits of incorporation, make sure to also consider the disadvantages and added complications. If you want to get the best bang for your buck when you incorporate, you must play an active role in the process of turning your company into a corporation. And that means you can’t take for granted the promise of tax benefits.

Also keep in mind that tax law is ever-changing and tax benefits that generations before you had may be nonexistent today, while new benefits may take their place. It’s advisable to keep up to date about what your state legislatures are coming up with from year to year. Because each company has its own personality and ambitions and of course net profits, some tax benefits may be more disposable than others. The only appeal of tax benefits is that a company retains more of its earnings, so if incorporation is costing you money in other areas, you will want to note this. It’s important to weigh all the costs and benefits against each other!