What is a DBA?
A DBA is the simplest form of business entity. You, either alone or with partners, just file a certificate with the local county or city clerk stating you are Doing Business As (DBA) a certain name. This filing becomes a public record searchable by anyone who wants to find out more about your business, including the names and addresses of the principals. However, there is no limited liability with a DBA. If the business owes money to creditors, or if someone is injured though the activities or negligence of the business, they can come after you personally. All your assets are at risk.
What is a corporation?
A corporation is a business entity authorized by a state. It is formed by filing a certificate with the state. The entity formed then offers limited liability to the shareholders; the ability to raise capital by selling shares in the corporation; and perpetual existence – it does not cease to exist when one or more of the principals die.
How does a corporation operate?
A corporation is structured as follows:
1. Shareholders own the stock of the corporation.
2. Shareholders elect Directors.
3. Directors appoint Officers (President, Secretary, Treasurer, etc.).
4. Officers are responsible for the day-to-day operations.
The Corporate Bylaws set forth the rules for operating your corporation. This document can be modified as the business grows and changes.
Our service includes a fully personalized set of Corporate Bylaws for your state as well as an editable copy in Microsoft Word format. With the appropriate approval of the Directors and the Shareholders, you can modify it as the company grows and changes.
A corporation must hold a Directors Meeting and a Shareholders Meeting at least once a year, It must keep written minutes of major company decisions and maintain general corporate records in compliance with the Corporate Bylaws as well as state and federal law.
What are S Corporations?
S Corporations are corporations that have elected to be taxed as partnerships by the IRS. They file a form with the IRS that allows the shareholders to be taxed directly for the corporation's profits. The corporation does not have to file it's own tax return. Significantly, it avoids double taxation whereby profits could be taxed first to the corporation and dividends paid by the corporation to the shareholders could be taxed a second time.
What is a Limited Liability Company (LLC)?
A Limited Liability Company, or LLC, is another form of business entity authorized by the state. It has features of both a corporation and a partnership. Like a corporation it offers limited liability and, if desired, unlimited life. It also offers attributes of partnerships, simplifying decision-making, record-keeping and tax filing.
How is a limited liability company (LLC) managed?
- An
LLC is managed by its members (owners) or by selected managers.
- If the
LLC is to be managed by its members, it operates much like a partnership. Each member has a say in the decision making process of the company.
- If the members choose, they may elect a manager or managers to act in a capacity similar to a corporation's board of directors and officers. These managers are then in charge of the affairs of the
LLC.
- Management by the members is the default rule of most states. If management by managers is not selected in the articles of organization, the members will run the
LLC.
What is a publication requirement?
Arizona, Nebraska and New York require notice to be published in a newspaper that a limited liability company (LLC) has been formed.
In New York, limited liability entities are required to publish notice of their formation or registration in two New York newspapers and to file proof of publication with the Department of State within 120 days
What is a Registered Agent?
Most states require businesses to maintain a registered agent to accept legal and official documents on behalf of your business. This could include, but is not limited to, documents such as franchise tax notices, annual reports , court summonses and other official legal notices.
What happens if my company fails to register or designate and maintain a Registered Agent?
Failure to maintain a registered agent may cause a company to fall out of "good standing" within the state. Your company may be dissolved and no longer be authorized to do business in the state. To reinstate your good standing, additional paperwork and filing fees will be required.
What should I name my business entity?
Choose the name carefully. The name you select must not be "deceptively similar" to any existing corporation or must be "distinguishable on the record" of your state. A common-sounding name may already have been taken by another business entity. We request you give us three names to improve the likelihood that one will be available. The name you choose must end with the required entity indicator. For corporations this is frequently,
Corporation, Corp., Incorporated or Inc. For a limited liability company it is commonly,
Limited Liability Company or LLC. Some states allow other entity indicators as shown on the state questionnaires.
Should I choose a limited liability company (LLC) or an S corporation?
S corporation and
LLC’s both have pass-through taxation – the shareholders or members of the entity report the entities profits or losses on their own tax returns. However, the
S Corporation lacks the flexibility of an
LLC in allocating income to the owners. An
LLC can offer several classes of membership interest while an
S Corporation can only have one class of stock.
Any number of individuals or entities may own interests in an
LLC. However, ownership interest in an
S Corporation is limited to 100 shareholders. Also,
S Corporations cannot be owned by other corporations, many trusts,
LLCs, partnerships or nonresident aliens. Finally,
LLCs are allowed to have subsidiaries without restriction. For advice regarding which entity is best for your particular situation, contact an attorney or an accountant.
Tip: What do most of our clients choose?
While most of our clients previously chose corporations as their entity of choice, we now find that most are now forming limited liability companies.
Why You Should Obtain a Federal Tax ID (EIN) Number
A Federal Tax ID Number, also known as an Employer Identification Number (EIN), is basically a Social Security Number for a business. The Internal Revenue Service uses this number to identify the business. It must be included on all tax filings of the business. Also, banks generally require an EIN to open a business bank account.
If you currently operate your business as a sole proprietorship or general partnership and are now looking to incorporate, or form a limited liability company, you must obtain a new EIN for your business.
We can obtain your EIN from the IRS on behalf of your business. The typical turn-around time for this service is 2-3 days after we receive approval from the state that your corporation or LLC has been formed. In order to obtain the Federal Tax ID Number (EIN) for your business, you must provide your personal Social Security Number and a physical U.S. address (PO Boxes are not acceptable.)
Glossary of Terms
Annual Report
A document filed with most states yearly that contains information about the business and its' owners/managers.
Articles (Certificate) of Amendment
The document by which one or more changes can be made to a corporation's articles of incorporation (or an LLC's articles of organization).
Articles (Certificate) of Incorporation
Formal document filed with the state to form a corporation
Articles (Certificate) of Organization
Formal documents filed with the state to form a limited liability company.
Business License
A governmental authorization allowing a business to conduct operations within specified cities, counties, and states.
Bylaws
Self-imposed rules that constitute an agreement or contract between a corporation and its shareholders on how to conduct the corporate business.
Certificate of Good Standing
Also known as a "Certificate of Existence" or "Certificate of Status" this is a certificate issued by a state to evidence that your corporation or LLC is in existence, and is authorized to transact business within that state.
Certified Copies
An official, state-issued certificate verifying that the document referenced is a true and correct copy of the original document filed with the state.
Common Stock
A corporation's primary class of stock. Common stock holders typically have the right to vote on matters that must be approved by the shareholders.
Copyright
Legal protection given to authors of literary, musical, and artistic works and similar intellectual property. A copyright conveys the exclusive right to print, reprint, and copy the work; to sell, assign, and distribute copies; and to perform the work.
Corporate Resolutions
Records of the major decisions taken by a corporation's Shareholders or Directors at a meeting.
Corporate Seal
An official imprint (usually containing a raised mark with company name and formation date) used to authenticate documents "signed" by the corporation or limited liability company.
Corporation
An independent legal and tax entity, authorized by the state, and separate from the people who own, control and manage it.
DBA
A business "doing business as" a certain name which it publicly registers in county or city records. DBA's are also known as Fictitious Names, Fictitious Business Names, Assumed Names, and Trade Names. They can be sole proprietorships or partnerships.
Dissolution
The termination of existence of a corporation or LLC, accomplished by filing Articles of Dissolution (or other forms of cancellation documents) with the state.
EIN
An Employer Identification Number issued by the IRS to identify a business entity. It is similar to a social security number except that an EIN is used to identify a business entity instead of a person.
Entity
A broad term for a vehicle for transacting business, such as a partnership, corporation, limited liability company, etc. It is formed by a filing with the state and is permitted by law to own property and engage in business.
Foreign Qualification
A process by which an existing corporation or LLC registers to do business in a new state. For example, a corporation originally formed in New York that wants to open an operation in California should qualify as a foreign corporation in California.
Incorporate
To obtain an official charter or articles of incorporation from the state for a corporation.
Initial Report
This document is required in some states and contains general information about the business and its owners/managers. Where required, this report is due shortly after a corporation or LLC has been formed.
Limited Liability
A cap on the maximum amount an owner of a business can lose or be charged for claims against the company or in its bankruptcy. A stockholder of a corporation or a member of an LLC can commonly lose only his or her investment.
Limited Liability Company (LLC)
An entity formed by members and filed with the state. It provides limited liability as well as the tax and organizational benefits of a partnership. Profits/losses can be split among members as they choose.
Member
One of the owners of a limited liability company.
Membership Certificates
Membership certificates are issued to members of a limited liability company (like shares of stock in a corporation) to certify ownership.
Name Availability Check
A process of contacting the Secretary of State or other government office to check the availability of a business name. This ensures that the name is not already being used by an existing entity.
Nonprofit Corporation
Organization in which no stockholder or trustee shares in profits or losses; usually exists to accomplish some charitable, humanitarian, or educational purpose.
Officer
An executive of a corporation such as the President, Treasurer or Secretary. The officers are elected by the board of directors.
Operating Agreement
An agreement among LLC members describing the manner in which they will run their business.
Partnership
A business operated by two or more people. Partners share the profits/losses; they have control of, and personal liability for, business operations. Taxes are paid by the partners on their personal tax returns, in proportion to their share of the profits.
Professional Corporation
A corporation formed for the purpose of engaging in one of the learned professions, such as law, medicine, dentistry or architecture. Most states allow professional persons to incorporate provided that all shareholders are members of the same profession.
Registered Agent
A registered agent is an individual or entity designated by a Corporation or Limited Liability Company to accept official documents on behalf of the entity within a particular state.
Reinstatement
The restoration of a corporation or limited liability to "good standing". For example, an entity that has been dissolved by the state may be required to pay all unpaid taxes, update required filings, and file required documents before being returned to "active" status.
S-Corporation
A corporation that has elected S-Corporation tax status with the IRS. In an S Corporation, all profits or losses "pass through" to the owners, who report them on their personal tax returns. The S-Corporation itself does not pay any income tax.
Shareholder
A person or entity who holds shares in a corporation, thereby owning all or part of it.
Sole Proprietorship
A business run by an individual. The owner receives all of the profits and suffers all the losses of the business. The owner has unlimited control of, and personal liability for, the business. Business taxes are paid by the owner through his or her personal income tax return.
Stock Certificate
A document issued by a corporation showing the shareholder's ownership in it. The certificate shows the number of shares, par value, class of stock (e.g., common stock), and voting rights.
Tax ID Number
IRS identification number. Banks require it before they will open an account. For corporations, nonprofit entities, associations, partnerships, and LLC's, it is the employer identification number (EIN).
Trademark
A government protection of words, marks, or symbols that identify goods or services offered for sale. A trademark is registered at a state or federal agency to protect the identity and brand of a product.
Withdrawal
A formal certification to cease business activities in a state and terminate an entity's qualification to do business there.
