| FAQs |
|
| | |
| How do I choose a business name? |
|
There are two types of names business owners need to be familiar with when starting a business. The first is a structural name which is the actual business name of your company. The second is a domain name which is your website name. Typically it is not important that they are the same. Typically structural names should be vague and professional while domain names should be product specific. A business owner can have several domain names under one structural name.
Below are some structural name tips: |
|
- The name should be vague but professional sounding.
- Simple is better.
- The name should not be specifically related to one product or service
- (This allows your business to grow while maintaining a business name that is relevant to whatever products you end up selling.)
- Do not use your actual name
- For privacy reasons.
- Using an actual name in your business title looks less credible.
- Using your initials is a good approach to finding a name and initials are professional sounding
- After taking your initials, you can add a word to it that gives your business a large company feel to it like:
- Global
- International
- Solutions
- Avoid using geography
- (If you include the name of where you live in your structural name this limits the potential for growth and takes away credibility.)
- Choose a name that is easy to say and easy for others to remember.
- Come up with several variations, in case the original name is already taken.
|
| Why do business owners form a corporation or LLC? |
|
- Limited Liability
- Asset protection
- Personal Privacy
- Add credibility to business
- Tax Savings
- Ability to build business credit
- Audit protection
|
| What is the term limited liability mean and why is it important? |
|
| Limited liability refers to the extent of personal liability of an owner of a corporation or LLC is limited to the owner's investment in the company. If the owners business is sued, their personal assets, such as their house, are protected from the lawsuit. |
|
| How does incorporating my business protect my personal assets? |
|
| Corporations and LLCs act as separate business entities, apart from their owners. Because of this the owner of an LLC or Corporation is offered limited liability in the instances of a lawsuit brought against the owner's company. |
|
| How does incorporating protect my personal credit score? |
|
| The SBA Report that 92% of small business owners are damaging their personal credit when growing their business. This can result from a business owner not opting for or not be able to establish corporate credit, or because they are trying to build corporate credit without the proper information or guidance. |
|
| What risks do I have if I decide to run by business as a sole proprietorship (DBA)? |
|
A sole proprietor's business has no legal separation from its owner. The owner is the business, and the business is the owner. Therefore, Sole Proprietors are personally liable for any lawsuits that may arise against their business. This could mean a sole proprietor could lose their house, their investments, their car, their dog, etc. if their business is found liable in a lawsuit.
Sole proprietors are notorious for failing in their business endeavors. Because of this a sole proprietor is not given professional consideration.
The IRS is so assured that a sole proprietor will be unsuccessful in running a business that they refer to them as "hobbyist". Further, the IRS offers no tax breaks to Sole Proprietors because they assume they will not be generating enough money to stimulate the economy. Lastly the IRS is more likely to audit a Sole Proprietor more than any other business structure, because they are suspicious of and Sole Proprietor that actually has some income to file with.
Because a Sole Proprietor has no distinction between themselves and their business, all their personal information becomes public record.
Lenders and Venders are hesitant to establish trade lines with Sole Proprietors. |
|
| How does incorporating my business protect my personal information? |
|
When you are a sole proprietor you are required to list your name, your address, your phone number, etc, as public record to obtain a business license. Sole Proprietors are also required to use their social security number for certain business transactions.
When you incorporate your business, your business becomes its own entity; very minimal personal information is required. The Corporation or LLC has its own address, phone number, and even a social security number of sorts (known as an EIN,) which can all be offered in substitution of the owner's personal information.
Some states protect the personal information of corporation and LLC owners more than others. Nevada is famous for requiring minimal personal information on the LLC or Corporation documents that become public record. |
|
| How does incorporating my business protect me against identity theft? |
|
A person's Social Security Number is the most sought after piece of information by identity thieves. Sole proprietors can be required to use their social security numbers several times a day when conducting business with other lenders and venders. The more you give your social security number out, the more likely you are to have it stolen. Internet based business owners are particularly vulnerable.
When you form a Corporation or LLC, your business becomes its own entity; as such, it is issued an EIN which is the corporate equivalent of a social security number. The Corporation's or LLC's EIN can then be used in place of the owner's social security number. |
|
| What is "piercing the Corporate veil? |
|
The corporate veil is what separates a company’s or LLC’s assets, with the personal assets of the owner. Maintaining the corporate veil safeguards the owner of a LLC or Corporation from being personally liable in lawsuits or claims filed against the company.
Certain circumstances can justify the piercing of the corporate veil, in which case the owner’s personal assets would no longer be protected, and could be lost to a lawsuit brought against the company.
Each state has different corporate laws, and varies in what circumstances justify the piercing of a corporate veil.
Nevada corporations and LLC are famous for having a corporate veil that is nearly impossible to pierce. |
|
| What are the differences between a C- corporation and a S-corporation? |
|
S Corporation has pass through taxation. This means all the income made by the company is passed through to each share holder, who are then taxed on their individual earnings. C corporations are taxed on two levels; this is known as double taxation. The C Corporation is first taxed on the corporation’s net income. Once the company's profits are distributed the shareholders are taxed similar to those of an S corporation. The S-Corporation does have some restrictions. An S-Corporation cannot be owned by a NON US citizen and cannot have over 100 shareholders.
However, C corporations have greater tax planning flexibility and can shield stockholders from direct tax liability. In addition, S corporations are subject to limitations, such as the number and type of stockholders they can have. |
|
| What is an Employer Identification Number (EIN)? |
|
An EIN stands for Federal Employee Identification Number. It is also known as a Tax Identification Number (TIN.) An EIN acts like a social security number for your LLC or Corporation. It is a 9 digit number issued by the IRS for tax identification purposes. Banks and lenders as well as other businesses require this number as a form of identification.
The IRS requires that all corporations, multi-member LLCs, and any business, including one member LLCs or sole proprietors, who hire employees, to receive an EIN.
Though the IRS does not require single member LLCs to acquire an EIN, most do anyways, so they can use it in place of their personal social security number. |
|
| What is a registered agent and a registered office? |
|
Corporate State Law requires every LLC or Corporation to have both a registered office that legal documents can be sent to, and a registered agent, which can be an actual person, or business entity, to be present at registered office during regular business hours to receive legal documents, such as service of process (legal notification that your business is being sued.)
Do I need to have a registered office?
No. Federal Mandate requires registered offices to be actual physical addresses.
Do I need to have a registered Agent?
Yes. Registered Agents are required by federal mandate for every state the LLC or Corporation is doing business in.
Can I be my own registered Agent?
Yes. However most LLC and Corporation owners opt to use a third party services as their registered agents for several reasons:
A registered agent is required to be at the registered office during normal business hours. Such regulations can dramatically impair the small business owner’s autonomy.
A registered agent's main purpose is to sign service of process documents
(which are notifications that your business is being sued.) "Being served" in front of your employees, friends, or associates can be very embarrassing and damaging to your credibility. |
|
| Can my home address be my business' registered address? |
|
In most states, yes it can. However most home based LLCs or
Corporations elect for a third party registered office to protect the personal information and privacy provided by the LLC and corporation structure.
Registered agent names and registered office’s addresses are required when filing the articles of organization or incorporation, which become public record.
If you serve as your own registered agent, and use your home address as the address of your registered office you are making your personal information public record, and ultimately compromising the precious identity protection of the LLC and Corporation. |
|
| Can one person form an LLC? |
|
| Yes. Unlike a S Corporation, there is no limit or minimal requirement of the number of members required for a LLC. An LLC does not even need to be owned by a person. A Corporation can form an LLC. |
|
| What is a Sales Tax ID Number? |
|
| A sales Tax ID Number is also known as a resale certificate. It is essentially a business license that allows you to operate in which ever state it registers with. A Sales Tax ID Number also allows you to purchase products at whole sale pricing that your business might turn around and sale. |
|
| What is a Resale Certificate? |
|
| A resale certificate is another name for a Sales Tax Id number, and is essentially the business license that allows a business to operate in which ever state it registers with. |
|
| What are the tax benefits of incorporating my business? |
|
The government knows that Corporations and LLC stimulate the economy. To encourage entrepreneurs the government has offered significant tax breaks to the LLC and Corporate business structures. There are hundreds of tax deductions offered to LLC and Corporation owners.
Typically the LLC and Corporation are significantly less likely to be audited then the sole proprietorship. S Corporations and LLCs that elect to be taxed as an S corporation can avoid double taxation. C Corporation can financially plan ahead and save thousands of dollars in taxes. |
|
| What is "pass through" taxation? |
|
| With Pass through taxation the IRS does not tax the business structure itself. Rather, the income of a business is passed through to the individual owners or share holders, who are then taxed on their individual shares of the profits or losses of the business. |
|
| What is double taxation? |
|
| C Corporations are subject to 2 levels of taxation known as Double Taxation. The net income of a C Corporation is the first to be taxed. After that the companies profits are distributed to the share holders who are then taxed on their individual shares of the companies profits. |
|
| What state should I incorporate in? |
|
| Nevada and Delaware are known as the traditional corporate havens in the nation. Up and coming Wyoming is becoming popular as well. |
|
| What is the difference between incorporating in Nevada, Delaware, and Wyoming? |
|
The major difference between Delaware and Nevada is that Delaware focuses its benefits on large fortune 500 companies, while Nevada directs its benefits to smaller businesses. Wyoming is trying to attract the out of state corporate market by copying the state laws of Nevada and Delaware, however most entrepreneurs are holding off on incorporating in Wyoming until it can get some case law and experience in corporate law under its belt.
Bar none, no state can compare to the impenetrability of Nevada’s Corporate Veil. |
|
| Can I incorporate my business in Nevada if I am not a local resident? |
|
| Yes! In fact Nevada goes to great lengths to attract out of state business entrepreneurs to incorporate in their state. It is important to remember that if you are building business credit to be incorporated in your home state initially due to business credit compliance issues. |
|
