Should I Start a Home Based Business With and LLC?
The right form of legal business structure for your business depends on factors such as the business activity and its financial implications. Each legal form of business has risks and benefits. A sole proprietorship or a partnership is easy to form and operate. These forms require no statutory procedures to form and operate except for the permits and licenses necessary to operate business in your state. Sole proprietorship and partnership are ideal for businesses which does not involve personal risk and potential financial liabilities. The personal liability of a proprietor or partner (s) is unlimited towards business obligations or debts. If a claim or liability arises out of the business, your personal assets are in jeopardy.
Limited Liability Company or Corporation offers limited personal liability protection to its business owners. There are statutory procedures required to be complied with to form LLC or Corporation. State laws govern the formation and operation and each state may have different requirements. For forming a LLC or Corporation you have to consult the state agency handling incorporations and organizations. Usually business incorporations are handled by the Secretary of State or Corporation Commissioner’s offices. All states provide online information regarding incorporation or LLC formation and personal support over telephone or in person.
For forming a LLC in any state, the basic requirement is to file an article of organisation and pay the filing fees. You require a valid name to form LLC. Make sure that the name is not similar to another business in your state. Some states provide name availability check option and you may check on the internet also. The name as stated in the articles should end with ‘Limited Liability Company’, ‘LLC’ or another abbreviation which clearly states the limited liability status of the business. The articles of organisation must state all the critical information about the LLC members and the purpose for which it is formed. The articles should also state a person or entity as a registered agent with a local street address for process service. Some states may have more requirements for forming LLC. An LLC operating agreement is required as a part of articles by some states. Even if the operating agreement is not a legal necessity, it is advisable to have one for your LLC. It will provide your LLC a separate identity and establish the limited liability status firmly in the eyes of law. Publication of the intent to form the LLC is also a legal requirement in some states. Some states prohibit formation of LLC for business like banking, insurance or professions.
Why Should I Create an Operating Agreement?
While doing business keeping your personal life separate from your business is very important. This will help you gauge the success of your business and give a better perspective to your customers. Business cards and letterheads are a part of this. There several types of legal business structures you can adopt depending on your business. If you are doing business on your own, you automatically become a sole proprietorship in the eyes of law whether you report it or not. If you do business under a fictitious name and have advertised or recorded it any legal manner such as to protect it as a trademark, you are presumed of operating you sole proprietor ship under that name. Likewise, if are jointly operating with two or more persons, you become a partnership whether or not you have written in down in an agreement. You have to report the operations to the Federal and State in an information return form. The issue with these forms is that the business does not have a separate legal existence. The sole proprietor or partners are wholly liable to settle all business debts and obligations.
To protect your personal assets from business liabilities or obligations, you should adopt a legal business structure that provides personal liability protection to business owners. The common forms in use are Corporations and Limited Liability Companies. Both forms limit the personal liability of business owners to the capital contribution and all other business debts or obligations do not cross over except in certain circumstances. Forming a LLC or Corporation requires compliance of formal procedures with state government. Corporations re structured by units of shares and shareholders subscribe to particular number of units. Corporations have a separate legal existence and are perpetual in its continuity. A Limited Liability Company is formed by one or more persons by filing an Articles of Organization in accordance with the state rules and regulation governing such formation. For forming an LLC some states insist on filing the LLC Operating Agreement along with the Articles.
In Taxation rules, the corporation is treated as a person and has to file all the necessary returns stipulated by the revenue codes. The Corporation is taxed directly on its profits. When these profits are distributed among shareholders they have to declare that as income and pay tax on it if application. There exists another type of corporation, which is not subjected to this double taxation, a S Corp. In an S Corp or LLC the profits pass through to the shareholders or members and is declared and taxes paid through personal tax returns.
You Should Have an Operating Agreement
If you are contemplating the formation of a legal structure for your business, there are certain basic requirements to be taken into account. Each structure of business has benefits and risks associated with it. A sole proprietorship or partnership is well suited for a business which has few potential risk factors associated with it. The risk in a sole proprietorship or partnership is that the business owners are personally liable for all the business debts and obligations. This means that if your business generates a claim for damage due to any reason from a customer or an employee, your personal assets and cash can be appropriated for paying the damages or claim. To limit your personal liability from business operations, the best option is a Limited Liability Company or LLC.
LLC form is best suited for small business operations which involve considerable transactions and where the chances of generating a liability or claim exist. LLC formation is relatively simple and straight forward. It does not involve too many formalities either in its formation or maintenance when compared to a corporation. The advantages of form LLC is that while it limits your personal liability, it offers great flexibility in management and control of you business.
LLC formation is not so hard that you have to engage lawyers and pay huge fees. All States provide basic information in the formalities and procedures involved in llc forms. What is not available on the State websites, you can collect from the state agency dealing with the registrations. The basic steps for forming an LLC are
- Choose an available business name in line with your states regulations. Some names or nomenclatures are prohibited as a part of an LLC name.
- Draw up the required documents such as the Articles of Organization and the Operating Agreement.
- File these documents with the appropriate state agency along with the application and pay due fees.
- Obtain all the relevant licenses and permits needed by the LLC to run a business or to employ people.
Some states require that a public notice should be issued regarding the LLC formation.
The Operating Agreement is critical in an LLC’s conduct of business. Even if it is a single owner LLC, the operating agreement provides clarity in the LLC operations and creates individuality to the structure. Where there is more than one member, the operating agreement helps in writing every operational term into black and white to avoid any ambiguity or future disputes.
How to incorporate in Arizona
Forming a C corp in Arizona is not very difficult; you can do it in as little as three steps. What most incorporations don’t realize is that while there are only three steps to the incorporation process, some of those steps require many details. For example, to form a C corp in Arizona you will need to file your articles of incorporation, publish them in a newspaper a specific number of times, and then submit an affidavit of publication to the Arizona Corporation Commission.
The process seems simple, but it gets complicated as you go further along because of the numerous tasks that need to be performed. In Arizona, you do not need to have an operating agreement for your corporation, but having one can help you prepare the articles of incorporation and the bylaws.
The first step for incorporating in the state of Arizona is filling out and filing your articles of incorporation. The first task that you face with filling out your articles of incorporation is selecting the name of your corporation. When choosing a name you want to choose something that will make your business stand out, but something that doesn’t sound like anybody else’s business name. When you have finally decided on a name that fits in with the requirements for the state of Arizona you will want to run a name search through the Arizona Corporation Commission Name Approval’s website.
The second task that you have is to prepare the articles of incorporation. Your articles of incorporation must include specific information including a name that satisfies the requirements of A.R.S. Section 10-401 and the number of shares your corporation is authorized to issue. You will also need to include a statement of the type of business your corporation is going to practice in the state, and the name and address of each person who is going to be serving as a director. Your articles of incorporation must also include the name and address of each incorporator, along with their signatures, and the name, address and signature of the corporation’s statutory agent. If the known place of business for your corporation is going to have a different address than your statutory agents, you will also need to include that information.
The third thing that you will need to do is select your corporation’s statutory agent. This agent must be an adult individual who lives in the state or Arizona or it can be a domestic corporation that was formed under Arizona corporate law. You can also use a foreign corporation that is authorized to do business in the state of Arizona or a limited liability company that is authorized to do business in Arizona, or was formed in Arizona. The reason you need a statutory agent is if you are ever served with legal papers they can be served on behalf of your corporation. Just keep in mind that the statutory agent cannot have a post office box, they must have a street address.
Once you are ready to file your articles of incorporation with the ACC you will need to prepare a cover sheet and a certificate of disclosure. When completing the certificate of disclosure depending on how you answer the questions you might be required to submit more information. Once this is done you can file the articles of incorporation with the ACC in person or through the mail, in either case you will need to pay a filing fee of $60.
Once your articles of incorporation have been reviewed, you will receive a rejection or approval in the mail. If your articles of incorporation failed, you can resubmit them and pay another filing fee after correcting the mistakes. If they were approved you will need to publish them in a newspaper for the county your corporation is registered in for three consecutive publications. After this is done your corporation is formed, but you still have to prepare the bylaws and adopt them at a Board of Directors meeting.
How to incorporate in Wisconsin
One of the best things about choosing to incorporate in Wisconsin is that it is one of the many states that recognize S corporations. This means that you can form a C corp or an S corp in Wisconsin, depending on which form will fit your business, needs best. Even though am S corp will see the benefits of pass through taxation like the one a partnership does, you do not need to prepare an operating agreement for one. An S corp is incorporated the same way a C corp is incorporated, through filing the articles of incorporation and adopting the bylaws.
Before you can go about forming a corporation in Wisconsin, you will need to choose a name for your corporation. When choosing a name for your corporations you need to ensure that they name you choose is different from other corporations registered in the state of Wisconsin. The name also has to stand out from other businesses in the state it cannot be similar. To identify your business as a corporation you will need to include the word corporation or incorporated or an abbreviation of those words in the business name, it can even be tacked on at the end.
Once you have chosen a name and performed a name search to ensure that the name isn’t being used by anybody else you will want to prepare your articles of incorporation. Once you have finished preparing the articles of incorporation you will need to file them with the Wisconsin Secretary of State. Before you file your articles of incorporation, you want to make sure that all of the required information is included, otherwise your request to form a corporation will be denied, and you will have to start the process from the beginning.
In Wisconsin, you do not have to include the information on the initial directors of the corporation, but you do need to include information on the incorporators. There has to be at least one incorporator included in the articles of incorporation. If there is more than one incorporator, all of them have to be listed in the articles of incorporation, but only one of them has to be a natural person who is at least eighteen years old. All of the other incorporators can be businesses.
The state of Wisconsin allows a corporation to be formed for any lawful business activity, as long as it follows the laws of the state, and certain industries are regulated by the state more than others are. With this in mind it is not necessary to include the purpose in the articles of incorporation, but it can be included if you deem it necessary. The number of shares that your corporation is authorized to issue must be included in the articles of incorporation. It is also good to include the par value of the share of stock or designate whether it will be no par value stock. You will also need to include any provision granting or limiting preemptive rights and the name and address of the initial registered agent. The last thing that has to be included in the articles of incorporation is a statement saying the corporation is incorporated under the laws of Wisconsin.
Once the articles of incorporation have been filed and approved, you can hold a board of directors meeting to adopt the bylaws that have been prepared for the corporation. At the first meeting, you can also determine if a corporate seal is going to be required for opening bank accounts or for issuing stock.
How to Incorporate in Colorado
Forming a corporation in Colorado can be done by hiring a corporate law firm or by filling out the paperwork and filing it yourself. You also have the option of hiring online incorporation services to complete the paperwork for you and file it with the Secretary of State for you. Hiring online incorporation services to incorporate your business is nice because it saves you the time and hassle of doing everything yourself, but is still cheaper than hiring a lawyer. Online incorporation services can also create your corporate seal as part of the incorporation process.
The first step to incorporating your business within the state of Colorado is to choose a corporate name. The name that you choose for your corporation must be distinguishable from any other business that is registered in the state of Colorado, this means it cannot be the same as or similar to any registered business or reserved name. Each corporation’s name must contain a term that allows it to be easily identifiable as a corporation.
Once you have chosen and reserved your corporation’s name you will need to fill out and file the articles of incorporation. When filling out the articles of incorporation you will need to include some specific information that is required by the state of Colorado. The first thing that you will need to include is the personal information of any of the incorporators of the corporation; this includes their name and address. The incorporators must also sing the articles of incorporation before they are filed. Articles of incorporation usually include the purpose of the corporation, but Colorado does not require you to include your corporation’s purpose. Most articles of incorporation include information on the directors of the corporation, but under Colorado formation requirements, you do not need to include this information.
Stock information must be included in the articles of incorporation. In the articles of incorporation, you must include the number of shares of stock that you will be issuing and the class of stock that you will be issuing. If your corporation plans to issue more than one class of stock, you will need to include the number of shares you wish to issue for each class of stock. Cumulative voting also needs to be addressed with the stock information. If your corporation does not want to use cumulative voting during the election of directors, that must be stated in the articles of incorporation under the stock information section.
Limited liability companies use an operating agreement to dictate the rules that will govern their business. A corporation does not have an operating agreement; instead, they have the articles of incorporation and the corporation’s bylaws. The articles of incorporation can include any regulations on the powers of the corporation, shareholders, or board of directors. The bylaws are adopted by the board of directors for the corporation to follow. In most cases, the bylaws are written so that the corporation’s business and affairs are handled in a specific manner. The one thing that you need to remember is that the bylaws cannot conflict with the corporation’s articles of incorporation.
The articles of incorporation must be filed with the Secretary of State to form the corporation, when filing the articles of incorporation a filing fee must be paid. The bylaws do not have to be filed with the state, but they do have to be kept on file at your corporation’s executive office.
If you plan to open a corporation in Alaska, you can begin the incorporation process by hiring an online incorporation service or you can hire a corporate law firm to do it for you. If you choose to use a corporate law firm or an incorporation service, you will have to pay their fees on top of any filing fees that are needed for forming a corporation in Alaska. Hiring a corporate law firm is the most expensive method for incorporating your business because they charge you per hour, plus filing fees. Your last choice is to do everything yourself, all you need is the filing fee and the required paperwork and you are done.
When doing it yourself the first thing you have to do is to choose a name for your corporation. In Alaska, your corporation’s name must contain the word corporation, company, incorporated, or an abbreviation of those words. When naming your business you must not use a name that is being used by another business in the state, or a name that another business has already reserved. The business name that you choose cannot contain the words city, borough, or village and it cannot contain any words that imply a different purpose of the business than what is stated in the articles of incorporation.
In Alaska, you will need to fill out and file your articles of incorporation with the State Department. The articles of incorporation are similar to an operating agreement for a limited liability company, but they are a bit more detailed. Your articles of incorporation will include information on the officers of your corporation, but this information is not required. The articles of incorporation will also include information about the directors, but they are not required to be included. The directors do not have any age or residence restrictions, so you can use somebody who lives in another state or somebody who lives in Alaska.
Any information pertaining to the stock that your company will be issuing needs to be included in the articles of incorporation. One of the best things about incorporating in Alaska is that an increase in the number of shares that you are issuing or their par value will not increase your initial fees, unlike other states. Once you have included all of the required information for the articles of incorporation you will need to file the articles of incorporation and pay the required filing fees.
After you have filed your articles of incorporation, you will receive a certificate of incorporation once your request has been processed. Once you have received your certificate of incorporation you can start issuing stock to investors. Most business finds that the best way to issue stock is through a stock certificate. The stock certificate allows investors to have proof of their investment, rather than just something written in their portfolio.
You will need to file annual statements for your corporation with the SEC, but you will only need to file a report with the state of Alaska every two years. The cost to file this biennial report is $100, and it must be filed by January 2 of the first filing year, if you file it after February 1 it is considered delinquent.
Each year you will also need to pay the appropriate income tax to the state of Alaska. If your corporation’s income is less than $10,000, you will need to pay 1% of your taxable income in taxes. If it is over $10,000, you will need pay up to $4,500 in taxes on your taxable income up to $90,000. If you make more than $90,000 in taxable income, you will have to pay $4,500 for the first $90,000 and then 9.4% of anything over $90,000.
How to incorporate in New Jersey
Incorporating your business in New Jersey can be done by hiring a lawyer, using an incorporation service, or by doing it yourself. If you hire a lawyer to incorporate your business in New Jersey, you will be paying hourly fees, plus any filing fees that are associated with incorporating your business. If you decide to hire an incorporation service, which they can often be found online, you will be paying a flat fee for their service, plus any filing fees that are needed to incorporate your company in New Jersey. Incorporating your business yourself means you will only be paying any filing fees that are need for the incorporation process.
Incorporating your business is not that hard; most people find that they can do it themselves. One of the easiest ways to go about incorporating your business is to use an operating agreement that your company already has drawn up. Using an old operating agreement makes filling out the required paperwork easy because majority of the information that is needed is included in the operating agreement.
Before you begin filling out any paperwork you will need to choose a name for your corporation. When choosing the name of your corporation you will need to perform a search of the name to ensure that it is not being used by any other registered businesses, you also have to look for any similar business names. You will also need to follow any other regulations that are required for corporation business names, such as having the proper ending and not using any terms that are not allowed. When creating a business name keep in mind the length of the name, the longer it is the more it might cost to get a corporate seal stamp made. Your corporate seal can be sued for issuing stock or even opening a bank account.
Once you have chosen your corporation’s name you will need to fill out the articles of incorporation. The articles of incorporation for the state of New Jersey do not need to include any director’s information, but you will want to keep it in your corporation’s records. The officers’ information does not need to be included in the articles of incorporation either, but needs to be kept on file in your corporations records. You will need to include any stock information in the articles of incorporation, including the class of stock that you will be issuing, how many shares of each class you will be issuing and the value of each share of stock. A good thing to know about issuing stock in New Jersey is that you can authorize an unlimited number of shares of No Par value stock, but the other classes of stock are limited.
Once the paperwork is done, you will need to file it with New Jersey’s filing office. When filing the articles of incorporation with the state’s filing office, you will need to pay the filing fee that is required. Once you have filed the first year you will be given a special date for your corporation to file its annual reports. Each year either 30 days before or 30 days after the date, you are given, your corporation will need to file its annual report and pay a $40 filing fee.
Once all your paperwork is filed, you will need to hold a meeting for your corporation so that you can adopt the corporation’s bylaws. You can also choose your board of directors and handle any other business that is required at the first meeting. Once that is done you will need to obtain your federal employer identification number and open a bank account for your corporation.
How to incorporate in Idaho
Incorporating a company in Idaho is similar to incorporating a company in other states. The basic steps that you have to take are the same, but what is different is the type of information that has to be included. For example, some states require that you include the director’s information, while other states do not require you to provide the information when filing the articles of incorporation.
If you decide to incorporate a company in Idaho, the first thing that you want to do is decide who is going to incorporate your business. When it comes to incorporating your company, you have three choices to choose from. The first choice that you have is hiring a lawyer to incorporate your business. Lawyers are going to charge hourly fees, plus any filing fees that are incurred. Your next choice is hiring an online incorporation service to form your corporation; they will charge you a flat rate plus any applicable filing fees. The last choice that you have is forming the corporation yourself, which if you have an operating agreement in place, you can use that to form your articles of incorporation and bylaws. Choosing to do it yourself will save you a ton of money because you will only have to pay the filing fees that are incurred from forming your corporation.
To begin forming your corporation you will need to select a name for your corporation. When naming your corporation you will need to have a term included n the name that identifies the business as a corporation. You will also have to avoid using certain terms or phrases that are restricted by the state. The name must be unique, meaning it cannot be the same as or similar to any other business that is registered in the state.
Once you have, the name picked out you will need to fill out the articles of incorporation. The articles of incorporation must include basic information about your business, including the present address for your business. You can also include the director’s information, but it is not required. When choosing your director in the state of Idaho the good news is that there are no age or residence requirements, which means you can live in another state and incorporate your business in Idaho. You will need to include information for a registered agent for your corporation that lives in the state so that they can receive any legal documents that pertain to your business, such as lawsuits.
Once you have filled out the articles of incorporation you will need to file them with the Secretary of State. When filing the articles of incorporation you will need to pay the filing fee. The good news about the initial filing fees is that if you decide to increase the shares of stock that you are authorized to issue or increase the par value of the stock it will not affect your filing fees.
Once you have filed your articles of incorporation you will want to have a board meeting so that you can adopt the corporation’s bylaws. At the board meeting, you should also decide if you would be making a custom corporate seal. Custom corporate seals are often needed for doing business in other countries, but they can also be useful for daily business. For example, when issuing a stock certificate stamping it with a corporate seal makes it authentic.
How to incorporate in Maryland
One of the good things about incorporations in Maryland is that both C corp and S corps are recognized by the state. This is good news for business owners who are looking to incorporate in Maryland, but still receive the tax benefits of an S corp. If you are thinking about forming a corporation in Maryland you want to keep in mind that while incorporations are not required to have an operating agreement on file with the State, it is still something that your corporation should have so that no disputes can arise later about how to run the corporation.
The first thing that you will need to do when forming a corporation in Maryland is to choose a name for your corporation. Like other states when naming your corporation you must include a word or phrase in the corporations name that identifies it as a corporation, but the name must also be different from any other registered business in the State of Maryland.
The next thing that you must do is choose a resident agent for your corporation. The resident agent must be either a person who is a resident of the State of Maryland or a registered corporation of Maryland. Every corporation in Maryland must have a resident agent so that they can receive official state correspondence, but also in case the corporation is ever served with a lawsuit. The resident agent must be included in the articles of incorporation.
After deciding on who your resident agent is, going to be you will need to begin filling out your articles of incorporation. In the articles of incorporation, you will need to include the name and address of each person who is responsible for incorporating the business, but you will also need to include a statement by each incorporator stating that they are at least 18 years old and are forming a corporation in Maryland. You will also need to include the corporation’s purpose or a statement stating that the corporation can engage in any lawful business activity. The name of all of the directors must also be included in the articles of incorporation, along with the number of directors that your corporation has.
Stock information must also be included in the articles of incorporation. You will need to include the total number of shares that your corporation is authorized to issue. You must also break down the stock by class and par value. Other stock information that you must include with the articles of incorporation are the aggregate par value of all the shares and any preferences, conversions, or other share rights. You can also include other information about the stock that you are issuing, such as transferability of stock, but that is not required by law.
Once you have filled out the articles of incorporation you will need to file them with the State of Maryland, and pay your filing fee. The next things you will need to work on are the Bylaws. You will need to create the bylaws for your corporation because that is what will govern your business and any business affairs. You will not have to file your bylaws with the state government, but you will have to have a meeting to adopt the bylaws.
After completing all of this the only thing, which you have left to do is the annual report, which must be filed with the Maryland State Department of Assessments and Taxation each year when you file the corporate business personal property return. You will also have to pay a filing fee to file this document each year.
