ABCs of Small Business Industry: B is for Banking

As we enter week four of our series, we decided to look at a slightly different industry – banking. Now, focusing on banking may seem a bit odd. After all, most people don’t consider banking as something an entrepreneur can even get into. And while there are loads a regulatory loopholes to jump through, plenty of entrepreneurs do start their own bank! And running a bank can be quite lucrative. So if you have experience in the financial industry, and are looking for a change, this could be just the post for you! banking

How do you start a bank?

Like any business, you need to identify a need. Most communities are served by big-name banks like Chase or Bank of America, and people gravitate towards names they recognize. But even if it feels like your community is over saturated with corporate banks, there could be a place for a small, community bank, like if you decide to focus on serving a particular section or area of the community. Some people also like being able to meet face-to-face with a high-level executive to talk about loans or their account – something they’d never be able to do at a corporate bank.

If the market looks good, you then need to work on getting everything organized. Most states require banks to have multiple directors, who then put in an initial offering to get the bank started, usually around 25% of the bank’s starting capital. Since banks need a lot of capital to run, this is usually a substantial amount of money. Most banks sell off shares to raise the rest of their capital.

When your ducks are in a row, you file for a state or federal charter. Filing this form typically costs thousands of dollars, and requires a substantial amount of preparation. You’ll need to include information like feasibility studies, applications for the directors, projected costs, projected salaries – the state or federal government effectively needs to decide whether or not you’ll be successful before granting a charter. After this, you apply for deposit insurance from the FDIC, which requires banks to prove they have enough capital to cover any risk and losses. It will take a few months before the charter application is processed and, once it is approved, you normally have about a year to start the bank officially.

What business structures are best suited for banking?

Because banks are required to have directors, executives, and shareholders, a bank has to be some sort of corporation. However, in some states, a bank is an entity in itself. Though it is run in the same way a standard corporation is.

How stable is the banking industry?

Very. Because banks have to apply for a charter, an outside organization effectively reviews their business plan and target market, and determines whether or not the idea is viable. Banking costs a lot of money, but if you get a charter, you can usually bet that you’ll be successful. The rate at which banks fail has also slowed substantially as the economy has recovered.

Interested in community banking? Have any questions about the banking industry? Leave a comment below, or give us a call at 1-877-692-6772!

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50 States of Incorporation: Wyoming

It’s the last week of our 50 states of incorporation series and we’re focusing on the Cowboy State – Wyoming. Smack dab in the middle of the Rockies, Wyoming is America’s least populous state, but is easily one of the most beautiful. The vast majority of the land in Wyoming is owned and protected by the Federal Government, and Wyoming is home to the world’s first national park, Yellowstone. Incorporate in Wyoming Wyoming’s natural beauty has ensured the state’s tourism industry would flourish, and today it generates two billion dollars in state revenue. Along with tourism, Wyoming’s historic agricultural and mining industries continue to drive the state’s economy – Wyoming is the number one producer of coal in the country. Though largely rural, Wyoming is a great state for a small business, thanks largely to the low cost of doing business. So what does it take to get started there? And how do you incorporate in Wyoming?

How do you start a business in Wyoming?
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Business Basics: Business Entity

If there is one thing we’ve learned from over a decade and a half of helping small business owners, it’s that every business is different. For new small business owners, it’s important that you choose the business entity that will suit your unique needs. There are four basic entities that you can choose from, each with its own advantages and disadvantages. While there is no “right” choice, depending on what you sell, where you plan to take your company, and how ownership of the company is divided, there will be certain entities that will fit your business model better than others. Business Entity Choice

Sole Proprietorships and Partnerships

Sole proprietorships and partnerships are the simplest type of business entity. They are also the default option. It doesn’t take much to start a sole proprietorship or a partnership either. Just file for a ‘Doing Business As’ name, apply for the right licenses and permits, and open your doors. If the business is run by two or more people, you will also need an Employer Identification Number (EIN) and you’ll have to file another form come tax time. But this simplicity comes at a price. Everything the business owes and owns is tied to your personal assets. In other words, you, and your partner if you have one, will be held liable for the business’s debts if it fails. Also, if you do have a partner, you may not be protected if they decide to walk away from the business. So, while running a sole proprietorship or partnership is a lot simpler, it does put an undue amount of risk on the owner(s). To limit your liability, consider forming a corporation or limited liability company.

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Business Basics: Governance Documents

One of the most common questions we get here at MyCorporation about forming a limited liability company or corporation is, “How hard is it to actually run this type of business?” Running an LLC or corporation is very different than running a sole proprietorship, and the government will expect those running the business to adhere to certain rules. governance documentsIt should be noted that the only governance document need for Corporations and LLCs is an Articles of Incorporation or a Certificate of Organization. However, there are other types of governance documents that should be kept and maintained.

Articles of Incorporation and Certificates of Organization

In order to form a corporation, you have to file your articles of incorporation. And in order to form an LLC, you have to file what is normally called a certificate of organization. In both cases, these documents act a sort of birth certificate for the new business entity. They disclose the entity’s name, address, registered agent information, and the information of any managers or owners. A lot of states actually offer a “fill-in-the-blank” type of form on the website of their Secretary of State or department of corporations. However, these forms only meet the minimal requirements for a corporation or LLC as set by the state. They also don’t set the rules for how your company will actually be run. Along with these formation documents, you should consider drafting a set of bylaws or an operating agreement.

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What Goes into an Operating Agreement?

Operating agreements are one of the most vital, and overlooked, tools in running a limited liability company. We’ve actually covered operating agreements as part of our ‘ABCs of MyCorp’ series, but we never delved into what an operating agreement should actually say. operating agreement As a quick refresher, an operating agreement is essentially a document that defines how the LLC will be run, and the SBA recommends that every LLC draft one. The trouble is that only a couple of states, like Missouri and New York, legally require new LLCs to have an operating agreement. But without the rules, structure, and regulations an operating agreement provides, your LLC could be in serious trouble if partners disagree, a member wants to leave, or if the state starts questioning the validity of your LLC. Operating agreements are also pretty easy to draft and only need to cover a few key areas.

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50 States of Incorporation: Texas

This week we are looking at Texas – the Lone Star State. As the saying goes, everything is bigger in Texas. The state has successfully accommodated changes in the economy and US consumption – though it was originally a cattle state, oil rich land and a strong infrastructure has turned the cowboy state into one of the economically diverse states in the USA. Incorporate in TexasIn their Best States for Business survey, Forbes ranked Texas at #7 with the state’s economic climate in first place and most analysts also expect Texas to see some serious growth in the next few years. If you’ve ever wanted to start a business, Texas is a great place to do it. But how hard is it to start a business, form an LLC, or incorporate in Texas?

What do you need to start a business in Texas?

Surprisingly little! Some states require sole proprietorships, which are the simplest type of business entity, to register before they do business. All Texas requires is that the sole-proprietorship’s owner file an ‘Assumed Name Certificate,’ also known as a ‘Doing Business As’ name, with the County Clerk. Depending on where you plan on doing business, and what sort of business you run, you may also need to file for a business license – the Small Business Administration has a handy tool to help new business owners figure out exactly what they need on that front!

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What is a Foreign Corporation?

The term ‘Foreign Corporation‘ sometimes confuses people. Though it can also refer to a corporation from a different country, when business advisers refer to a Foreign Corporation or LLC, they are usually talking about a domestic company with permission to operate in a state other than the one the company was formed in. This permission is often called a ‘foreign qualification,’ Foreign Corporation and it effectively registers your company with the new state so the state can collect taxes. With it, you can open up another branch of your company, or move your base of operations, without changing states. But why would a business want to do that?

Why would you want a foreign qualification?
There are a few reasons why a business chooses to qualify as a foreign entity in other states. One of the main ones being that the company simply wants to expand its operations – sales could be strong in their home state, and they figure they’ll take a crack at opening another store or office in a neighboring state. Since you need permission to do business in another state, they pursue a foreign qualification. However, some business owners also believe that they may save money on taxes by forming a business in a state like Nevada or Delaware, and then qualifying in the state they actually do business in. There are pros and cons to incorporating in another state, so be sure to weigh your options carefully.

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50 States of Incorporation: South Carolina

This week on 50 States of Incorporation, we take a look at ‘The Palmetto State,’ South Carolina! Also know as ‘The Rice State’ and ‘The Swamp State,’ South Carolina’s official nickname comes from the state tree, the Sabal Palmetto, which distinguished itself during the revolutionary war. It was a fort made of Palmetto logs that repulsed the British fleet from Sullivan’s Island back in 1776! incorporate in South Carolina But South Carolina has a lot more to offer than strategically useful flora. Though it was hit hard by the recession, its strong agricultural heritage, and the state’s friendly attitude towards business, has really boosted its recovery. So what should South Carolinian entrepreneurs know about their state? And what does it take to open up a business and incorporate in South Carolina?

Are there any benefits to running a business in South Carolina?
Plenty! South Carolina is actually one of the most business-friendly states in the USA. Thumbtack gave the state an A- in overall friendliness, and South Carolina has the tenth lowest tax burden of all states. It also makes sense to incorporate in South Carolina as the state boasts a low, 5% flat corporate income tax rate. Of course, South Carolina does all it can to help small businesses within the state. The South Carolinian Secretary of State’s office maintains a Small Business One-Stop Site to help new entrepreneurs find and file for everything they need to get their business up and running, and the Department of Commerce is proud to offer multiple growth incentives to businesses with the state.

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What Happens After You Incorporate or Form an LLC?

For years, MyCorporation has been honored to help thousands of new entrepreneurs to get their new small business started on the right foot by incorporating or forming an LLC. But business maintenance doesn’t end when the articles of incorporation are filed! There are actually a few more steps to ensuring your new entity is compliant and ready for business. In order to help educate new business owners, and answer one of our most commonly asked questions, we are happy to reveal our new video, “What happens after you incorporate or form an LLC?”

Step 1. Apply for an Employer Identification Number. An EIN is going to be needed if you want to open a business bank account, or if you want to hire employees.

Step 2. File for trademark protection, and begin protecting your brand. You should also buy a domain name and secure social media properties as soon as possible.

Step 3. Look into what business licenses you have to apply for. Licensing varies depending on locality, entity, and industry, so it is a good idea to consult with a professional who can help you figure out exactly what you need.

Step 4. Remember to stay on top of annual maintenance. Most states will require business entities to file an annual report, which will have some basic information on your business like its name, address, registered agent, and industry. You also have to document any changes to the corporation or LLC. If you bring on new owners, or new investors, make sure to make note of it. You should also update your operating agreement or bylaws as new owners and investors will probably want a say in how the company is run.

Step 5. Thinking about expanding outside of your home state? Well, remember that you have to apply for permission to do business in any new state. If you don’t, you could be looking at hefty fines and dissolution of your business in that state. So don’t forget to file to qualify as a foreign entity in any state you plan to expand into.

Have any questions about corporate or LLC maintenance? Need help figuring out what you need to file? Just give MyCorporation a call at 1-877-692-6772 and we will be happy to help you out!

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50 States of Incorporation: Oregon

Oregon is one of the most ecologically diverse states in America, with rolling forests, wind-swept coasts, and beautiful mountains. This natural beauty is one of the main drivers of tourism, one of the state’s largest industries. Oregon is also home to growing businesses in the tech, forestry, and manufacturing industries, and, according to Forbes, the state is poised to see some serious incorporate in Oregon growth. Today we’re answering the question of how to start a business in the Beaver State, and how to form an LLC or incorporate in Oregon.

What is needed to start a business in Oregon?

Oregon requires that all businesses within the state register with the Secretary of State’s Office. Now, if all you want to do is run a sole-proprietorship, you may only need to file for a DBA, or ‘Doing Business As’ name. This registration is meant to prevent fraud, and allows you to do business under a name other than your own. If you want to form a limited liability company or incorporate in Oregon, you’ll have to do a bit more paperwork.

How do you form an LLC or incorporate in Oregon?

Forming an LLC or incorporating both turn your business into its own, separate legal entity. That is good news for you because it means your company can effectively carry, and is responsible for, it’s own debts, so creditors cannot seize your personal assets to pay for the business’s debts. To form an LLC, you file your Articles of Organization with the Secretary of State and pay a $100 fee. This form will ask you for the business’s name, which must contain the words ‘Limited Liability Company,’ or the abbreviations ‘L.L.C.’ or ‘LLC.’ Along with your company’s name, you have to list its address, organizers, and the name and address of its registered agent.

If you’d like to incorporate in Oregon, you fill out your Articles of Incorporation, file them with the state, and pay a fee. Your corporation’s name has to include a designator like ‘incorporated’ or ‘corporation,’ and you will have to list the names and addresses of the incorporators, as well as the name and address of your registered agent. Corporations, however, are a bit more complicated to run, and you are required to name a board of directors, who will then help lead the business. You should also prepare corporate bylaws to guide the business’s development, and prepare minutes for any meeting at which a major business decision was made.

Does the state offer any support to small businesses in Oregon?

Yes! Oregon actually has a very handy online tool called Business Xpress meant to help out new small business owners. Using it, you can track down forms, find networking and training opportunities, and even start a business plan! The tool also has links to programs meant to support women and minority business owners in Oregon, so be sure to look around and see if there are any opportunities or grants you can use to boost your business.

Are you ready to start a business in Oregon? Have any questions about how to form an LLC or incorporate in Oregon? Give us a call at 1 (877) 692-6772 or leave a comment below!

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