MMNASSOCIATES

Our Incorporation Services Includes:

Articles filed with the appropriate corporations division
Paperwork and instructions to get your taxpayer ID number (at no additional charge)
Standard Bylaws or Organizational Agreement
Organizational Minutes
Paperwork and instructions for Tax Elections (S Corporation or changes in Tax treatment)
Minutes appointing Officers and Directors (or Managers), Stock or Member Unit issuance, and approving tax elections
Shareholder or Membership List
Certificates

A corporate seal, printed and pre-numbered corporate certificates or a corporate kit that includes everything is also available.

Each corporation and LLC requires “Articles”, which are filed with the appropriate state corporation officers. You will also need a Federal taxpayer identification number for the IRS, which we provide the paperwork FREE OF CHARGE. We will even obtain the number for you for a small fee. Additional requirements may include bylaws and minutes, shareholder or member information, and elective tax options.

There’s a reason the corporation has been called the most successful abstraction in the history of law. Incorporating your business is a perfectly legal method to shield your assets from claims of creditors, lawsuits, and even some taxes.

Many people think that just because they are a single person or family, rather than a large business, that incorporating is not for them. Wrong! Incorporating can offer you and your business many advantages!

A corporation is a legal entity created separately from those who own and operate it. As a separate entity, the corporation's debts and taxes are separate from its owners (shareholders), thereby, offering the greatest personal liability protection of all business structures. Corporations can also be used to own real estate, automobiles, yachts, or aircraft while providing health and life insurance, retirement benefits, and expense accounts.

The following are the primary reasons individuals incorporate their businesses.

· Asset & Liability Protection
· Tax Savings
· Raising Capital
· Reducing Audit Risk
· Living the Corporate Lifestyle
· Building Business Credit
· Estate Planning
· Corporate Image

There are also many secondary reasons that just may make all the difference for you. Some of those reasons are:

· Control and management of a corporation is very structured and clearly understood.
· Losses by S corporations can be deducted personally.
· Real estate can be controlled within a corporation for the ultimate in asset protection.
· Corporations never die - they have a potentially perpetual existence.
· Many expenses can be paid by a corporation, including your cars, education, legal and accounting fees, insurance, moving expenses, seminars, books, meals, entertainment, travel, computers, office equipment, and much more.
· Ownership can be easily transferred between generations.
· Corporate pension plans can allow you to invest a significant amount of money into tax deferred plans
· The list goes on and on!

What is a limited liability company (LLC) and how does it offer limited liability?

A limited liability company is a separate legal entity (business structure) from the owners of the LLC. An owner of an LLC is called a “member”.

An LLC is like a hybrid between a corporation and a partnership. In an LLC:The members are shielded from personal liability for the LLC’s obligations (just as shareholders, directors and officers of a corporation are shielded by the corporation); AND IF the LLC elects to be treated as a partnership for tax purposes, the LLC will not be taxed on its profits; instead, the profits and losses of the LLC will be passed through to the owners (members) (as in a partnership). (For more about taxes, scroll down to What about taxes? below.)

Naming the LLC

You may chose any name you wish for your LLC, provided that the name is distinguishable from the name of any other organization registered with the Secretary of State's office.

One of the following MUST be at the end of the LLC’s name: “Limited Liability Company", "Limited Company" or the abbreviation "L.L.C." or "L.C.". The LLC’s name must not contain any of the following: the words "Corporation", "Incorporated", "Limited Partnership" or the abbreviations "Corp.", "Inc." or "L.

The advantages of forming an LLC

The LLC members are protected from personal liability. An LLC that elects to be treated as a partnership for tax purposes is not taxed as a separate entity; instead, profits and losses are passed through to the members and appear on the members’ tax returns. There may be significantly less paperwork required in an LLC than in a corporation.

No matter what state you form your LLC in, the state requires the LLC to have a registered (or resident) agent. A registered agent is responsible for receiving any legal documents on behalf of the LLC.

Typically, you can act as the LLC’s registered agent as long as your address is within the state in which you are forming the LLC.

Many states now allow an LLC to have a perpetual existence, as a corporation does. (LLCs formerly were required to specify in their Articles of Organization the date on which the LLC's existence would terminate.) However, unless the Articles of Organization or a written Operating Agreement provide otherwise, an LLC is dissolved upon the death, withdrawal, resignation, expulsion, or bankruptcy of a member (unless within 90 days a majority in both the profits and capital interests vote to continue the LLC).

Managing an LLC

Number of members: Unlike a corporation, which can have only one shareholder, some states require that an LLC have two or more members (owners). However, many states allow single-member LLCs. Member’s interest: Typically, a member’s interest in profits directly corresponds to his/her voting interest. Usually, a member’s voting interest is determined by dividing the amount of that member’s contribution to the LLC by the total amount contributed to the LLC by all its members. Transferability of a member’s interest: No one can become a member of an LLC (either by transfer of an existing membership or the issuance of a new one) without the consent of members having a majority in interest (excluding the person acquiring the membership interest), unless the Articles of Organization provide otherwise. Management: The LLC may be managed directly by the members, OR, the members may designate one or more managers. The Articles of Organization (filed on the state level) must specify whether the LLC will be managed by the members or by one or more managers. If the LLC is managed by its members, then each member is a manager of the company. (The members, or the managers, may also designate officers, but typically there is no need to have

Why incorporate?Protection from personal liability:

When you form a corporation, it is a separate legal entity, a "person" separate from you personally. Thus, your corporation's property and assets are separate from your personal property/assets. Recognizing the need to protect personal assets from business debts and liabilities is what prompts many people to incorporate.Tax advantages: Many tax advantages are available to corporations that are not available to individuals, sole proprietorships and independent contractors. Please check with your tax professional to see if a corporation may benefit you. Professional image: Like it or not, in business, operating as a corporation provides a certain prestige that does not necessarily attach to being a sole proprietor or independent contractor. Of course, you are providing the same quality product or service you provided before, but the world is likely to see you as more professional because you are doing business in a format that is recognized as professional in the business world.

What is a corporation?

A corporation is a legal business entity separate and distinct from the owners (shareholders) of the business. A corporation may own property, enter into contracts, and conduct business under its own name.

Operating as a corporation provides a certain prestige that does not necessarily go with being a sole proprietor or independent contractor. Of course, you are providing the same quality product or service you provided before, but the world is likely to see you as more professional because you are doing business in a format that is recognized as professional in the business world.

What are the types of corporations?

A C corporation:Is a general for-profit corporation. May have more than 75 shareholders. May issue more than one class of stock, and different priorities of the same class of stock. Is taxed on its corporate income, on both federal and state levels.

An S corporation:Starts out as a general for-profit corporation. Becomes an S corporation by filing an S corporation election (Form 2553) with the IRS. Can choose to be treated as a partnership for tax purposes. If it chooses to be treated as a partnership, is not subject to corporate income tax; instead, the profits and losses flow through to the shareholders. May have no more than 75 shareholders (husband and wife count as one). May have only one class of stock with the same priorities. Is often the business structure of choice for small businesses, including one-person corporations and Mom and Pop family businesses.

A nonprofit corporation:Is fundamentally different from C corporations and S corporations because it does not have a profit motive Is formed under a different state law than for-profit corporationsCannot have shareholders or issue stock.

How is a corporation formed?

To form a corporation, the incorporator must sign the Articles of Incorporation, file the Articles with the appropriate state agency (usually, the Corporations Division of the Office of the Secretary of State) and pay the state filing fee(s). Fees vary by state.

The incorporator does not need to be an officer, director or shareholder of the corporation.

What are the advantages of a corporation?

Typically, shareholders, directors, and officers are not responsible for corporate liabilities. As a legal entity separate from its owner(s), if the corporation suffers losses, the corporation itself must bear those losses to the extent of its own resources. Such losses would not affect the personal assets of the individual shareholders. Thus, the corporation protects the owner of a business against personal liability. (However, if a shareholder, director or officer of the corporation gives a personal guarantee of a corporate obligation, that person would be responsible for such obligation.)

Other advantages include: A corporation can continue to exist indefinitely as a separate legal entity after the death or incapacity of any of its shareholders, directors or officers. Sale of stock for the purposes of raising capital is often more attractive to investors than other forms of equity. Stock may be transferred so that owners can distribute their interest in the corporation without the corporation dissolving. Corporations have many beneficial tax options available, including setting up pension, profit sharing, and stock option plans. Examples: Shareholder-employees may often deduct health insurance premiums paid by the corporation from corporate income;

and Corporate-defined benefit plans often afford better retirement options and benefits than those offered by non-corporate plans.

Naming the corporation

You may chose any name for your corporation that you wish, provided that the name is not the same as, or confusingly similar to, the name of an existing corporation or limited liability company in that state.

One of the following MUST be at the end of the corporate name: "Incorporation", "Corporation", "Company", or "Limited", OR one of the following abbreviations - "Inc.", "Corp.", "Co.", or "Ltd."

What is a registered agent?

No matter what state you incorporate in, the state requires the corporation to have a registered (or resident) agent. A registered agent is responsible for receiving any legal documents on behalf of the corporation.

Typically, you can act as your own registered agent as long as your address is within the state that you are incorporating in.

How is a corporation owned and managed?

The structure of a corporation has three tiers: shareholders at the top, Board of Directors under the shareholders, and Officers under the Board of Directors.

The shareholders (or stockholders)—at the top of the structure—own the corporation. Their ownership is evidenced by share certificates. They elect the Board of Directors.

The Directors manage the corporation and are responsible to the shareholders. (Exceptions: A few important actions of the Board of Directors do require shareholder approval—amendment of the Articles of Incorporation; sale of substantially all of the corporate assets; merger or dissolution of the corporation). The Directors make policy and major decisions about the corporation, but do not individually represent the corporation in dealing with third persons .

The Directors, in turn, elect the Officers of the corporation. The Directors delegate to the Officers authority to deal with third persons. Example: authorized Officers, on behalf of the corporation, sign any contracts the corporation enters into. Officers are responsible for conducting the day-to-day operations of the corporation.

Officers typically include President, Secretary and Treasurer. There may also be one or more Vice Presidents.

How many persons are required?

In most states, one or more persons may form and operate a corporation. In a one-person corporation, that same person may be the incorporator, the resident agent, the Sole Director, the Sole Shareholder, and the President, Secretary, and Treasurer. Many one-person corporations elect to be treated as S corporations.

What about paperwork and corporate formalities?

To avoid losing corporate status, and thus losing the benefits of limited liability and special tax treatment, those who run the corporation must observe corporate formalities: Shares must be issued to shareholders, Officers must be appointed, and there must be annual meetings, and minutes of corporate meetings (or written consents of the shareholders and Directors in lieu of meetings). Preferably, the corporation should keep sufficient capitalization on hand to cover foreseeable business debts. The corporation is required to file annual or biennial reports with the Secretary of State. Please check with your tax professional about whether the corporation will need to withhold taxes and pay into the state unemployment fund on behalf of its employees, and about other tax issues including the filing of tax returns.

Might shareholders ever become liable for corporate debts?

If corporate formalities are not observed, shareholders may be held personally liable for corporate debts. Example: if a thinly capitalized corporation is created, if the corporation's funds are commingled with employees' and Officers' personal monies, if stock is never issued, meetings are never held, or other corporate formalities required by your state of incorporation are not followed, a court or the IRS may "pierce the corporate veil" and hold the shareholders personally liable for corporate debts. Also, if a shareholder personally guarantees a corporate obligation, and the corporation fails to pay it, the shareholder-guarantor would become liable.

Might shareholders ever become liable for corporate income tax?

Yes, in two situations:In a C corporation that does not observe corporate formalities (as described in the Q&A point immediately above this one) In an S corp that loses its S corporation status because it does not comply with Internal Revenue Code requirements for S corporations.

C corporation vs. S corporation

There are many differences between a C corporation and an S corporation. Only the main tax differences are addressed here.

A C corporation is a general for-profit corporation that pays income tax at its own corporate income tax rates and files its own corporate tax forms each year. An S corporation is a general for-profit corporation that files income reporting returns each year but typically does not pay corporate tax on its income. Instead, its profits and losses flow through to the shareholders (just as if the corporation were a sole proprietorship or partnership) yet the shareholders, directors and officers of the S corporation enjoy the protection from personal liability that the corporate structure provides.

What is C corporation "double taxation"?

Generally, a C corporation is taxed on its own profits; then, in addition, any profits paid out in the form of dividends are taxed again to the recipient-shareholder as dividend income at the individual shareholder's tax rate. This is called "double taxation." (However, most small C corporations rarely pay dividends. Instead, shareholder-employees are paid salaries and fringe benefits that are deductible to the corporation. The result is that, although such shareholder-employees' personal income from the corporation is subject to income tax, double taxation on dividends rarely occurs.)

Because an S corporation is treated as a partnership for tax purposes [the corporation's profits and losses flow through to the shareholder(s)], typically there is no income tax on the corporate income, and hence no problem of double taxation.

What is an S corporation election?

To obtain S Corporation status your corporation must file an Election by a Small Business Corporation (IRS Form 2553) with the Internal Revenue Service. The I.R.S. will grant S corporation status if certain requirements are met. Please consult an accountant or C.P.A. who knows and understands the details of your business as well as federal and local tax rules so that you can make an informed decision as to which form of business entity (C corporation, S corporation or Limited Liability Company) best

For small businesses:

Incorporation & LLC formation services, other filing services, corporate products & services, website design & editing software.

Start Your Incorporation Today!