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 .

Deciding on the entity type for your newly formed business is a time-consuming task. Researching the pros and cons of each business entity can involve hours of Internet searches and consulting with attorneys and accountants. To find a simple comparison of common business entities available, check out this simple chart found at the online incorporation Knowledge Center at MaxFilings.

The entity comparison chart provides side-by-side comparisons of sole proprietorships, limited partnerships, C corporations, S Corporations, and Limited Liability Companies. Each of these entities is compared and contrasted according to different situations, such as transfer of ownership, management decisions, and the raising of capital. In addition, the Knowledge Center at MaxFilings provides more detailed information on each type of business entity to aid in your decision.

The business entity comparison chart is only an informational resource. You should always consult with a professional before making any final decisions. Once an entity type has been decided, incorporate your business online at your convenience at MaxFilings online incorporation service.

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.

Corporation

A corporation is a separate legal entity that exists independently from its owners. A corporation is created and comes into existence when articles of incorporation (charter or certificate of incorporation in certain states) are filed with the proscribed fees, and accepted by the proper state authority

S Corporation

An S Corporation is merely a corporation which has elected a special tax status with the federal government. It was created for smaller business owners. The special tax treatment permits the income of the corporation to be treated like the income of a partnership or sole proprietorship in that the income is “passed through” to the shareholders.

In order to be considered an S Corporation, the stockholders of a properly filed corporation must elect such status within 75 days of formation for the current tax year, or at any time during the preceding tax year. This election is made by filing Form 2553 with the IRS. To qualify for S Corporation status:

• Must be a domestic corporation.
  Only one class of stock.
  Not more than 35 stockholders.
  Stockholders must be individuals, estates or certain trusts.
  Except for the above characteristics, an S Corporation follows the same guidelines as a regular “C” Corporation.

Limited Liability Company

A Limited Liability Company (”LLC”) is a separate legal entity that offers an alternative to partnerships and corporations by combining the corporate advantages of limited liability with the partnership advantage of pass-through taxation. An LLC is created and comes into existence when articles of organization are filed with the proscribed fees, and accepted by the proper state authority

STRUCTURE OF EACH

Corporation

A corporation is owned by stockholders. While stockholders do not directly manage the corporation, they influence corporate decisions through indirect actions such as electing and removing directors, approving or disapproving amendments to the articles of incorporation and voting on important corporate decisions.

The members of the Board of Directors are responsible for managing the affairs of the corporation. Usually, directors make only major business decisions, however they supervise and appoint officers who make the
day-to-day business decisions of the corporation.

Officers are responsible for the everyday management of the corporation.

Typically, officers are appointed directly by the Board of Directors.

A stockholder may serve on the Board of Directors and also be an officer of the corporation. In fact, in most states one person is enough to form a corporation, and that person can be the sole officer, director and stockholder

S Corporation ( See DESCRIPTION of S corporation and Corporation above)

An S Corporation follows the same structure as a regular corporation. However, an S Corporation is usually owned and run by a small number of individuals or family members (one or more). Thus, while the above structure applies, the same person or related persons or a small number of persons MAY control all positions.

Limited Liability Company

An LLC is owned by its members. The members of an LLC are like partners in a partnership or shareholders of a corporation. A member will more closely resemble a shareholder if the LLC utilizes a manager or managers, because under that situation the members will not participate in the management of the LLC. However, if the LLC does not utilize managers, then the members will more closely resemble partners because they will have decision making powers in the LLC.

The member’s ownership in the LLC is represented by their respective “membership interest”, in the same manner as a partner has an “interest” in a partnership or a shareholder has stock in corporation.

Number of Members: Most states require LLC’s to have at least two members. The states which allow one member LLC’s are: DE, ID, MO, MN, NY, TX and VT.

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