Sunday, April 4, 2010

Incorporating Your Small Business

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Having a self-sufficient business is probably one of the most common of dreams. Even more so incorporating small businesses into big businesses with larger perspectives and larger visions.

If you have a small business there comes a point in time when you will need to make a decision on whether or not you need to incorporate.

Almost every small business starts as a proprietorship or a partnership and as they grow they ponder over the idea of incorporating.

One of the primary advantages of incorporating your business is that it offers limited liability. If a business is under a sole proprietorship the liability of the business is the responsibility of the proprietor. When the same business is incorporated, the responsibility will depend on the amount of stake or share in the company.

Another salient feature of incorporation is that if you have a debt under the name of the corporation you as an individual will not be held responsible for it. With a proprietorship or partnership, a similar debt would have resulted in the seizing of your assets.

The second most important advantage of incorporating your small business is continuance. In comparison to a sole proprietorship a corporation has a larger life span. In fact legally it has an infinite life span.

If the company shareholders leave the company, die or if the ownership changes. A corporation will always exist.

Business is driven by capital and as a corporation it is easier to raise capital. Influx of capital or funds will help the business to develop, grow and bring in more funds. When you incorporate your small business, you are not only able to borrow as a corporation, but you can also sell shares and raise equity capital.

If the key benefits of incorporating are in line with your companies goals you can begin the process of incorporation.

  • The first step to incorporation is to choose a corporate name and have a proper business address. You can not run corporation out of home unlike with a sole proprietorship.
  • Secondly, you need to select the state in which you will be incorporating. Your home state may not be the best state for incorporation. You should Chose the state that will derive maximum benefit.
  • Thirdly, you need to select the type of corporation that will most benefit your company. Speak with your accountant, business consultant and/or legal consultant to determine what type of entity will be the best for your business. It may be a LLC, an S corporation or maybe a C corporation.
  • The next process is to choose the type of share. As a corporation, you can issue common stock as well as preferred stock.
  • Next, you will need to obtain a Certificate of Incorporation, which is normally available with the Secretary of State's office.
  • Lastly, you need to process and file your incorporation documents. This process can be taken care of by a registered agent or an attorney.
Once you are incorporated make periodic appointments with your resident agent to ensure your corporation is in compliance with the secretary of state.

Article Source: Chris Howard

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Thursday, April 1, 2010

How to Incorporate Your Small Business

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If you are a sole proprietor, you might be considering incorporating your small business. There are many reasons why small businesses turn to incorporation. It is more difficult for a sole proprietor to raise capital because they have no shares of their company to sell. It is also harder to get banks to finance your business venture. Taxes are a huge concern for small business owners, because it is possible to be required to pay the federal tax rate and a self-employment tax, meaning you are being taxed twice. The biggest risk for small business sole proprietors is the unlimited liability they face if their business is sued. This can put your personal assets at risk. It is for these reasons that small business owners need to learn how to incorporate their small businesses.

When you are looking to incorporate, small business solutions can include online incorporation. There are several online services available that provide all of the forms and information needed so that you get the type of incorporation that is appropriate for your business needs.

When you think about how to incorporate, business owners have several options available. You might choose the LLC, or limited liability company structure, an S-Corporation or C-Corporation format, or a non-profit incorporation model. With all of these business structures, there are forms to fill out and fees to pay in each state in which you will do business.

An LLC combines the advantages of being a sole proprietor with the tax and liability protection advantages that come with incorporation. An LLC can be made up of only one person--other structures require a board of directors. In this format you will usually pay self-employment tax on profits you take out of the business. No shareholder meetings are required, and the recordkeeping is easier than in other incorporated business structures.

When you are incorporating, business owners often choose the C-Corporation model. In this format, you will need to elect a board of directors, and a group of shareholders must take major business decisions under consideration. The board of directors handles the daily management of the company. You may sell stock in your company to shareholders, which is a great way to raise money for business purposes, and you can deduct the cost of employee benefits from your business tax obligation. C-Corps are required to hold annual meetings and keep minutes of them. This format often works best for larger businesses.

An S-Corporation is named after the Subchapter S code of the Internal Revenue Service's tax laws. The shareholder/owner can pass corporate earnings and profits straight onto his or her personal tax return, and all workers at an S-Corp must receive "reasonable compensation standards," according to the IRS. S-Corp dividends are required to be distributed to shareholders based the number of shares they own.

When you say to yourself that it's time to incorporate my business, online incorporation can be a great first step in meeting that business goal.

Article Source: Wayne Hemrick

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Monday, March 29, 2010

Legal Book Review - Incorporating Your Small Business

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If you own a small business and you wish to protect your assets, and stretch your tax dollar to the fullest then you might wish to consider incorporating your business. Maybe you don't know a lot about how to incorporate your business, or why you should. Perhaps, you'd like to know the history behind the reasons people have incorporated their businesses in the past, or how that relates to the same needs, challenges, and issues of our present time and your particular business.

If so, there is a book that I would highly recommend, and one that I have in my own personal library. Interestingly enough, this book has been on my library shelf for 30-years. And when I was clearing out all the old books, donating some and giving others away, I decided to keep it. Not because I could use this same book today to incorporate a business, I can hire a lawyer to do that.

Rather, because I think the history, and arguments for and against incorporating a small business are discussed at length, and they still play today. The name of the book is;

"How to Incorporate; A Handbook for Entrepreneur and Professionals," by Michael diamond and JL Williams, 1987.

Boy, have things changed since 1987, still much of the philosophy and definitions of course and all the history is the same, but the forms are much different and now there are LLCs which they didn't have at all back then. This book is extremely interesting because it helps us understand the evolution of corporations in America both large and small. The flow of business law is quite interesting in that regard. Indeed, I hope you will please consider this.

Article Source: Lance Winslow

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Friday, March 26, 2010

Incorporating a Small Business: S corporations versus C corporations

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If you've been considering incorporating your small business, you've probably been confused about the difference between S and C corporations.

The similarities between S and C corporations are as follows:

  1. Both S and C corporations are both separate legal entities that offer limited liability protection. If, for example, the corporation is sued only the corporation's assets are at risk. The assets of the board members or CEO are usually safe.
  2. An S Corporation is essentially a C Corporation that has a special tax status with the IRS, created by filing form 2553. The articles of incorporation that are filed with the state are same.
  3. Both entities must hold annual shareholder's meetings. Meeting minutes must be kept with the corporate records. Failure to follow this procedure can result in a judge's decision to 'pierce the corporate veil' and hold the corporation's owners personally liable for any penalties or debts.
So what are the differences?

  1. S and C Corporations differ greatly with regards to taxation. With S corporations any income or loss generated by the business appears on the personal tax return of the owners. This is often referred to as a "pass-through" tax entity.
  2. C corporations are often referred to as separately taxable entities. As you've probably already guessed, any gains or losses do not appear on the owner's personal tax records.
By now you're probably thinking, "What's the use of an S corporation if my tax statements aren't kept separate?"

The reason is this: Dividends paid to the small business owners from corporate profits may be taxed twice. The IRS can tax both the corporation and the owner.

3. S and C corporations also differ with regards to ownership limitations, some of which are as follows:

  • C Corporations can have an unlimited number of shareholders while S Corporations are restricted to no more than 100 shareholders. As a small business owner this shouldn't be much of a problem.
  • S corporations cannot have shareholders that reside outside of the United States. Practically anyone can own shares of a C corporation, regardless of where they reside.
  • Also, S Corporations ownership is largely restricted to individuals. C Corporations, other S Corporations, LLCs, partnerships and many trusts cannot own shares of an S corporation. C corporations can sell shares to individual or other legal entities.
Well there you have it. Basically S corporations offer the same liability protection without the tax separation or freedom of ownership. The restrictions placed on S corporations are hardly noticed by the bulk of small businesses with only a few owners. If you're still not sure what type of corporation to form, there's a lot more information about incorporating a small business at

Article Source: Jacob Wren

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Tuesday, March 23, 2010

The Advantages of Incorporating Your Small Business

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Are you a sole trader wondering whether or not you should incorporate your small business? Hopefully this article will spell out some of the key benefits that you could expect to see from small business incorporation.

Incorporation could be the right step for you if you're planning to grow your business going forward. Incorporation will make it easier for you to attract additional funding, either in the form of capital investment or loan finance. Also, should your business hit financial difficulties in the future, incorporation will give you limited liability protection from the company's debts and liabilities. We'll discuss these benefits more fully below.

Firstly, let's discuss why incorporating your small business makes it easier to raise additional funding for the growth of your company.Incorporation provides your business with a formal share structure, and so the issuing and valuation of shares becomes significantly more straightforward, making it easier to raise funds via additional capital investment.

Incorporation also gives your company increased credibility with the financial institutions and therefore makes it easier to attain additional finance.

Next let's look at the subject of personal liability protection.

When you incorporate your small business, it's status changes to become a totally independent legal entity. As a result, you get personal liability protection from any debts incurred by the business. Once incorporated, as a shareholder you will only be personally liable for the debts of the company up to the amount of equity you invested in the newly formed company.

In other words, the business's creditors will only be eligible to payment of amounts owed from the assets of the incorporated company and not from the personal assets of the shareholders and directors.

Personal liability protection is obviously one of the most attractive benefits of small business incorporation. It effectively removes the risk to your personal assets that comes with being the owner of a small business.

As well as the benefits already mentioned, there may also be tax advantages to incorporating your small business.

Before you decide for sure to start the small business incorporation process, you should always seek professional advice from a qualified financial expert, as individual circumstances are different.

Article Source: Richard Taylor

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Saturday, March 20, 2010

What to Consider When Incorporating a Small Business

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When incorporating a small business in any country, state, province or other jurisdiction there will be a special procedure in that jurisdiction.

The basic principles of incorporating a small business are choosing a name, obtaining a name search, filling out articles of incorporation or a memorandum of association, notice of directors and notice of registered office. You should also set up a minute book for the company which involves organizing the company subsequent to the incorporation.

Great consideration should be given to the name that you choose when incorporating a small business. You must ensure this name is not similar, does not sound the same as or is remotely the same as any other corporation, business name, sole proprietorship, partnership or trade-mark registered in that country, state or province as the case may be. It is not enough that the name is available. It can still be considered a conflict. Some governments will accept a name that is only different than others already registered which may not be enough to determine whether the name could be a conflict in the future.

If it turns out to be a conflict you may be forced to change the name which will be very costly regardless of the fact that your government allowed you to incorporate the name. Using a qualified search house to assist you with obtaining your name search report will cut down the chance of this happening since they are trained. You need to check with the jurisdiction in which you wish to incorporate and see if they have guidelines that can be followed. In Canada for instance it is best to have a search house assist you since they are trained to know which names would be a conflict. Sometimes even if a name sounds the same it could be a conflict, such as using the words "1st" or "First".

You will be required to provide a Name Search Report when incorporating a small business. You should obtain your name search in advance since if you register online or in person, you will be required to provide the report number or a copy of the report as the case may be before you will be able to incorporate.

If you do not wish to go through the procedure of obtaining an alpha name for your company you can register a numbered company in most jurisdictions. In Canada for instance you can register a company with names such as 2019977 Ontario Inc., 2019977 Alberta Ltd., or even 2019977 Canada Inc. Many people when incorporating a small business will register a numbered company and then register a business name against the company, i.e. 2019977 Canada Inc. c/o as John's Hardware Store.

Each government will have its own form of articles of incorporation or memorandum of association. Each government has a section on its website which outlines the requirements for incorporation and the forms to be completed. In most cases you can download these forms, fill them in and print them off. Frequently additional forms are required to be completed as well including a Notice of Directors and/or a Notice of Registered Office either at the time of incorporation or within so many days after incorporation. When you register online the government will request the registration number associated with the name search report you ordered.

Some governments will allow you when incorporating a small business to register a company with articles of incorporation that are not correct. The governments look for specific information to be contained in the articles. When incorporating a small business you could still be filing deficient articles and later on you may have to amend them when a government agency or another matter comes to light. It is a good idea to either hire a solicitor to register your business or buy some type of incorporation kit to assist you. It's not difficult. You just need to understand the clauses that should be contained in the articles for them to be complete.

An example of where someone could go wrong is when they are incorporating a small business and they provide for only one director on the articles. In some jurisdictions you must show a floating board of say 1 to 10 in order to change the number of directors easily and if you do not do so and you want to bring on another director later on then you will need to amend the articles and this can be costly. Again, it is a simple change but if you do not know the fine details then you will make a mistake which could cost you in the future.

When incorporating a small business you will be required to provide the name of the company, the registered office address (which is the address where government mail can be sent), the names of the directors and their addresses (these must be physical addresses where the directors can be located in person), the nature of business (which should in most cases be left blank to enable any business to be carried on), the share attributes (which in most cases would be an unlimited number of common shares), the attributes for the shares (which in most cases can be not applicable if only one class of shares is shown), the transfer restrictions (which should be upon approval of the directors and shareholders) and the special provisions (which provide that shares cannot be sold to the public and the number of shareholders will be less than 50).

Incorporations are governed by the business corporation statutes in the various jurisdictions. For instance in Ontario, Canada it is called the Business Corporations Act. In Ontario Section 105 of the statute provides that a director of a corporation (a) must be at least 18, (b) of sound mind, and (c) a person, (d) not bankrupt. Each jurisdiction will have similar requirements for someone to be a director of a company.

As soon as you have incorporated, you must then set up your minute book. This is the part that many small business owners do not bother to do and it is very important. Once you are incorporated you will need to appoint the officers, approve the form of share certificate, allot the shares to the shareholder and the shareholder has to pay for the shares, and elect the permanent directors. If you do not do this and you are the owner of the company and something happens to you, there will be no record of you being the shareholder and therefore the ownership of the company comes into question. As well, if you decide to sell your company down the road and you have no minute book, then you will have to pay to have one set up before you can sell and this will be much more costly than if you had done it in the first place. Your minute book can be a binder rather than an expensive minute book.

Article Source: Holly A. Crosgrey

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Friday, February 19, 2010

Avoid the #1 mistake that KILLS new websites

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Today I have a new resource to tell you about that will stop you
from making the common start-up mistake that KILLS many new

It's called the "Ebusiness Start-Up Handbook," and it's a
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Start your website *without* doing this critical groundwork first,
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The "Ebusiness Start-Up Handbook" was produced by the experts at
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I highly recommend you take the first step toward financial
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