Business Basics: Reasonable Compensation

This week we are looking at reasonable compensation, a legal necessity for anyone running a Corporation. Reasonable compensation is connected to one of the most fundamental parts of working for a company – getting paid – and yet it’s so widely misunderstood. When you form an Corporation, you create a separate, legal entity that ‘earns’ money. You then pull your wage from those earnings and pay whatever payroll taxes you owe. reasonable compensation

In order to close a loophole wherein those running the corporation could ask for an extremely low salary, pay next to no payroll taxes, and then close the wage gap with distributions, the IRS requires that all corporate officers and executive be paid ‘reasonable compensation.’ But what constitutes reasonable compensation is a little more murky.

Who needs to be concerned with reasonable compensation?

Anyone that is runs, or helps run, a C-Corporation or S-Corporation must be reasonably compensated for their work. Continue reading

Business Basics – Estimated Tax Payments

Estimated tax payments are one of the biggest shocks for new business owners. They know that they have to pay taxes, they just don’t realize they have to send in a check four times a year! Most businesses that expect to more than $1,000 – or $500 if the company is incorporated – in taxes have to make estimated payments to the IRS. And, since the next quarterly payment is due on September 15th, we thought it’d be a good idea to do a quick rundown of what estimated tax payments are.

Estimated Tax Payment

What are estimated tax payments?
Exactly what they sound like. These payments are simply what you’d normally owe on your income. However, since you don’t have an employer to withhold and send in what you owe, you have to do it instead.
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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!

Business Basics: Business License Compliance Package

We decided to do something a bit different with our weekly business basics post this time around, and instead look at a new service we’ve just started offering – business license compliance packages. We’ve covered business licenses before, but we thought it’d be a good idea to revisit the topic and explain why we decided to start offering this service to our customers. business licenseOur team kicked around the idea for awhile, trying to figure out whether or not there was any demand for this type of service, and we realized that there were three questions we’d have to be able to answer before launching.

Why offer business license compliance packages?

MyCorporation has always aimed to meet all of the needs of new business owners. The next logical step after creating your business is to apply for all of the licenses you need to legally open your doors. Without the right licensing, you’re effectively dead in the water. So expanding our offerings to include licensing just makes sense.

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50 States of Incorporation: Virginia

Virginia – the mother of all states. Home to the first English colony in the New World, and the birthplace of more U.S. presidents than any other state, the Commonwealth is easily one of the most storied and important states in America. Virginia continues to be one of the nation’s top producers of tobacco – a crop it has grown since the colonial era – and has one of the most diverse economies of any state. Ranching, farming, tourism, high-tech manufacturing, and government agencies contribute to the bustling and thriving Virginian economy. Incorporate in VirginiaAn educated workforce and pro-business government has also placed Virginia at the top of Forbes’ ‘Best States to do Business In’ list for the past four years. Virginia is an obvious choice for any budding entrepreneur. How do you start a business in the state? And what does it take to form an LLC or incorporate in Virginia?

How do you start a business in Virginia?
It’s actually quite easy! All you need is a ‘Doing Business As’ name, the right licenses and permits, and, if you want to hire someone, a federal tax ID number, often called an Employer Identification Number. Virginia has a handy tool to help new business owners register their business and its name online. Once you are all registered, you can technically open for business as a sole-proprietorship. However, while sole-proprietorships are easy to run, they make you, as the business owner, responsible for all of the business’s debts. If you hope to mitigate your risk, you should form an LLC or incorporate in Virginia.

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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 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!

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!

Introducing MyBizWiz – Our New Entity Choice Wizard!

MyBizWiz, MyCorp’s new business entity wizard, was created to help answer one of our customers’ most commonly asked questions; ‘What type of business entity should I form?’ There are plenty of different factors that need to be considered before making that final plunge. How many people run the business? What sort business is it? Do you have personal assets you’d like to protect?

Introducing MyBizWiz - Our New Entity Choice Wizard!

In order to help new small business owners navigate the often confusing world of legal business entities, MyCorporation chose to build the new MyBizWiz tool. All you have to do is answer a few simple questions about your business, and our entity-choosing wizard will tell you what type of business entity would suit you best. It also gives you a general description of that entity and runs down the basic benefits behind it.

To get started, just click here and answer a few questions. There are no obligations, and we don’t ask for any personal information – MyBizWiz is here to help you choose the best type of business entity for your company!

We’re happy happy to answer any questions you might have about MyBizWiz -give us a call at 1 (877) 692-6772!

Business Basics: Limited Liability Partnership

A Limited Liability Partnership is a very interesting type of business structure. Limited Liability Companies already combine the ease of running a partnership with the protection of a corporation, and the IRS originally ruled that LLCs would be taxed as partnerships. So what is the difference between a Limited Liability Partnership and a Limited Liability Company? And which one would be the best structure for your company?Limited Liability Partnership

What is a Limited Liability Partnership (LLP)?

We’ll answer the easiest question first. An LLP is very similar to an LLC – both protect the company’s owners from lawsuits and debtors, and both have a pass-through tax structure, meaning anything the company earns passes through it, directly to the owners, without being subject to any corporate income tax. However, a Limited Liability Partnership offers an extra bit of liability protection to each partner. So, just like in a Professional Corporation, the other partners in an LLP will not necessarily be liable for the consequences stemming from another partner’s actions.

Do all states recognize LLPs?

Yes, though the laws recognizing LLPs vary from state to state. The majority of the states have adopted the Revised Uniform Partnership Act, which includes a provision for LLPs stating ‘An obligation of a partnership incurred while the partnership is a limited liability partnership, whether arising in contract, tort, or otherwise, is solely the obligation of the partnership.’ In layman’s terms, that essentially means that the company, and not the individual partners, is responsible for any obligations stemming from contracts or torts. The states that haven’t adopted the RUPA instead opted for their own laws to recognize LLPs, but all follow the same basic pattern.

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