The end of the year is right around the corner, and every year we hear small business owners panicking about December’s rapidly approaching end, wondering what they have to do to end the year right. Not to worry – ending the year is actually pretty easy, as long as you don’t wait until the last minute to get everything done! So if you haven’t already, start thinking about…
Submitting any filings or dissolutions
Some of the most common questions we are asked revolve around the best time to form an LLC or incorporate. And while there are no ironclad answers to those questions, the beginning of the year is normally a good time to send in that paperwork. Deadlines and renewal dates are easier to remember, staying on top of your taxes is simpler, and you can even file your paperwork early and miss the beginning of the year rush if you opt for a delayed filing. Continue reading
We have written on non-profit corporations before, but as we only dedicated a sliver of a paragraph to how you actually form a non-profit, we felt the topic was worth revisiting. A non-profit corporation is a great way to fulfill a philanthropic pursuit, and if you are looking at dedicating your life to charity, then running a non-profit may be right up your alley. Forming a non-profit corporation is actually very similar to forming a regular corporation.
Step 1. Find a business name
Your non-profit is going to need a name just like with any other standard corporation. That name needs to be unique and, typically, has to include the a designator like ‘Corporation’ or ‘Incorporated,’ though not all states require that.
Step 2. File your Articles of Incorporation
After you’ve confirmed that your corporate name is available, you have to actually form the corporation by filing what is normally known as your Articles of Incorporation. The forms usually aren’t too complicated, and normally just ask for the names and addresses of the corporation, its registered agent, and its directors, as well as the corporation’s purpose for existing.
Incorporation is one of our specialties, and many of our clients come to us because they want to incorporate their business. After all, incorporation helps protect you in the event of a lawsuit, and forming a separate business entity helps separate the company’s debts from your private assets. However, our customers also often ask us about a real caveat to incorporation – double taxation. After you incorporate, your business has to pay a tax on any income that it earns, subject to the federal and state corporate income tax rates. On top of that, you still have to pay tax on income you earn from working for the corporation. Effectively, this taxes the same amount of income twice, and that heavy burden frightens many small business owners, most of whom don’t have much extra capital to throw around. There is, happily, a way to avoid double taxation, and it is the subject of our Business Basics post for this week – filing for S-Corporation status.
Chapter 1, Subchapter S of the Internal Revenue Code allows smaller businesses to avoid paying federal, and usually state, corporate income tax. S-Corporations are the most popular type of corporation in the United States, with 61.9% of all active corporations filing Form 1120S to apply for S-Corp status.
In order to qualify, your corporation must have fewer than 100 shareholders and issue only one class of stock. If your corporation qualifies, you can file for S-Corp status, which will allow any income earned by the corporation to pass through the business, untaxed, directly to the shareholders. You, of course, still have to pay your personal income taxes, and by law must take a reasonable compensation as a wage. But your corporate income, in most cases, will stay untouched.
Welcome to Part 2 of our Business Basics posts on Canada. Last week we took a quick look at corporate law in Canada, and explored some of the major differences between American and Canadian corporate law. If you are thinking about incorporating up north, you should start there as it will give you a basic idea of what to expect in terms of regulations and rules.
This week we are going to shift gears a bit and answer a few of the most commonly asked question about incorporating in Canada.
We’ve talked extensively about how to incorporate a business in the United States, but we have yet to explore the corporate laws of our neighbor to the north – Canada. Since MyCorporation offers incorporation packages for Canada, we thought it would be a good idea to dedicate two Business Basics posts to exploring Canada, with one on corporate law and the other detailing how to actually start a corporation in Canada. So, without further ado, here is a quick look into corporate law in Canada.
If you’ve been following our Business Basics series, you’ll know we’ve already covered registered agents, and briefly explained what it is they actually do. However, people still had questions about registered agents, as well as the benefits and pitfalls with choosing a third-party service like registered-agent.com. So we decided to re-visit the topic and dedicate a post to answering some of the most frequently asked questions we’ve received. Also, if you haven’t read it already, we recommend first reading our last post on registered agents as it answers the more basic questions.
An Employer Identification Number, or EIN for short, is basically a social security number for your business. Like with social security numbers, the IRS uses EINs to track what businesses need to certain types of tax. However, not all businesses are technically required to have an EIN as sole proprietorships can be identified by the owner’s SSN instead. That doesn’t mean, though, that you should avoid filing for one, as there are three main reasons why obtaining an EIN is important for a small business.
It allows the business to hire employees.
If you run a sole-proprietorship and you are the only employee that works for the business, all of the profits and losses are going to be reported as part of your personal income. You then pay whatever state and federal taxes you need to, just like you would if you received an income from anywhere else. However, when you hire an employee, you are responsible for withholding any necessary taxes from that employee’s income. The IRS then cannot simply use your SSN to keep track of what they are owed as there are now two different employees, and that’s where the employer identification number comes in. EINs let the IRS and other tax-collecting bodies know what businesses need to be sending in the usual payroll taxes.