Online Incorporation MaxBlog

Naming your business may be easier said than done. When considering what to name the business, keep in mind that it should be short, easy to remember, and related to what your business does.

The process of naming a business involves various steps depending upon the entity type, some of which require approval from local and state authorities. MaxFilings, the online incorporation service, assists entrepreneurs with this process.

Below is a brief summary of business name requirements for the various business entities:

Sole Proprietorships and Limited Partnerships

No formal process required. Each is considered to operate under the name of the owner or partners. If the business will operate under another name, a fictitious name or a “doing business as” (DBA) affidavit is required in most jurisdictions. This informs local government and the public that the business is operating under an assumed name and indicates who the owner(s) are.

Limited Liability Companies and Corporations

These entities require a more formal process. The name is established when articles of organization are filed with the secretary of state. If the name is already in use, the articles will be rejected. However, calling the secretary of state’s office beforehand or using an online incorporation service such as MaxFilings can prevent such a delay.

Similar rules exist for both LLC’s and corporations. The name for a LLC is required to include “Limited Liability Company”, “LLC”, or some phrase indicating the business is an LLC. Terms such as “Corporation”, “Incorporated”, “Corp.”, “Inc.” or some phrase to indicate the business is a corporation. State statutes identify which terms can be used. 

The ability to raise capital is an important issue that you must consider as an entrepreneur. In fact, the decision of which type of entity to form when incorporating your business can be determined by this point alone in some cases. It is also vitally important to consider your cash flow needs to start out so you are able to grow your business later on.

There are basically two types of financing, debt and equity.

Debt financing is where you borrow money to be repaid over a period of time with interest. Full repayment is required within1 year or less for a short-term note and more than a year for long-term debt. Also, the lender does not gain any ownership in the company but may require a personal guarantee for the loan, especially for small businesses.

Equity financing is described as an exchange of money for ownership in the company, usually though common stock. This type of financing basically allows you to raise capital without incurring debt. The inherent disadvantage however is that by issuing stock in the company, your ownership interest is diluted and loss of control is possible.

When it comes time to incorporate your business, you’ll need to consider the different characteristics regarding raising capital associated with each type of business entity. The main point of difference is whether stock can be issued to the general public or not. Online incorporation services at MaxFilings provide an easy way to incorporate your business once you choose the type of entity you will be forming.

Only a C or S corporation can issue stock to the general public. Stocks can make it easier to raise investment capital and transfer ownership, and the ability to offer stock options can assist the company in recruiting and retaining good talent. All stock issued is subject to various state and federal securities laws.

A Limited Liability Company (LLC) cannot issue common stock to the general public, but the benefit of raising capital is replaced by the relative simplicity and ease of operating an LLC. Capital is generally raised through the companies’ partners and debt financing.

Both corporations and LLCs, however, must maintain the ratio between debt and equity financing at an acceptable rate. Too much or too little of each may make it more difficult to attract investors and obtain debt financing from a lender, who may question the ability of the note to be paid back.

In the end, this decision cannot be made lightly and must involve the counsel of an attorney and accountant. However, the two main points to consider in regard to raising capital boils down to growth needs of the company and the administrative requirements of a C corporation, S corporation, or LLC.

If you will be conducting business outside your state of incorporation, you must apply for and receive foreign qualification from each state your business will operate in.

A new article, What is Foreign Qualification?, posted in the Knowledge Center at MaxFilings provides a good overview of the process of applying for foreign qualification.

The foreign qualification process involves paying filing fees and submitting the proper paperwork, which includes:  

• A name availability search
• Appointment of a registered agent
• Certificate of Authority registration

Read the article for a good overview of foreign qualification and who needs it. It’s easy to file for foreign qualification online at MaxFilings.

Getting your company incorporated can be a very busy time for you. Handling the legal matters is just another thing piled on to preparing business plans, marketing strategies, etc. There are few errors that can’t be reversed with the help of legal counsel but dealing with things correctly and professionally in the beginning can save you precious time and resources.

It’s important to institute a corporate structure that is easily adaptable to changing business and financing needs. Susan Schreter, a coach that helps entrepreneurs find reliable investors recently tapped into the expertise of Joe Whitford, a law partner with Davis Wright Tremaine and long-time advisor and advocate of productive venture building. He discussed the 6 most common mistakes he is often called in to correct. Take care to avoid these mistakes as you incorporate your business:

1. Only Authorizing Common Stock-It is recommended for young companies trying to raise capital should issue both common and preferred stock and business founders should only receive common stock. Depending on the state and the tax implications, 30 million common stock shares and 20 million preferred stock shares are recommended.

2. Over allocation of Shares-Many companies dole out too many shares to founders, initial employees, and consultants. This leaves too few for actually raising capital and growing the business. It is recommended that only ¼ to 1/3 of shares are allocated to these people in order to leave an ample amount for raising funds.

3. Establishing a High Initial Stock Value-The Internal Revenue Service requires stock recipients to pay tax on the estimated market value of the shares, which can be very costly if those valuations are set too high.

4. Granting too lenient shareholder rights-Entrepreneurs should not include provisions in the articles of incorporation that allow shareholders to acquire additional shares in future financing transactions. These rights should be negotiated on a per transaction basis.

5. Invention Assignment-Many companies do not take due diligence in documenting the ownership of inventions by founders and new employees. By not declaring an invention as being owned by the company rather than an individual, funding opportunities and technological alliances can be lost.

6. Not including shareholder agreements with company founders-It is always best to detail the duration of services with founders who receive stock in a company in order to retain certain rights to one or more individuals that may lose interest in a company.

Avoiding these 6 mistakes can save your company a lot of hassle. Turn to the online business incorporation leader MaxFilings to assist you with forming your company and find other important information in the Knowledge Center at MaxFilings.

MaxFilings now has available the Business Forms CD, which contains over 50 customizable forms that virtually every business needs. Now, whether you are starting a new business or trying to instill more administrative order in your current one, having easy access to a wide variety of business forms will be a tremendous convenience.

The CD includes 26 common business forms that provide an outline for hiring employess, collecting payments, and other common legal documents used in business such as a contractor agreement and power of attorney.

All forms are formatted in Microsoft Word and can easily be manipulated specifically for your business.

The Business Forms CD also includes 24 additional forms specific to corporations such as a proxy, stock purchase agreement, and certificate of corporate vote to name a few.

Along with online incorporation and business services, the Business Forms CD available now at MaxFilings is an additional tool in helping you effectively manage your company.

A foreign company is not one from another country but rather a business operating in another state. Foreign qualification, available online at MaxFilings, is the process by which a company becomes qualified to conduct business in another state besides the one it is based in. This is especially common among larger companies.

The first part of this process involves a name availability search that must be conducted in each state the company will be doing business in to ensure the name is not being used by another foreign or domestic corporation/LLC. If there is a duplicate or one too similar, an assumed name must be used in that state.

Next, a registered agent in the other state needs to be selected to serve as the company’s in-state liaison. Then, you must register for a Certificate of Authority in that state. The company must be in good standing in its home state so be sure annual statements are filed and the proper fees and taxes are paid.

Avoid the hassle and let MaxFilings take care of all your foreign qualification and registered agent needs. Each state has different requirements and processing times, which can be expedited for a fee. And with easy online ordering, you can save your work and return later to finish.

Section 1244 stock in a corporation provides qualified shareholders with an important tax advantage in the event the company suffers a loss or goes out of business.

For ordinary stock, capital losses from the sale of those assets must be offset with other capital gains or with ordinary income, to a limited extent. However, losses from the sale of a section 1244 stock can be used to offset ordinary income up to $50,000 for individuals or $100,000 for joint filers.

In order to qualify for Section 1244 stock, a corporation and its shareholders must meet five important criteria, detailed on “What is Section 1244 Stock?” found at the Knowledge Center at MaxFilings.

Section 1244 stock can help ease the burden for you and your shareholders in the event the company goes defunct. This is an important issue to consider when incorporating your business.

Are you incorporating a new business?…Or looking for information on the various corporate structures available? Sometimes the jargon associated with different explanations found by general searches on the Internet can be difficult to understand.

Basically, the differences in various corporate structures lie in their tax treatment. An S corporation is a standard corporation that elects special tax status from the Internal Revenue Service through the filing of IRS form 2553.

Many of the benefits of an S corporation are the same as other corporate structures, such as:

- Limited liability of debts, obligations, and liabilities incurred by the business or stemming from legal action(s).

- Protection of shareholders’ personal assets

However, unlike a C corporation, an S corporation does not pay any income tax itself. Rather, it is more like a sole proprietorship, limited partnership, or LLC where an individual shareholder reports their share of the corporation’s income and loss on their personal tax return, also known as pass-through.

So why would you want to choose an S corporation over other options? Some points to consider:

- An S corporation is for those wanting limited liability and a formal corporate structure but with pass-through taxation of profits, thus avoiding double-taxation.

- By law, an S corporation is considered an individual entity, and separate from its owners/shareholders.

- Easier to raise capital since stock and other forms of financial securities can be issued.

Further explanation of an S corporation and the different factors to consider is described simply at the Knowledge Center at MaxFilings. And after researching with this useful resource and consulting with an attorney, MaxFilings’ online incorporation center can help you form whichever structure fits your needs.

A C Corporation is recognized by the law as an individual entity, separate from its shareholders (owners), many times treated as a human being.

Shareholders enjoy limited liability for the debts, obligations and liabilities incurred by the business as well as liability stemming from possible legal action.

Protection of shareholders personal assets is one of the major reasons business owners choose to incorporate. Normally, shareholders cannot lose more than the amount they invested in the corporation. If the corporation goes bankrupt, the shareholders will not be liable for its debts. Should someone sue the corporation and the corporation is found liable, they can take the corporation’s property to satisfy the judgment but if that property does not satisfy the judgment, they will not be able to take a shareholder’s personal assets, i.e. home, car, bank account. An exception to a shareholder’s limited liability happens when the corporation has recklessly harmed people or has been used to perpetuate a fraud.

C Corporation Taxation

C Corporation shareholders do not report any of the business income and expense on their individual tax return. The corporation files tax returns and pays its income taxes (at generally lower tax rates than would individuals) while the individual shareholders report and pay personal income taxes only on monies paid them by the corporation.

It should be noted that shareholders are required to pay income taxes on income from dividends paid by a C Corporation even though income taxes have previously been paid by the corporation.

Why Form a C Corporation?

C Corporations best serve owners who want the limited liability, a more formal business structure, the ability to reduce overall income taxes and accumulate assets in the business, and ways to more easily raise capital.

Official documents, typically called a Certificate of Incorporation or Articles of Incorporation, must be filed with the appropriate state in order to form a C Corporation.

http://www.maxfilings.com/incorporation-knowledge-center/

Considering Incorporation in Delware? Think Delaware South and Delaware West

Delaware incorporation has long enjoyed a reputation as the choice for many businesses, but that is changing as other states make efforts to foster a business-friendly environment for incorporation, says a new article released by MaxFilings Online Incorporation Service.

The Delaware incorporation article looks at points that businesses should consider when deciding where to incorporate, helping you compare and contrast incorporation in Delaware, Nevada and Florida.

You may also be interested to learn when none of these states may be the best choice for incorporation. Check out the article here: Where to Incorporate: The 3-Man Fight between Delaware, Delaware West and Delaware South