Tag Archives: corporate compliance

Business Basics: Professional Corporations

Posted on by

Welcome to our weekly business basics post! This week we decided to explore a specialized legal entity called a professional corporation (PC). Now most of those who know a little bit about corporate law probably know that there are two, main types of corporations – S-Corps, and C-Corps. But in addition to these, there are a few other specialized structures that are important to keep under the belt of a small business, like the professional corporation.

So what is a professional corporation?

Like with a regular corporation, converting a sole proprietorship or a partnership into a professional corporation turns the business into its own, separate legal entity. However, unlike a regular corporation, the owner of a business being turned into a professional corporation must be licensed to offer a specialized professional service. In other words, the owner of the would-be PC has to be a doctor, or lawyer, or accountant, or architect; some sort of licensed profession.

Why would someone choose to form a professional corp?

Like a standard corporation, a professional corporation provides a certain amount of protection for the business owner, or owners, as a PC can carry its own debt and liabilities. It is important to note that a PC does not protect an owner from being sued as a result of their own negligence – a doctor that turns his or her practice into a PC, for example, can still be sued for malpractice. But if two doctors act as partners within a practice, forming a professional corporation can help protect one doctor from being liable for any judgement received from a lawsuit against the other doctor. So without that protection, one of the partners could be held accountable for the mistakes of the other one. Professional corporations, then, are very useful for any licensed professional running a practice with another licensed professional.

What do I have to do to form a professional corp?

First, you must be licensed to provide whatever service your practice offers in the state you do business in. Most states will want to see proof of relevant licensure at the time of incorporation, and the state licensing board will likely have to approve your articles of incorporation before you can move forward. Usually the licensing board will ask that the articles of incorporation bear special language and, depending on the state, PCs occasionally have to contend with certain laws after they are formed – for example many states ask that a professional corporation designate itself as such by including ‘PC’ or ‘Professional Corporation’ in the name of the practice.

Professional corporations take a bit more effort to form, but are extremely useful for practices run by two or more licensed professionals. After all, the last thing you want is to have to pay lawsuit that resulted from the negligence of your partner. And, like other corporations, a PC offers some protection from debtors looking to collect on a business’s liabilities. It is important, however, to check with your secretary of state and your state’s licensing board to clarify what, exactly, you must do to form a professional corporation and what special provisions you will have to contend with as a licensed PC.

Share!!!

Business Basics: Registered Agent Services

Posted on by

Welcome to our weekly Business Basics post! This week we decided to explore a service that nearly every Corporation and LLC uses – registered agents. If you are thinking about forming an LLC or incorporating your business, you will need to find a registered agent. But what exactly do they do again?

What is a registered agent?

A registered agent is the person, or in some cases the company, that a business designates to receive service of process if there is a summons or a lawsuit. Since incorporating or forming an LLC helps to separate your personal and professional lives, and provides fiscal and legal liability protections, the state cannot simply serve you with legal paperwork. LLCs and corporations are, after all, their own, separate legal entity. So a registered agent acts as the impartial receiver of those legal notices. States will also sometimes send renewal reminders and notices to your registered agent, helping you to stay on top of what you need to file to stay compliant with state regulations.

Do I need one?

Nearly every, single state requires that LLCs and corporations doing business within its borders designate a registered agent, so yes it is very likely that, legally, you must have a registered agent. But, beyond the legal considerations, having a registered agent also helps you to maintain a bit of privacy. Having legal paperwork delivered directly to your place of business can wind up raising some eyebrows. There are considerations to be made for office-morale as well – after all, if you are working for a corporation that keeps getting notices and letters from attorneys, you might not have much confidence in the company. A registered agent helps create a sphere of privacy, so that you and your attorney can handle any pressing legal matters without causing a panic.

Can I act as my own?

It all depends on where you do business. As we mentioned above, having a registered agent that is separate from your business will provide a bit more privacy. However, some states do allow members of LLCs, or directors of corporations, to act as the business’s registered agent. Minnesota, as an example, does not require any business formed in the state to name a registered agent, though the company does have to list an address where a person who represents the company can be found. However, all fifty states have registered agents offering their services so, if you do want to name one, you are always able to.

Where can I find one?

Most states actively maintain a list of registered agents who are allowed to provide such a service within their borders. Just look up your state’s secretary of state or department of corporations – chances are that there is a list of active registered agents somewhere on the site. MyCorp is also happy to provide you with our own registered agent services, and we are able to do so in all fifty states!

Having a registered agent is extremely useful, and even if the state you do business in does not require you to have one, it is still a good idea to contract somebody as your registered agent, just to help maintain a bit of privacy. Just make sure that whoever you do hire stays in contact with you, as any and all important paperwork from the state will likely come to them first. The last thing you want is to miss a deadline because your registered agent never got around to calling you!

Share!!!

M is for… MyCorp!

Posted on by

Ok maybe you saw this coming, maybe you had ‘M’ all figured out way back at “E is for Entrepreneur,” but can you blame us? Having pride in your small business is a good thing. And wanting to share a little bit about your business in order to educate and entertain your customers is also a good thing.

So let me take you back to when (‘M’ is for) MyCorp started to become what it is today. Deborah came onto the team in 2004 not by hopping on board as the CEO, but as vice president of legal and business affairs. Not until 2009 did Deb purchase the devision, becoming the CEO of MyCorporation.

Today, MyCorporation is known as a leading provider of online document filing services for clients who wish to form a corporation or limited liability company.

But that’s not all we file! MyCorp helps small businesses to: file Corporations, LLCs, DBAs (Doing Business As), Amendments, Corporate Compliance, Dissolutions, Foreign Qualifications, Reinstatements. We also obtain Certificates of Good Standings and Certified Copies of Articles for your company. We offer corporate supplies such as Leather Binders, embossers/seals, stock and member certificates, and customized Operating Agreements / Minutes and Bylaws.

For over ten years, we have happily helped small business clients and real estate investors incorporate their businesses in a reliable and affordable manner, and have loved every second of it. We’re in the business of small businesses and we wouldn’t want to be anywhere else.

Share!!!

Making Sense of Retirement Plans

Posted on by

As retirement plan sponsors, small businesses assume many responsibilities regarding their employees’ path to retirement, often acting as fiduciaries. Over the next year, any employer offering such plans faces new regulations from the Department of Labor. The rules, known as 408(b) (2), were originally scheduled to go into effect this past July, but have been postponed until April 1, 2012. The rules aim at providing greater transparency to the retirement industry as a whole, through documenting the fees participants pay brokers and retirement plan contractors for managing their accounts.

Retirement plans can be a burden to small business owners. This is due to the fact that upon becoming a plan sponsor, owners become a plan fiduciary and therefore must act in the sole interest of their participants. Owners cannot make a profit off of retirement plans. Any gains must be reimbursed to the plan.

These gains can be detected by the Department of Labor. Due to the April 1 start date of the rules these audits have been greatly increased. Although this might cause headaches for some small business owners, having a healthy retirement plan is still very important. Providing a retirement plan is a great way to ensure longevity among current employees. This is also a great way to attract bright new employees. There are two steps small business owners should take in order to safely navigate the retirement plan waters.

First, employers should understand what type of plan they provide, or want to provide, to their employees. There are two main types of plans, defined benefit and defined contribution plans. A defined benefit plan, funded by the employer, promises you a specific monthly benefit at retirement. The plan may state this promised benefit as an exact dollar amount, such as $100 per month at retirement. Or, more often, it may calculate your benefit through a formula that includes factors such as your salary, your age, and the number of years you worked at the company. For example, your pension benefit might be equal to 1 percent of your average salary for the last 5 years of employment times your total years of service.

A defined contribution plan, on the other hand, does not promise you a specific benefit amount at retirement. Instead, you and/or your employer contribute money to your individual account in the plan. In many cases, you are responsible for choosing how these contributions are invested, and deciding how much to contribute from your paycheck through pretax deductions. Your employer may add to your account, in some cases by matching a certain percentage of your contributions. The value of your account depends on how much is contributed and how well the investments perform. At retirement, you receive the balance in your account, reflecting the contributions, investment gains or losses, and any fees charged against your account. The 401(k) plan is a popular type of defined contribution plan.

Second, small business owners should become familiar with the new rules. Come April 2012, business owners, as plan sponsors, will be responsible for:

1. Identifying all service providers working for their employees’ retirement plans, including part-time workers, contractors and sub-contractors.
2. Have these workers put all of the duties they are performing for the plan in writing.
3. Have them put in writing whether or not they accept fiduciary responsibility.
4. Find out how much these workers make either from the retirement plan company or assets.
5. Make sure these fees are reasonable for the services being provided.

Providing a solid retirement plan will create stability and contentment both among small business owners and their employees.

Share!!!

Preparing the Office for a Natural Disaster

Posted on by

Natural disasters are devastating. Unfortunately they can’t be avoided. In the aftermath of a tornado, earthquake or hurricane we often think about the consequences our homes and loved ones will face. However, we shouldn’t forget about the effects a natural disaster will have on the workplace. In the wake of hurricane Irene, it is important to create a plan for our businesses and employees should a natural disaster strike.

Work Together
We all know that no office is perfect. It’s likely that certain employees just don’t mesh. Discussing a plan for preparedness is a time to put office politics aside and work together. At the center of the discussion should be the most efficient way to respond to a natural disaster. Focus on how can your team work together to ensure safety and communication in the office.

Create an Action Plan
A plan, whether it be for an earthquake, tornado or flood, should be developed in order to establish operating and communication procedures. What responsibilities should be delegated to each employee? In terms of a storm, consider creating a committee who will be responsible for insulating the office. Establish a phone or email tree that can be utilized in order to touch base with each other after a disaster. Once a plan is created, make sure to periodically revisit it in order to update procedures. Encourage input and feedback from employees. Work together to create a plan that everyone understands, feels comfortable with and is willing to implement.

Don’t Forget At-Home Employees
Most businesses have employees or independent contractors that work from home or out of the office. Make sure that you don’t forget these people when you are creating your action plan. Contact them with the office’s ideas for a plan and ask for their input. Make sure that reaching out to them is included in your plan. Establishing a plan to promote safety and communication for all of your employees, both in and out of the office, is crucial.

Regroup
Picking up the pieces after disaster strikes may seem almost impossible. However, after the dust has settled reevaluate your action plan. Ask your team what worked and what didn’t. How could the plan be improved? Take this time to tweak the plan. Make sure that those employees who were affected by the disaster have the help and support they need. Work together to rebuild and regain stability. Reevaluate the action plan to ensure continued preparedness.

Following the string unexpected earthquakes and hurricanes, Preparing your office and employees for a natural disaster is more important than ever. Work together and encourage communication to ensure continued office safety.

Share!!!

Rough Waters: Navigating Labor Laws

Posted on by

For many small business owners, understanding labor and employment law can be seriously confusing. Paying an attorney to help explain labor law specifics can be extremely expensive, thus creating another road block. Still, for all business owners, understanding labor laws is paramount. For example, it is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors. Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.

How do you classify an employee? People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. However, whether these people are independent contractors or employees depends on the facts in each case. The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. An individual is not an independent contractor if he or she performs services that can be controlled by an employer (what will be done and how it will be done). This applies even if he or she is given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.

Overtime pay is also a sticky subject with many small business owners. Not surprisingly, overtime pay for employees is federally and statutorily regulated. An employer who requires or permits an employee to work overtime is generally required to pay the employee premium pay for such overtime work. Employees covered by the Fair Labor Standards Act (FLSA) must receive overtime pay for hours worked in excess of 40 in a workweek of at least one and one-half times their regular rates of pay. The FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime hours are worked on such days. The FLSA, with some exceptions, requires bonus payments to be included as part of an employee’s regular rate of pay in computing overtime.

Finally, employers providing benefit packages to employees must also comply with additional federal rules and regulations. The Employee Retirement Income Security Act (ERISA) regulates employers who offer pension or welfare benefit plans for their employees. Title I of ERISA is administered by the Employee Benefits Security Administration (EBSA) (formerly the Pension and Welfare Benefits Administration) and imposes a wide range of fiduciary, disclosure and reporting requirements on fiduciaries of pension and welfare benefit plans and on others having dealings with these plans. These provisions preempt many similar state laws. Under Title IV, certain employers and plan administrators must fund an insurance system to protect certain kinds of retirement benefits, with premiums paid to the federal government’s Pension Benefit Guaranty Corporation (PBGC). EBSA also administers reporting requirements for continuation of health-care provisions, required under the Comprehensive Omnibus Budget Reconciliation Act of 1985 (COBRA) and the health care portability requirements on group plans under the Health Insurance Portability and Accountability Act (HIPAA).

Still confused? The most efficient way to ensure that your small business is compliant with the variety of applicable federal rules and regulations is to check with the secretary of state in the state where your business is located. Keeping up to date with labor laws is vital to the success of any business. Learn more about business maintenance HERE!

Share!!!

1099 Health Care Act: Information and Implications

Posted on by

Small businesses face a unique set of challenges in the current economy.

The Senate voted to repeal the unpopular 1099 tax reporting requirement of the Affordable Health Care Act Tuesday, April 5th. This is the first piece of legislation that officially repeals part of President Obama’s widely-debated health-care reform movement.

Small business owners have expressed their frustration at the provision, which would require them beginning in 2012 to report to the IRS all payments of more than $600 on 1099 forms—work that many small companies just don’t have the time or manpower to do. According to the Washington Post, The bill would have generated an additional $22 billion in tax payments over the next ten years. In addition, the major provisions of the Health Care Act include:

1. Tax Credits for small business
2. Help for Seniors with the cost of Drugs in the Doughnut Hole
3. Elimination of Pre-existing conditions exclusions for children
4. A High Risk pool for anyone turned down due to Pre-Existing Conditions
5. Re-Insurance for early retirees (55 to 64)
6. Prohibition on Rescission of insurance policies if you get really sick
7. No More Lifetime Limits on insurance policies
8. Unmarried Children can stay on their parent plan (up to 26th birthday)

Despite the Health Care Act, there are numerous tax implications for employee’s and independent contractors. For small businesses seeking to make sense of the new legislation, regardless of possible appeals, the classification of their employees is paramount. Specifically, what makes someone an employee and not just an independent contractor? The answer is often less than simple. Many business owners fail to make the distinction, thus opening them up to potential lawsuits and tax complications.

The best way to avoid penalties is to know the law. Employee classification holds enormous potential for lawsuits, mainly because most employers really don’t understand the employee distinctions. The IRS published a great deal of information regarding this classification. The information can be found HERE.

Who is considered an independent contractor? The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done. The earnings of a person who is working as an independent contractor are subject to Self-Employment Tax. Who is considered an employee? Under common-law rules, anyone who performs services for you is your employee if you can control what will be done and how it will be done. This is so even when you give the employee freedom of action. What matters is that you have the right to control the details of how the services are performed.

Only time will dictate the future changes and appeals to the Health Care Act. Small business owners should consider all of their employees and classify them into the correct category in order to avoid potential lawsuits and tax complications.

Share!!!

The 5 W’s of Business Blogging

Posted on by

We all read blogs to get a sense of what is going on with the world. We read informational blogs, entertainment blogs, and solely news related blogs. Never has it been easier for an individual to have his or her voice published. The same opportunity is available for small businesses, but should you join the blogging community? ABSOLUTELY! Blogs provide a platform for you business to send a clear message to your customers. Below are the 5 W’s regarding blogging and why you should jump on board.

Who?
Yes, your business is the obvious who. However, make sure you address who specifically will be in charge of your blog. Often, small businesses hire a marketing intern for this job. This is a great idea. First, make sure that the blog author is aware of a few important things. The blogger should have a clear understanding of the purpose and mission statement behind your business. Tailor blog content not only to issues surrounding your business, but expand your articles to include different types of customers. You want your blog to be a clear representation of what your business is all about while appealing to a wide audience.

What?
What should you blog about? If you are a new start-up you could blog about the issues you faced- create a trouble shooting entry. Think about your community as a whole and blog about your industry. Do you know of other products, applications or ideas that will help your community? For example, if you are a bakery and recently changed the type of eggs you buy due to how it affects your product, blog about that experience. Offer relevant advice. Go nuts! One word of caution- If you’re going to pump out regular content that is meaningful, you obviously need to blog about a topic in which you’re knowledgeable, thoughtful and passionate. Without these three things your content may be ill received, if read at all.

When?
How often should I blog? This can be a difficult question to answer. Professional bloggers often update daily, sometimes twice a day. This is not recommended for small businesses. A few times a week, at most once a day, is a good schedule. Although you do not want huge lag time between entries, it can be beneficial to let your entry ‘simmer’ for a few days to gain attention. Also- most online blog traffic occurs between 9a.m. and 2p.m EST. Therefore, post your blog in the early afternoon.

Where?
Where do I publish my blog? Several publication options exist. Check out sites such as WordPress.com, blogspot.com and Tumblr.com. These sites will walk you through the steps to creating your blog including your background colors, linking it to other sites and actually publishing. If your business has a website, and it absolutely should, it is often smart to provide a link to your blog on your site. Often, customers cannot get a sense of ‘who you are’ by solely looking at your website. Also, posting a link to your blog on Facebook or Twitter can also increase traffic. Your blog can be your voice. Connect with the customer and let them know what you are all about.

Why?
Spread the news about your small business! If you care about accessing customers, reaching an audience, communicating your vision, influencing people in your industry, marketing your services or just plain engaging in a dialog with others in your industry a blog is a great way to achieve this.

Learn more about small business tools HERE!
Not incorporated yet? Let MyCorporation help you! Learn more HERE!

Share!!!

Comparing Business Structures

Posted on by

One of the most difficult steps in the start-up process is deciding which business structure fits your business idea best. There aren’t that many options, but the distinctions between the types of entities can be overwhelming. A lawyer can help you make the decision but with a little research, you may be able to choose yourself. Here are some pros and cons of the major business structures you can choose from.

Sole Proprietorship. A sole proprietorship is the default business structure if you don’t file anything with the Secretary of State. This isn’t always the best choice for everyone, as it can result in a higher frequency of audits and it doesn’t provide protection for your personal assets and you can be personally liable for business debts. However, it is simpler to get started and the profits or losses can be reported on your personal tax return, without filing separately.

Limited Partnership. A limited partnership offers protection for the personal assets of the limited partners, however the partners who are actively involved in management do not have any protection. This is a nice option for many companies that focus on investing in real estate as it allows money to be raised for the business without involving outside people in the management of the business. This type of structure requires a filing with the Secretary of State.

Limited Liability Company (LLC). The Limited Liability Company, commonly known as an LLC, is one of the most popular entity structures among businesses right now. It’s a relatively new structure that combines the benefits of the corporation structures but eliminates some of the negative aspects. Specifically, the LLC protects everyone in the company from personal liability for business debts and allows losses to be “passed-through” to the people involved in the company. This “pass-through” option is a huge benefit to the LLC because it means that the people involved in the company can claim the losses of the company on their personal tax returns. In an LLC, you can take on passive investors to raise financing and corporation maintenance is fairly easy.

C-Corporation. A C-Corporation is the most general type of corporation you can have. The owners of a C-Corporation are mostly protected from personal liability for business debts, although if the corporation doesn’t follow the formalities of a corporation, there can be problems with personal liability. As a result, the formalities such as filing annual reports, maintaining separate bank accounts, keeping track of meeting minutes, and holding shareholders meetings are very important. A benefit of operation a C-Corporation is that the owners can share corporate profits with the corporation, lowering the overall tax rate. A C-Corporation can also have unlimited number of shareholders. A third benefit of C-Corporations is that if you wish to take your company public (selling shares over a public trade, i.e. NASDAQ or NYSE), you will need to be in a C-Corporation so starting out that way saves trouble down the road.

S-Corporation. An S-Corporation is a C-Corporation that has specially elected to be treated as an S-Corporation. It has the same personal liabilities protections and potential issues although it has significantly more stringent formalities. An S-Corporation can only have a certain amount of shareholders and the shareholders must meet specific requirements. An S-Corporation also allows for corporate profit sharing, but the allocations must be done in accordance with the shares each owner owns. A benefit is that owners can use any losses of the corporation on their personal income tax returns, reducing personal tax liability in many instances.

Another thing to consider when choosing a business structure is that your state may have some restrictions regarding the types of businesses that can operate in each structure. The Secretary of State for your state may be able to provide some guidance about this or an online filing service can as well while they’re filing your paperwork, if you choose to use them.

As you can see, there are numerous advantages and disadvantages to each type of business structure. Depending on the type of business you are starting, some of these disadvantages may not affect you as much as others. The only thing is to make sure that the business structure works best for you, and you are familiar with the applicable requirements. Let MyCorporation help you get started! Learn more HERE!

For more information, promotions and special offers, follow us on Twitter HERE!

Share!!!

Financing Made Simple

Posted on by

Financing a start up is daunting for many entrepreneurs. While hunting for cash, many find themselves sucked into flashy gimmicks promising “Free Money!” and “Fast Cash Now!” from websites and hiring consultants. Unfortunately, most of these promises are empty, leaving many small business owners searching for cash.

As difficult as it may seem, small business funding is available. For qualifying businesses, there really are opportunities to land free money from state, county and city governments, as well as private foundations and corporations.

Technology startups traditionally have the best chance of getting grant funding, often through the federal government’s Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) programs. These programs are lucrative, awarding more than $2 billion each year, but both require a tight match with exacting requirements.

Finding grant money for non-tech businesses is a little tougher. The first step: Figure out if you qualify for any special small business certifications. Some of these special certifications include women or veteran owned businesses. Federal and state governments sometimes give priority for grants to these types of business owners.

Utilize the internet to connect with your local government. Check their websites to find the economic development agency or equivalent in your area. These agencies often offer government sponsored grants in an effort to attract new businesses. Grants are also offered in order to encourage business owners to make their business economically friendly. Unfortunately, in the current economic state, government funding is difficult to secure. However, patients and perseverance can pay off.
Another way to generate cash flow is to find partners or investors. Finding a few partners and/or investors that share your interests and you get along with can be the key to successful financing. Not only do partners and investors give money, finding a couple of partners or investors can make you money in two other ways. First, they involve themselves in the business and have a vested interest in the business doing well. They may bring other types of experience to the business and this is helpful for getting your start-up going in the best possible direction. The second way partners or investors help make the company money is that many other financing entities (including banks, grants, trade associations, and venture capitalists) feel more comfortable giving money to a business that has partners and investors. Getting involved with trade associations that apply to you, attending conferences that invite people who share your interests or expertise, and subscribing to industry journals are three great ways to finding compatible partners and/or investors.

Thankfully, the economy is improving. Credit is coming back to midsize and larger companies faster than small businesses. That’s because small businesses are riskier. Small businesses should benefit from general economic conditions improving and, as that happens, lenders should feel comfortable taking on more risk and making more small-business loans.

Learn more about financing your small business HERE!

Share!!!