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There are many people who consider S-Corporation election when forming their new corporation.  An S-Corporation offers both advantages and disadvantages that regular C-Corporations do not, and may be beneficial depending on what type of business you run and how you would like to run that business.  S-Corporations operate similarly to regular corporations, but are taxed in a manner that is similar to a Limited Liability Company.

For example, the main difference between an S-Corporation and a regular C-Corporation is that the profits and losses of the S-Corporation are passed on to the various shareholders in the corporation.  The shareholders are then taxed on their individual share of the corporation’s profits or losses and report this on their individual tax returns.

All S-Corporations start out their lives as regular C-Corporations.  To become an S-Corporation, the corporation must meet certain requirements and file Form 2553 with the IRS.  To qualify as an S-Corporation, the following requirements must be met:

·        Must have less than 100 shareholders

·        Shareholders must be U.S. citizens or resident aliens

·        Shareholders must be individuals, estates, certain exempt organizations, and certain types of trusts

·        Must have only one class of stock

If these requirements are met, then the shareholder can file Form 2553 to become an S-Corporation.  For new corporations, the deadline is 75 days after conducting business, acquiring assets, or issuing stock (whichever is earlier) to file Form 2553 and become an S-Corporation.  Existing corporations must file Form 2553 by March 15 of the year they wish to make the election.

Maintaining a corporation is not ultra complicated, it’s just that it’s hard to know what to do, and when. 

Did you know that after registering a business with the state that several filings may be required on an annual basis? Without those filings an entity may be dissolved. MyCorporation can help prevent this from happening and guard your corporate status with My IncGuard™.

My IncGuard™ sends monthly reminders about annual reports, quarterly tax returns, year-end notices, and much more! Sign up today and help ensure your business stays in compliance with state and federal requirements.

For your convenience and to avoid any interuption of service, we will automatically renew your My IncGuard™ Service annually.

By providing payment information, you agree and consent to the automatic renewal of your My IncGuard™ Service each year. You are also authorizing MyCorporation to bill your credit card for this service each year. If you choose to cancel your My IncGuard™ Service and discontinue automatic annual billing, MyCorporation must receive your written notice of cancellation at least 30 days before the next renewal term.

Once a business is formed on the state level, most jurisdictions require corporations or Limited Liability Companies to designate a registered agent to receive documentation on behalf of the company.   Very simply, a registered agent is an individual or entity upon whom documents relating to the corporation may be served.  
To remain in compliance with state law, a Registered Agent must be designated to receive correspondence on behalf of the company. A Registered Agent will typically receive business and legal documents from county, state, and U.S. agencies on behalf of the corporation and/or LLC. These documents include such things as notice of litigation (service of process), franchise tax forms and annual report forms.

The Registered Agent must have a physical (street) address in the state in which the company is formed.  This means no P.O. Boxes.  In addition, the Registered Agent must be available during regular business hours to receive service of process. The Registered Agent’s name and address are listed on the formation documents of the business and that information is kept on record as the official contact for the company.  In fact, Registered Agent information is considered a matter of public record.

The failure, to register and designate a registered agent may hinder the company’s ability to

• legally enter into contracts and gain access to the state court system. Moreover, it may;
• subject the company to monetary, civil, and possibly criminal sanctions.
• Also, failure to maintain a registered agent may cause a company to fall out of “good standing” with the state or;
• may cause a jurisdiction to revoke a business’s corporate or LLC legal status.

An officer or owner of the business can serve as a Registered Agent; however, many entities find it easier and more reliable to select a third-party Registered Agent Service skilled in providing such services. Even if you are located in the state in which you are incorporated, there are many benefits to using a Registered Agent Service. One such benefit is that the Registered Agent Service’s information is listed on the formation documents and becomes a matter of public concern. In essence, the Registered Agent Service can put a layer of privacy between your business and the public and may reduce the amount of solicitations your company receives.

If a document must be served on the company, it will be served to the independent third party, as opposed to serving you with legal and/or personal business documents in the presence of customers, clients, vendors, employees, and/or neighbors.

Another benefit of selecting a Registered Agent Service is that you do not have to be concerned with being continuously available to accept important business and tax documents or dealing with difficult and often annoying process servers.  This will be handled by the Registered Agent Service on your behalf.

It is far more safe and efficient to select a reliable third party that has experience as a Registered Agent. It is important that businesses select a highly reliable company that has been approved by the appropriate state agency to serve as a Registered Agent.  Using a Registered Agent Service provides business owners with timely and efficient service as well as peace-of-mind regarding important business documents.

When working with MyCorporation, you have the benefit of Intuit, Inc’s backing, and the knowledge and security that MyCorporation has been providing exceptional Registered Agent services to customers for years.
  

Designate MyCorporation as your Registered Agent today!

One of the most common questions for entities wishing to incorporate is – “Where should I incorporate?” In fact, an entity can choose from any of the 50 states or the District of Columbia. There has been a great deal of hype about incorporating in certain states that happen to be well-known for having favorable laws for corporations. When an entity elects to incorporate outside its “home” state, the most common states in which the entities incorporate include Delaware and Nevada. However, even taking account of favorable laws in certain states, an entity’s “home” state (i.e., the state in which the corporation conducts a majority of its business) may often be the best state to incorporate.

Due in large part to their liberal incorporation laws and favorable tax policies, the most “incorporation friendly” states are Delaware and Nevada. And here’s why…

Should I incorporate in Delaware?

Delaware’s advantages as a place of incorporation range from the Delaware General Corporation Law to the flexibility built into the corporate formation process.

Incorporating in Delaware is generally less expensive than most other states. The initial charge for incorporating in Delaware can be as low as $89.00; the annual franchise tax can be as low as $65.00 in many cases; and the cost of continuing operations is low as well. There is no Delaware corporate income tax for corporations that are formed in Delaware so long as they do not transact business in Delaware.

Another benefit of Delaware incorporation is Delaware’s extensive and often easily interpretable law. Delaware has a separate Court of Chancery (a business court) that does not use juries, but instead utilizes merit-based (not elected) judges. Because there are no juries, decisions from the Chancery Court are issued as written opinions, and as such, Delaware has a large body of written legal precedent to rely upon.

Delaware law also allows for a version of the Limited Liability Company called a Serial LLC. Traditionally, an LLC is relatively simple to form and maintain. It is similar to the formation of a sole proprietorship or a partnership, but also provides a layer of protection (the corporate shield) as a limitation of liability. Unlike regular LLCs, Delaware’s “Serial” LLC allows different lines of business to be treated separately from each other from a liability standpoint.

Incorporate a Business or Form a Limited Liability Company in the State of Delaware.

Come tax time next year, you’ll be glad you did!

What about Nevada?

Nevada began with corporate statutes based on Delaware, and went further to establish a corporate structure that allows investors and owners of Nevada corporations to remain completely private. The Supreme Court of Nevada has consistently taken a very strong stand in the protection of corporate privacy, even when a corporation fails to adhere to basic corporate formalities.

Since the implementation of these privacy statutes in 1991, the number of new incorporations in Nevada has exploded. Unlike most other states, Nevada does not require corporate stockowners to disclose their information. In fact, the information is not kept on file with the state.

Additionally, to ensure privacy, Nevada allows its corporations to use bearer stock certificates, which make it virtually impossible to prove the ownership of a Nevada corporation. Accordingly, owners or investors utilizing bearer shares can have complete control and ownership while remaining anonymous.

Nevada also does not tax the income of its corporations or its state’s citizens. A Nevada corporation is also not subject to any other hidden taxes such as franchise taxes, capital stock taxes, or inventory taxes. Sales tax applies only to products sold within the state.

Incorporate a Business or Form a Limited Liability Company in the State of Nevada.

Come tax time next year, you’ll be glad you did!

Incorporating in Your Home State May be BEST!

For most small businesses, however, it may still be best to incorporate in the state where your business is based. Many legal and business professionals advise that you incorporate in the state in which your corporation intends to conduct the majority of its business, and, if you intend to do business in only one state, you should incorporate in that state.

If you incorporate in a state that is traditionally considered to be “corporation friendly,” but then conduct business outside your state of incorporation, you will likely have to qualify to do business in the state in which you are conducting business. Qualifying to do business outside your state of incorporation is called “foreign qualifying” or “foreign qualification.” Qualifying as a foreign corporation involves: (1) filing the appropriate foreign qualification documentation with the relevant Secretary of State; and (2) paying additional filing and maintenance fees. For some entities it may be worth the additional time and money associated with foreign qualification, but for many corporations, it simply creates an additional, unnecessary headache.

When determining the appropriate state of incorporation, you should undertake the following considerations:

1. What are the tax implications/benefits of incorporating outside your home state vs. incorporating inside your home state?
2. What are the additional costs of incorporating outside your home state and where, if anywhere, must you foreign qualify?
3. Are the corporate laws in one state favorable to the type of business entity you are forming, and how do they affect the obligations of the principals and/or shareholders of the corporation?

Even though some factors favor incorporating in the “friendly” states of Delaware or Nevada, it may be more expensive and more complicated to incorporate out of state. For this reason, it is important to consult with your attorney or accountant about the pros and cons of incorporating out of state before making your final decision.

Incorporate a Business or Form a Limited Liability Company in your home state.

Come tax time next year, you’ll be glad you did!

You’ve already incorporated, so you are aware of the importance of corporate protection, including maximizing tax benefits and limiting your personal liability. There are other things that should also be considered now that you are a corporation. One of the most important things to consider is obtaining an Employer Identification Number (aka “EIN”).

What is an EIN?

An Employer Identification Number or “EIN” is also known as a federal tax identification number. The EIN is a number (like a corporate Social Security Number) assigned to your corporation by the Federal Government. It is a nine-digit number assigned to sole proprietors, corporations, partnerships, estates, trusts, and other entities for filing and reporting purposes. As the name implies this number is used for tax purposes. You need your Federal Tax ID Number to fill out payroll reports, pay federal taxes, and even open a corporate bank account. An EIN is used to identify a business entity. Consequently, most businesses need an EIN.

Why Do I Need an EIN?

Legally, you are required to identify your business with one of two numbers: either your Social Security number or an EIN (employer identification number). A Social Security number can be used on all your government forms and other official documents, if you are a sole proprietor, but most small business advisors recommend that you apply for an EIN and use that number instead.

When do I need to obtain a Federal Tax ID Number (EIN)?

You should obtain a Federal Tax ID:

1. If you have a corporation;
2. If have employees;
3. To open a business bank account;
4. If you want to build corporate business credit; or
5. You are establishing a pension, profit sharing, or retirement plan.

If you pay wages to one or more employees, you must obtain an EIN. In addition, you should obtain an EIN if your business is a corporation and you are an employee of the corporation.

You will need a new EIN if:

In addition to the discussion points above, even if you have an EIN, you will need a new EIN under the following circumstances:

• If you file bankruptcy under Chapter 7 (liquidation) or Chapter 11 (reorganization) of the Bankruptcy Code or filed Form 8832 to elect corporate status for your Limited Liability Company (LLC), you will need to obtain an EIN;
• If you sell or transfer your business, you will need a new EIN. It is important to note that you may not transfer your EIN if you sell or otherwise transfer your business. The new operator may not use your EIN. In addition, you cannot use the EIN of a former owner, even if it is your spouse.
• If you are a Sole Proprietor and take in partners and operate as a partnership, you will need a new EIN.

See, IRS Publication 1635

You may not need a new EIN if:

• You change the name of your business (but everything else remains the same).
• You change your location or add locations (stores, plants, enterprises or branches of the entity).
• You operate multiple businesses (including stores, plants, enterprises or branches of the entity).

It is important to note that you may not transfer your EIN if you sell or otherwise transfer your business. The new operator may not use your EIN and you cannot use the EIN of the former owner. Note also, a Sole Proprietor who conducts business as a Limited Liability Corporation (LLC) may not need a separate EIN for the LLC. See, IRS Publication 1635.

Legally, you are required to identify your business with one of two numbers: either your Social Security number or an EIN (employer identification number). Therefore, most businesses need an EIN. However, as with all important business and legal decisions, it is important to consult with your attorney or accountant about the pros and cons of incorporating, and the need for an Employer Identification Number before making your final decision.

Incorporate a Business or Form a Limited Liability Company in your home state. Come tax time next year, you’ll be glad you did!

Obtain your Employer Identification Number (”EIN”) today!

How Can MyCorporation.com Help You?

• Form a NEW Corporation
• Form a NEW LLC
• Obtain your EIN

1. Creating a Business Structure
   The most common types of business entities include Sole Proprietor, Partnership, Corporation, and Limited Liability Company (LLC). When deciding on the entity type for your business, some things to consider include: formation costs, management structure, liability risk, and tax implications. For more information, please visit our Learning Center.
2. Selecting a Registered Agent
   Did you know that most states require businesses to have a registered agent? A registered agent must be available to accept service of process documents, such as any legal proceeding, legal notices, or official government correspondence presented to the company. No one wants to be sued. But in the unfortunate event that someone sues the business, who wants to be served papers in front of customers and employees? To get the much needed privacy any business deserves, select the reliable Registered Agent service from MyCorporation.
3. Obtaining Licenses and Permits
   Licensing and permit regulations vary depending on the type of business, its location, and where it conducts business (locally, regionally, or nationwide). To find out what licenses and permits your business may need, get a Business License Package from MyCorporation.

The new year is the perfect time to get organized and clean up your business matters…Whether it’s forming a corporation or limited liability company (LLC), protecting your business assets, or maintaining/updating your corporate or LLC documents, now’s the time.  It’s a new year and time to start 2008 on the right foot – and MyCorporation.com can help with all of your business and document filing needs.             The following advantages of incorporation should be considered when forming a business: (1)        Incorporate!  The most obvious advantage of incorporation is the limited liability of the company’s shareholders. A company is an entity separate and distinct from its shareholders. The company owns and operates the business and also incurs its liabilities, therefore, the owners of a corporation or LLC can minimize, if not eliminate, the personal risk. Forming a Corporation can provide the protection and tax savings needed to give you peace of mind and make your business even more successful and profitable.  (2)        Benefits to Incorporating. The following are just some benefits associated with incorporating: (a)        Tax Advantages.  Incorporation often provides fore greater tax deductions for the business, your employees, and potentially for family members of business owners.  Even if you are the only shareholder and employee of your business, benefits such as health insurance, life insurance, travel and entertainment expenses may now be deductible (b)        Easier access to capital. Most sole proprietorship and partnership business owners know how difficult it is to raise additional capital for their businesses.  Investors tend to shy away from partnership investments because of the risk of subjecting their personal assets to the liabilities that may arise from the business in which they are investing.  On the other hand, a corporation can readily raise capital by issuing additional shares of stock.  Investors can purchase shares in return for their capital.  This allows a business to raise money without incurring debt or interest charges, thus lowering the cost of capital.   (c)        Easier transfer of Ownership.      Through the sale of stock, a corporation can quickly transfer ownership interest without substantially disrupting operations, complex legal documentation, or dissolving the corporation.  Transferring ownership and raising capital are usually easier through the use of stock. Corporations usually have a perpetual life as well, distinct from that of the shareholders. The following items should be considered to maintain full corporate compliance and the protections offered in connection with corporations and LLCs: (1)        Annual Report Filings for Corporations & LLCs. Most jurisdictions require corporations and limited liability companies (LLCs) to pay annual fees and taxes for the privilege of operating as a business entity. In addition to these annual fees, most states also require that corporations (and often LLCs) submit information about corporate status and activities or corporate changes that will become public record. In most states, this information report is referred to as an “Initial/Annual Report” or “Statement of Information.” Corporations and LLC are required to file this Annual Report/Statement of Information even though they may not be actively engaged in business at the time this filing is due. The applicable filing period varies by state and, in most cases; the fees associated with these “informational filings” are nominal. However, if you fail to provide the required information in a timely manner, your corporation and/or LLC could be subject to suspension and/or revocation in addition to penalties or late fees imposed by the state. (2)        Articles of Amendment or Dissolution.  Many states require that a corporation file a Certificate/Articles of Amendment when making an addition to, deleting from, or otherwise altering the existing provisions of the Articles of Incorporation for a General, for-profit Corporation.  If such additions, deletions or alterations have taken place, it is important to consider filing the appropriate Amendment with your Secretary of State.  Also, in the event that a Corporation or Limited Liability Company wishes to terminate its existence, the entity must file Certificate of Dissolution or Articles of Dissolution.  (3)        Entity Conversions.  Many states now allow for the conversion of a stock corporation into a Limited Liability Company, Limited Partnership, or General Partnership.  In addition, a domestic LLC, LP or GP and a foreign entity may, in some jurisdictions, be converted into a Domestic Corporation.  As such, it is important to consider your entity’s desired corporate status, and consult with your accountant regarding the impact of potentially converting your entity, which would require filing the appropriate conversion with the corresponding Secretary of State. (4)        Bylaws, Minutes, Notices. Internally, it is important to maintain corporate documents and observe corporate formalities so as to maintain the protections afforded by your state’s corporate laws, and to minimize the potential for personal liability.  Accordingly, you should make sure that your corporate bylaws are in place, and up to date.  In addition, your state may require that you give appropriate Notice of Regular Annual Meetings of the Board of Directors and Shareholders (or the appropriate Waiver of Notice).  Such documentation is important to maintain on an annual basis, and the beginning of a new year is a great time to make sure your corporation or LLC is “in order.” Each of these items should be considered at least on an annual basis, but the beginning of the year is the perfect time to make sure your corporation or limited liability company is in good standing and that you are handling all of your corporate matters in a timely fashion.  If you need assistance with any of these document filings, MyCorporation.com offers document preparation and filing services to meet your business needs.

This year’s deadline for electing S-Corporation status is approaching fast -  March 15, 2008.Now’s the time to consider whether your corporation should elect “S-Corporation” status. Let’s First Start off with Explaining What an S-Corporation is….An S-Corporation begins its existence as a general, for-profit corporation upon the filing of Articles of Incorporation at the appropriate state office. Once formed, a general for-profit corporation that has not requested “S-Corporation Status” with the IRS will be required to pay income tax on taxable income generated by the corporation. In addition, any dividends distributed to shareholders may be subject to taxation as dividend income to that shareholder as well (hence the problem of “double taxation” that can occur in a ‘Non-S-Corporation’). However, after the corporation has been formed, it may elect “S-Corporation Status” by timely submitting IRS form 2553 to the Internal Revenue Service. Certain states require that your corporation file state-specific forms to qualify for S-Corporation status in that state for state taxation purposes. In addition, S-Corporation status is not available for purposes of state tax liability in certain states. Please contact your state’s taxing authority for further information.Once this filing is complete, the S-Corporation is taxed in a manner similar to a sole proprietorship or partnership, rather than as a separate entity. Thus, the income is “passed-through” to the shareholders for purposes of computing tax liability. Therefore, each shareholder’s individual tax return will report the income or loss generated by the S-Corporation.

Who typically elects S-Corporation status?Most entrepreneurs prefer the S-Corporation structure for the following reasons: ·          The S-Corporation combines many of the advantages of the sole proprietorship, the partnership, the corporation, and the LLC into one entity.·          Unlike sole proprietors and partners in a partnership, shareholders of an S-Corporation are afforded the same level of limited liability and personal asset protection as are the shareholders of a general, for-profit corporation.·          In an S-Corporation, shareholders avoid the “double-taxation” common to shareholders of non-S-Corporations because all income or loss in an S-Corporation is reported only one time on the personal income tax returns of the S-Corporation’s shareholders. Where a corporation claims income from a passive investment (e.g. from real estate owned) for three consecutive years that exceeds 25% of the corporation’s gross receipts, S-Corporation status may be terminated by the IRS. Most real estate investors, for example, prefer placing real property in an LLC (Limited Liability Company) rather than an S-Corporation for this very reason.Are There any Requirements to Qualify as an S-Corporation that I should know about?  To qualify for S-Corporation status, the corporation must ·          Be filed as a U.S. corporation. ·          Maintain only one class of stock. ·          Maintain a maximum of 100 shareholders. ·          Be comprised SOLELY of shareholders who are individuals, estates or certain qualified trusts, who consent in writing to the S-Corporation election. ·          NOT have a shareholder who is a non-resident alien. Please note that failure to observe ANY of the above requirements could revoke S-Corporation status at any time.

That Sounds Great but what are the differences between an S Corporation and an LLC?While on the surface the S-Corporation and the Limited Liability Company (”LLC”) may seem similar, but please note the following very significant distinctions. The following are some of the differences between the two types of corporate entities: ·          S-Corporations are limited to 100 shareholders, while LLCs have no limit to the number of members.·          S-Corporation shareholders must ALL be individuals who are U.S. citizens or permanent resident aliens. LLC members (owners) may be individuals, corporations, partnerships, many trusts, and even non-resident aliens. Are there any Tax Advantages to forming an S-Corporation?In an S-Corporation, only earnings actually paid out to an owner as compensation for services are subject to payroll taxes. Any money left in the business for reinvestment or distributed to the shareholder as a dividend is not subject to payroll taxes…and not subject to self-employment tax. Let’s review an example: “John” operates his business as an unincorporated, sole proprietorship. John has a net income (gross income less expenses) of $60,000 during the year. During the course of the year, John withdraws $40,000 as his personal salary leaving the remaining $20,000 in the business. If John operates as a sole proprietorship, he’ll owe self-employment tax on the full $60,000 (($60,000 x 15.3% = $9,180). However, if John forms a corporation, elects S-corporation status, and withdraws the same $40,000 as compensation for his services, he would only owe self-employment taxes on the $40,000 in salary ($40,000 x 15.3% = $6,120). Thus, forming an S-Corporation would save John $3,060 in payroll/self-employment taxes.  The “S-Corporation” Deadline:To qualify as an “S-Corporation” for the 2007 tax year, a “calendar year” corporation must timely file IRS Form 2553 with the IRS.If a corporation was in existence in 2006 or earlier, then this filing must be submitted to the IRS on or before:

March 15, 2008

If the corporation is a “New Corporation” (formed on or after 1/1/2008), then the S-Corporation election may be submitted at anytime during its tax year so long as the filing is made no later than 75 days after the corporation has begun any of the following activities (whichever is earliest): ·                                                         Conducted business as a corporation ·                                                         Acquired assets, or ·                                                         Issued stock to shareholders  TAKE ACTION NOW!
If you decide that an S-Corporation is the right way to go for your company, let MyCorporation prepare your S-Corporation application (Form 2553) for your filing with the Internal Revenue Service to elect S-Corporation status.  If MyCorporation has already formed your corporation and you asked us to prepare the S-Corporation election form, then check your final package.   MyCorporation only PREPARES IRS Form 2553.   All shareholders must sign this form and YOU must submit this form to the IRS in a timely fashion.   For existing corporations, the form must be submitted to the IRS by March 15^th.    In the case of a new corporation, you must submit this form within 75 days of when your corporation first acquires assets, begins conducting business or issues shares to its shareholders.   How Else Can MyCorporation Help You? ·          Prepare IRS Form 2553 (S-Corporation Election) for an EXISTING Corporation. ·          Form a NEW Corporation (General for Profit and S-Corporation options will be available for your selection) ·          Form an LLC ·          Learn More about Corporations and LLCs ·          Download Tax Publications and Information (Instructions, Minutes, Tax Returns, etc…) ·          S Corp Instructions ·          S Corp Tax Return 1120S (Tax Form) ·          S Corp Tax Return 1120S (Instructions) ·          Schedule K-1, Shareholder’s share of Income, credits, deductions (Tax Form) ·          Schedule K-1, Shareholder’s share of Income, credits, deductions (Instructions)
Important Disclaimer:  As with any important legal matter, we strongly urge you to contact a licensed professional before making any decisions that could impact your tax liability. Please see your accountant or financial advisor for advice as to whether your corporation will qualify for S-Corporation status.